What does digital money mean for emerging market and developing economies?

BIS Working Papers  |  No 973  | 
29 October 2021



Physical cash and commercial bank money are dominant vehicles for retail payments around the world, including in emerging market and developing economies (EMDEs). Yet payments in EMDEs are marked by several key deficiencies – such as a lack of universal access to transaction accounts, widespread informality, limited competition and high costs, particularly for cross-border payments. New digital money proposals seek to address these deficiencies.


We categorise new digital money proposals, such as cryptoassets, stablecoins and central bank digital currencies (CBDCs). We assess the supply and demand factors that may determine in which countries these innovations are more likely to be adopted. We lay out particular policy challenges for authorities in EMDEs. Finally, we compare these proposals with digital innovations such as mobile money, retail fast payment systems, new products by incumbent financial institutions and new entrants such as specialised cross-border money transfer operators.


The distinction between central bank and non-central bank money is fundamental: central bank money is provided as a public good, and for this reason CBDCs are categorically different than private cryptoassets and stablecoins. While some of the factors that may drive their adoption are similar, their consequences would be very different. For EMDEs, new forms of digital money could pose specific development, macroeconomic and cross-border challenges. Yet technological advances built on the existing financial plumbing are already enhancing inclusion and efficiency in EMDEs. Taken together, perhaps the most important contribution of new private digital currencies so far is to draw greater – and welcome – attention to the challenges to financial inclusion and cross-border payments and remittances in EMDEs.


Proposals for global stablecoins have put a much-needed spotlight on deficiencies in financial inclusion and cross-border payments and remittances in emerging market and developing economies (EMDEs). Yet stablecoin initiatives are no panacea. While they may achieve adoption in certain EMDEs, they may also pose particular development, macroeconomic and cross-border challenges for these countries and have not been tested at scale. Several EMDE authorities are weighing the potential costs and benefits of central bank digital currencies (CBDCs). We argue that the distinction between token-based and account-based money matters less than the distinction between central bank and non-central bank money. Fast-moving fintech innovations that are built on or improve the existing financial plumbing may address many of the issues in EMDEs that both private stablecoins and CBDCs aim to tackle.

Keywords: fintech, stablecoins, crypto-assets, e-money, central bank digital currencies, emerging market and developing economies, financial inclusion, remittances, payments.

JEL classification: E42, E51, E58, F31, G28, O33.