The Central Bank of Armenia has been engaged in research efforts aimed at illuminating the potential need for issuing a Central Bank Digital Currency (CBDC) in Armenia. Recognizing the intricate relationship between CBDC and the payment infrastructure, the Central Bank of Armenia is examining the necessity of CBDC issuance as part of a broader agenda to modernize the payment infrastructure. The prioritization of CBDC research is evident in the Central Bank’s 2021 Strategy, which mandates the formulation of a stance regarding the issuance of a digital currency by the bank.
The primary objective of this research was to uncover the practical applications of CBDC within the Armenian economy and assess the potential effects of introducing CBDC on the payment system. To achieve this, both domestic and international developments were thoroughly analyzed. Throughout 2022, a series of discussions occurred between a dedicated working group within the central bank and representatives from Armenian banking and payment institutions.
An agent-based model was created to simulate the potential adoption of CBDC in Armenia. The analysis of various scenarios revealed that the adoption of CBDC is contingent upon the existence of genuine use cases — specific challenges in the financial market that cannot be effectively addressed using conventional technologies. In a few of these identified real-use cases, the issuance of CBDC diminishes the influence of commercial bank money while having no significant impact on the circulation of physical cash.
Based on the findings from the survey of private financial institutions and the simulations conducted with the agent-based model, it was concluded that, given the current state of payment infrastructure development in Armenia, the introduction of CBDC as an alternative payment instrument would have limited implications for Armenian society. Nevertheless, the underlying technology holds the potential to enhance various aspects of the financial market.
Subsequently, a working paper summarizing these research findings was published in June 2023.
Source:
https://www.cba.am/EN/panalyticalmaterialsresearches/CBDC_26.06.2023.pdf