Serbia is on track to introduce its own digital currency, the digital dinar, following amendments to the Law on the National Bank of Serbia, which are currently under parliamentary review. These amendments grant the National Bank of Serbia the exclusive authority to issue the digital dinar.
The digital dinar would serve as a supplement to traditional cash and electronic payments, allowing citizens and businesses to conduct transactions without using physical money or paying bank fees. Unlike decentralized cryptocurrencies, the digital dinar would be centrally controlled by the National Bank, ensuring its stability and security.
Understanding central bank digital currencies (CBDCs)
A central bank digital currency (CBDC) is a digital form of money issued and regulated by a central bank. While it shares similarities with virtual currencies, it differs significantly in its control and issuance. The digital dinar would be backed by the National Bank of Serbia, making it a secure and stable form of currency, exchangeable for cash. The European Central Bank (ECB) is also considering the digital euro, which would serve as a digital version of the euro, usable for online and in-store payments.
CBDCs like the digital dinar could facilitate transactions both online and offline, even without internet access, and would not require bank accounts or transaction fees. Digital currencies are also seen as a way to strengthen economic sovereignty and improve the efficiency and security of payment systems.
Global and regional considerations on CBDCs
Many countries are exploring CBDCs, with some like Jamaica, the Bahamas and Nigeria already implementing them. Pilot projects are underway in regions like the EU, China and Russia. However, there is no consensus on the benefits of CBDCs, with some countries, such as Denmark and Japan, not pursuing them due to widespread use of cashless payments or a preference for physical money.
Economist Ljubodrag Savić believes that the introduction of the digital dinar could benefit both the state and citizens. It would reduce transaction costs, simplify payment processes, and help improve tax collection. However, he emphasizes the importance of careful monitoring of international implementations to mitigate potential risks, including fraud.
Challenges and market conditions
Despite the global momentum towards digital currencies, transactions involving CBDCs are still in their infancy, particularly in Europe. Dragoljub Rajić, coordinator of the Business Support Network, points out that geopolitical stability is a critical factor for the successful implementation of CBDCs. The ongoing global uncertainty, such as the war in Ukraine and potential trade tariffs, poses a challenge to the widespread adoption of digital currencies.
Rajić suggests that Serbia should wait for more stability and analyze international experiences, particularly in the USA and the EU, before moving forward with the digital dinar. He also notes that digital currencies could be useful in sectors like energy and IT, where international transactions are common.
Conclusion
While Serbia is taking significant steps towards introducing the digital dinar, its success will depend on global market conditions and the lessons learned from other countries’ experiences. The digital currency has the potential to streamline transactions, reduce costs, and enhance economic security, but careful planning and monitoring will be key to its successful implementation.
