The International Monetary Fund (IMF) Managing director has recognized the role that Central Bank Digital Currencies (CBDCs) could play in increasing financial inclusion and making cross-border payments and remittances cheaper and quicker.
These remarks were made by Kristalina Georgieva, IMF Managing Director, on June 19, 2023, at the High-level Policy Roundtable on Central Bank Digital Currencies while discussing ‘The Role of the Public Sector in Money and Payments – A New Vision’ in Rabat, Morocco.
Georgieva said that though CBDCs could increase efficiencies in cross-border payments, foster competition, and enhance transparency, they could lead to financial stability risks, data privacy, and legal challenges, if poorly designed.
Georgieva further cautioned that easy access to foreign CBDCs could lead to risks of currency substitution and capital flow volatility.
According to Tobias Adrian, Financial Counsellor and Director of the Monetary and Capital Markets Department at the IMF, new technologies, and new legal and regulatory environments will be a hurdle to some but a springboard to others. Adrian said that CBDC platforms would need to be backed by strong legal and regulatory frameworks.
Adrian made the above remarks at the joint IMF—Bank Al-Maghrib High-Level Policy Roundtable on Central Bank Digital Currencies that was discussing Exploring Cross-Border and Domestic Payment and Contracting Platforms, in Rabat, Morocco on June 19, 2023.
Adrian said that CBDC platforms are worth investigating and that individual countries will base on preferences, needs, and policy objectives to decide which CBDC direction to take. Adrian said that several central banks have begun experiments on CBDCs and they are following their work with great interest.
According to the Deputy Managing Director, Bo Li, by the end of February 2023, over 40 countries had approached the IMF to request technical assistance on CBDCs and the IMF had already engaged with almost 30 of the countries.
Li made these remarks at the panel on the IMF Approach to Central Bank Digital Currency Capacity Development on April 12, 2023. Li said CBDCs are likely to have profound implications for monetary policy and financial stability.
Li further said that the IMF will monitor and advise on digital money developments, including CBDCs, for its members. Li said that the IMF’s approach to capacity development on CBDCs aims to help member countries make well-informed decisions when considering designing and issuing CBDCs.
According to the Bank for International Settlements (BIS) CBDC survey of 2021, nine out of 10 central banks were exploring CBDCs. Half of the central banks in the BIS survey were developing or running concrete experiments on CBDCs.