IMF chief advocates CBDCs as cash replacement & catalyst for financial inclusion

During the Singapore FinTech Festival, International Monetary Fund (IMF) managing director Kristalina Georgieva emphasised the imperative for global readiness in adopting central bank digital currencies (CBDCs). Despite acknowledging that CBDC adoption is not imminent, Georgieva urged countries to actively explore and prepare for the potential deployment of CBDCs and associated payment platforms.

Exploring the landscape of CBDCs

Georgieva revealed that approximately 60% of countries are currently exploring CBDCs in various capacities. While adoption remains a distant prospect, she highlighted CBDCs' potential to replace physical cash, enhance resilience in advanced economies, and promote financial inclusion in underserved communities. Georgieva sees CBDCs as a coexisting alternative to private money, offering a secure and cost-effective option.

Technological infrastructure and cross-border payments

The IMF head underscored the critical role of robust technological infrastructure in CBDC projects. Emphasising the need for personal data protection and potential integration of artificial intelligence (AI), Georgieva particularly stressed the importance of supporting cross-border payments. She noted that current cross-border transactions are expensive, slow, and limited in accessibility, urging proactive measures to ensure CBDCs are designed to facilitate seamless cross-border transactions.

IMF's CBDC handbook and collaboration with BIS

Georgieva highlighted the IMF's commitment to CBDC development, presenting the organization's CBDC virtual handbook. She acknowledged the significant role played by the Bank for International Settlements (BIS) in conducting experiments related to digital money within the public sector.

The IMF's recent collaboration with the Financial Stability Board resulted in a Synthesis Paper, unanimously adopted by G20 finance ministers and central bank governors in October, outlining necessary crypto regulations.

As CBDCs emerge on the global financial horizon, the IMF urges nations to stay ahead in their preparedness for these digital currencies. While widespread adoption is yet to materialise, the potential benefits of CBDCs in replacing cash, bolstering economic resilience, and fostering financial inclusion make it a topic of increasing importance on the international stage.