IMF Director Urges Public Sector to Prepare for CBDC Deployment
During the Singapore Fintech Festival, the Managing Director of the International Monetary Fund (IMF), Kristalina Georgieva, talked about the potential replacement of cash with central bank digital currencies (CBDCs). She also highlighted the need for CBDCs and related payment platforms to be designed to enable cross-border payments, including with CBDCs. Georgieva emphasized that the public sector should continue to prepare for the deployment of these platforms in the future.
CBDcs can offer resilience in more advanced economies and improve financial inclusion, especially in areas where few people hold bank accounts. They can also replace cash, which is expensive to distribute in island economies.
This discussion by Georgieva comes after the IMF released a CBDC handbook for policymakers and experts at central banks and finance ministries worldwide. She noted that many countries are already developing regulations for digital money but indicated there is still ample space for innovation and uncertainty over use-cases.
Currently, 130 countries, representing 98% of global GDP, are exploring the implementation of CBDCs, with 11 having already launched a digital currency. Meanwhile, 19 G20 countries are in the advanced stage of CBDC development, according to the Atlantic Council’s Central Bank Digital Currency Tracker.
AI Amplification of CBDCs
Georgieva also mentioned the potential for artificial intelligence (AI) to enhance the benefits of CBDCs, especially in improving financial inclusion and providing personalized support to those with low financial literacy. However, she highlighted the importance of protecting personal privacy and data security while avoiding embedded biases to reduce inequality rather than perpetuate it.
Hot Take: CBDCs Positioned to Replace Cash and Improve Financial Inclusion
Kristalina Georgieva’s emphasis on the potential of central bank digital currencies (CBDCs) to replace cash and improve financial inclusion underscores the ongoing global interest in exploring and implementing digital currencies. The push from the IMF, alongside the growing number of countries in advanced stages of CBDC development, indicates that the transition toward digital currencies is gaining momentum. The focus on developing AI technology to amplify the benefits of CBDCs also shows a commitment to enhancing financial services and inclusion globally while addressing potential privacy and security concerns.