The Role of Central Bank Digital Currencies (CBDCs) in Financial Inclusion

The Asian and Pacific regions are relying on new technological innovations to enhance convenience and solve problems faster, particularly during the COVID-19 pandemic. Central bank digital currencies (CBDCs) are among the digital solutions that can improve the financial sector's functioning and broaden the range of financial products and services for the underbanked and underserved populations, promoting financial inclusion. CBDCs can reduce transaction costs, build trust in digital services and provide financial products better suited to disadvantaged communities. However, CBDCs carry risks related to cybersecurity, privacy, and financial sector stability, requiring appropriate policy responses to maximize their potential. It is particularly crucial to scrutinize these risks in less-developed environments where technical capabilities and infrastructure are less advanced.