Verghese V Joseph –
SINGAPORE, November 15, 2023 – At the opening of the Singapore Fintech Festival 2023 this morning, Kristalina Georgieva, Managing Director of the International Monetary Fund (IMF), emphasized the significance of digital inclusivity. She noted that as cutting-edge technology, such as artificial intelligence (AI), continues to impact finance and financial services, it will be crucial to ensure inclusivity and diversity as the world maps out the technological journey.
According to Georgieva, Central Bank Digital Currencies (CBDCs) have the potential to displace cash, but adoption may take some time. “In island economies, cash is expensive to distribute. CBDCs can replace it,” she stated. In economies that are more developed, they can provide resilience. And in areas where few people have bank accounts, they help enhance financial inclusion.
A nation’s digital version of its fiat currency, known as CBDCs, is governed by its central bank. They enable central banks to distribute government payments straight to families because they are supported by blockchain technology. “CBDCs would provide a cheap and secure substitute for cash. Similar to the cash we may take out of our banks now, they would also provide a link between private funds and a yardstick to determine their worth, the IMF chief stated.
According to the IMF, more than 100 nations, or around 60% of all nations, are investigating CBDCs. As of June 2023, Georgieva noted that just 11 nations have fully embraced CBDCs; nevertheless, according to a Bank for International Settlements poll, 93% of central banks are considering offering retail CBDCs. Nigeria, Jamaica, and the Bahamas have already introduced similar virtual currencies. She underlined how CBDCs could improve cross-border payment efficiency, which is essential for quick capital deployment.
Georgieva disclosed during her speech a forthcoming cooperative project between the World Bank and the IMF intended to improve cross-border payment networks. Additionally, she announced the publication of a CBDC manual designed to help international authorities navigate the emerging digital currency market. She also emphasized the importance of artificial intelligence (AI) in her remarks. The benefits of CBDCs could be greatly increased by using tools like OpenAI’s ChatGPT, which offers instant credit rating and individualized advice to people with lower financial literacy levels. She did, however, insist that as these technologies develop, protecting individual privacy and data security becomes increasingly important.
Georgieva’s call for action aligned with the Monetary Authority of Singapore’s position on cash being generally incompatible with the evolving digital economy. The IMF president acknowledged the difficulties and complexities associated with the deployment and regulation of digital currencies, reflecting a growing consensus on the role these currencies play in promoting a more equitable global financial system.