Key Insights
- IMF Managing Director says CBDCs can eventually replace cash.
- But widespread CBDC adoption globally will take time despite over 100 countries exploring.
- IMF urges central banks to continue developing CBDCs and infrastructure for future rollouts.
The rise of central bank digital currencies (CBDCs) has the potential to revolutionize payments and eventually replace physical cash, according to IMF Managing Director Kristalina Georgieva. However, widespread adoption will likely take time.
Speaking Wednesday at the Singapore FinTech Festival, Georgieva said CBDCs offer numerous benefits over cash such as lower costs, financial inclusion, and resilience. Over 100 countries representing 60% of the world are now exploring CBDCs.
CBDCs can replace cash which is costly to distribute in island economies, Georgieva stated. They can offer resilience in more advanced economies. And they can improve financial inclusion where few hold bank accounts.
But while interest is surging, most CBDCs remain in early research or pilot stages. Only about 11 countries have fully launched a digital currency to date.
IMF encourages central banks to keep advancing toward CBDCs
Georgieva urged central banks to stay the course on CBDC development despite uncertainties around usage and design. She advised continued public sector preparation to enable future CBDC rollouts when the time is right.
The IMF chief sees particular promise in using CBDCs for efficient cross-border payments. Compatible CBDC systems between countries could significantly lower costs.
Georgieva also noted artificial intelligence could amplify CBDCs’ benefits through personalized financial services and credit scoring to promote inclusion. However, privacy and bias safeguards remain critical.
Read also! CBDCs Going Mainstream Globally, Just Not US Yet: BofA Report
CBDCs won’t replace cash overnight
While CBDCs likely won’t replace physical cash overnight, the IMF sees digital currencies as the future. Georgieva emphasized central banks should keep pursuing CBDC innovation and infrastructure to modernize payments.
This is not the time to turn back, she asserted. The public sector should keep preparing to deploy CBDCs and related payment platforms in the future.
With cautious optimism, the IMF believes CBDCs can open the door to a more efficient, inclusive and resilient global financial system as adoption advances.
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