The Implications of Central Bank Digital Currencies (CBDCs) on Monetary Policy: Evidence from Pakistan

Abstract

The emergence of Central Bank Digital Currencies (CBDCs) represents a transformative evolution in the financial landscape, particularly for developing economies such as Pakistan. This study investigates the potential implications of CBDCs on Pakistan’s monetary policy framework, emphasizing their capacity to enhance financial inclusion, streamline payment systems, and improve monetary policy transmission. By employing a qualitative methodology that includes in-depth stakeholder interviews, a comprehensive literature review, and case studies of international CBDC initiatives, this research identifies key themes, benefits, and challenges associated with the adoption of CBDCs in Pakistan. The findings reveal a positive sentiment among financial stakeholders regarding the potential benefits of CBDCs in addressing existing systemic inefficiencies and fostering broader economic participation. However, concerns regarding cybersecurity, regulatory compliance, and the potential disintermediation of commercial banks are pivotal considerations that policymakers must address. The study emphasizes the need for a collaborative and inclusive approach in designing CBDCs to ensure successful implementation while safeguarding the integrity of the banking system. Ultimately, this research contributes to the ongoing discourse on CBDCs, offering insights that can inform the strategic direction for monetary policy and financial innovation in Pakistan

Keywords: Central Bank Digital Currency (CBDC): Monetary Policy: Financial Inclusion: Payment Systems: Stakeholder Perceptions: Regulatory Compliance