Digital Currencies and the Challenges of Issuing Them by Central Banks (A Case Study of the Central Bank of Libya)

Abstract

This study investigates the feasibility and viability of issuing a Central Bank Digital Currency (CBDC), a "Digital Dinar," in Libya, as a potential tool to address the country's deep-rooted economic and structural challenges, primarily the persistent liquidity crisis, the prevalence of the informal economy, and low financial inclusion.

The research employs an analytical methodology that combines a review of the global theoretical framework for CBDCs with an in-depth case study of Libya's financial and digital environment. A SWOT analysis was utilized to assess the project's strengths, weaknesses, opportunities, and threats, while also drawing lessons from pioneering international experiences such as Project "Aber" (Saudi Arabia & UAE) and the "eNaira" (Nigeria).

The study concludes that the motivation for a Digital Dinar in Libya stems from urgent domestic necessities rather than merely following a global trend. It reveals a fundamental paradox: high public demand for digital payments coexisting with a fragile electricity and telecommunications infrastructure. The analysis indicates that the project is a "double-edged sword," offering immense opportunities but facing severe threats related to cybersecurity, a legislative vacuum, and political instability.

Consequently, the study determines that a "big-bang" launch approach is unsuitable for Libya, and the optimal strategic choice is a hybrid and phased model. The study recommends the establishment of a high-level national committee, the immediate development of the legal framework, and the adoption of a gradual approach starting with a wholesale CBDC (wCBDC) pilot before moving to a retail CBDC (rCBDC). It gives the highest priority to developing offline payment solutions as a fundamental prerequisite for success.