Last week, the Governor of the Bank of Mauritius, Harvesh Seegolam, confirmed plans to develop a retail central bank digital currency (CBDC) with a pilot planned for November this year. The central bank has achieved significant progress since setting up a sandbox in December 2022 and is considering cross-border transactions for future phases. Digitalization and financial inclusion appear to be the primary motivations.
Slow and steady
According to Mr. Seegolam, the central bank has adopted a “prudent and cautious approach” in its CBDC exploration. Back in 2020, it approached the International Monetary Fund (IMF) to strengthen its technical capacity.
Since then, Mauritius has progressed to setting up a CBDC sandbox last December. Apart from experimenting with features and CBDC design attributes, it also carried out numerous stakeholder engagements with the private sector. Now it says a pilot phase for the digital rupee could be rolled out as soon as November.
CBDC design features and use cases
Several design features of the digital rupee have already been established. For example, the central bank envisages a two-tier distribution model “to manage potential risks to monetary policy and financial stability.” According to the Governor, this is essential to mitigate disintermediation risks and ensure commercial banks’ full involvement in the CBDC journey. It has also decided to make the Digital Rupee interest-free.
But beyond domestic investigations, the bank is also interested in cross-border use cases to ease current frictions in international payments. Cross-border CBDC transactions could end up as part of “Phase 2” and support the country’s digitalization ambitions as well as the G20’s broader objective for “faster, cheaper, more transparent and secure cross-border payments.”
CBDC motivations
In the past, Mr. Seegolam has said that introducing a digital rupee would “contribute to greater digital financial inclusion and improve the efficiency of payment processes by enabling faster and safer settlement procedures.” A recent IMF report also cited Mauritian authorities’ interest in greater digitalization to promote diversification and reduce the economy’s reliance on the tourism sector. They aim to turn the country into a regional digital hub.
