Frontier technologies carry a promise to fast track the Sustainable Development Goals (SDGs) through supporting innovative, forwarding-looking policies and solutions. There are, however, numerous risks and complexities of digital technologies that come along with those opportunities, as well as policy and regulatory challenges.
In recent years, relatively new approaches of policy experimentation and regulatory sandboxes have emerged among countries and have proven to be effective in creating a more conducive and contained space where governments, in partnerships with relevant stakeholders, can experiment and trial with digital technologies and innovations at the edge or even outside of the existing policy space and regulatory framework.
The COVID-19 pandemic has not only brought about unprecedented challenges to sustainable development but have also accelerated the adoption of digital connectivity and transformation. At the same time, the pandemic has exposed harsh fragilities and digital divides especially for countries in special situations. In response, the Division for Public Institutions and Digital Government (DPIDG) of United Nations Department of Economic and Social Affairs (DESA), and the Information and Communications Technology and Disaster Risk Reduction Division (IDD) of United Nations Economic and Social Commission for Asia and the Pacific (ESCAP), in partnership with the Ministry of Environment, Climate Change and Technology, and the Maldives Monetary Authority (MMA) are collaborating on enhancing institutional capacity to implement regulatory sandbox on frontier technologies in the Maldives. In this context, the Maldives has identified ‘Central Bank Digital Currency (CBDC)’ and ‘Stable Coin Digital Currency’ as its two priority areas of focus in the context of payment systems.
The objective of this report is to assess the opportunities, risks, and challenges for the implementation of CBDC and Stablecoin(s) in the Maldives. The paper explores the potential implications and risks of digital currencies, examines technical considerations and compares the socioeconomic conditions and likely objectives in the Maldives with other countries. It goes on to identify any current regulatory gaps and the monetary policy issues raised by digital currencies, the use of the sandbox concept to promote CBDC/Stablecoin products via experimentation and proof of concept projects, and how the various stakeholders, notably the government and the MMA as well as the private sector, might become involved. The paper concludes with a set of recommendations on practical ways of mounting a live CBDC/Stablecoin experiment in the current environment for the consideration of the Maldivian Government.