The Future of Money: IMF Managing Director Discusses Potential of Central Bank Digital Currencies

SINGAPORE – Central bank digital currencies have the potential to replace cash, but adoption may take time, Kristalina Georgieva, managing director of the International Monetary Fund, said on Wednesday.

“CBDCs can replace cash which is expensive to distribute in island economies,” he said at the Singapore Fintech Festival on Wednesday. “They can provide flexibility in more advanced economies. And they can improve financial inclusion where few people have bank accounts.”

A CBDC is a digital version of a country’s fiat currency, regulated by the country’s central bank. They are powered by blockchain technology, which allows central banks to channel Government payments directly to families.

“CBDCs will offer a secure and low-cost alternative [to cash], They will also introduce a bridge to move between private funds and a scale to measure their value, the IMF chief said, just like there is cash today that we can withdraw from our banks.

The IMF has said that more than 100 countries are exploring CBDCs – or about 60% of the world’s countries.

“The level of global interest in CBDCs is unprecedented. Several central banks have already launched pilot projects or even issued CBDCs,” the IMF said in a September report.

According to a 2022 survey conducted by the Bank for International Settlements, 93% of the 86 central banks surveyed said they were exploring CBDCs, while 58% said they were considering issuing retail CBDCs in the short or medium term. Have the possibility or may possibly release. ,

But according to Atlantic Council data, as of June, only 11 countries have adopted a CBDC, with an additional 53 in advanced planning stages and 46 researching the topic.

Referring to a 2018 speech by her predecessor Christine Lagarde, when the former IMF chief encouraged policymakers to follow the “winds of change” and explore the use of CBDCs, Georgieva said: “Five years later, I’m here to provide an update on that journey.”

Referring to the speech, Georgieva said, “First of all, countries began to move forward. Many countries are investigating CBDCs and developing regulation to guide the development of digital money.”

On Wednesday, the fund launched a CBDC handbook as a reference guide for policymakers around the world. Georgieva said that many countries are investigating CBDCs and developing regulation to guide digital money development.

“Second, we haven’t hit the ground running yet. There’s a lot of room for innovation and a lot of uncertainty on use cases,” Georgieva told the audience including industry experts, investors and journalists.

“The issue seems bleak today in some countries, but they should also be open to potentially deploying a CBDC tomorrow. Why?” Georgieva said. “This is not the time to turn back.”

“The public sector should be prepared to deploy CBDCs and related payment platforms in the future. Fourth, these platforms should be designed from the outset to facilitate cross-border payments, including CBDCs,” the managing director said.

Countries that have issued retail CBDCs include the Bahamas, Jamaica, and Nigeria.

The Monetary Authority of Singapore has said that cash is “generally incompatible” with the digital economy. In a 2021 report, the country’s central bank said demand for cash as a means of payment was set to decline further.

According to BIS, the use of CBDC for cross-border payments could reduce the costs of receiving, storing and spending foreign exchange, depending on the design and regulations.

Georgieva also said that artificial intelligence could “extend some of the benefits of CBDCs” by providing accurate credit scoring and personalized support.

Demand for generic AI has accelerated following the release of OpenAI’s ChatGPT in November last year, which was estimated to reach 100 million monthly active users within two months of its launch.

“It can improve financial inclusion by providing fast, accurate credit scoring based on a variety of data. It can provide personalized assistance to people with low financial literacy,” Georgieva said.

He said, “To be sure, we need to protect individual privacy and data security and avoid implicit biases so that we do not perpetuate inequality but aim to reduce it. Managed judiciously, AI can help Is.”