International Monetary Fund (IMF) Managing Director Kristalina Georgieva said Wednesday that central bank digital currencies (CBDCs) can replace cash in island economies.
CBDCs, a digital form of a country’s sovereign currency, are investigated by many countries, which are developing regulations to guide digital money developments, but there is so much more space for innovation and uncertainty over use-cases, according to Georgieva.
"This is not the time to turn back. The public sector should keep preparing to deploy CBDCs and related payment platforms in the future," she told during her speech at Singapore Fintech Festival. "These platforms should be designed from the start to facilitate cross-border payments, including with CBDCs."
While more than 100 countries are exploring or piloting CBDCs, including the US Federal Reserve, just a handful have so far issued them.
Georgieva said the adoption of CBDCs is "nowhere close," but around 60% of countries are exploring them in some form today, adding "They can offer resilience in more advanced economies. And they can improve financial inclusion where few hold bank accounts."
The IMF chief stressed that the success of CBDCs will rely on policy decisions and the response of the private sector, noting that countries wishing to introduce CBDCs may need to think a little more like entrepreneurs.
"AI, for instance, could amplify some of the benefits of CBDCs. It could improve financial inclusion by providing rapid, accurate credit scoring based on various data. It could provide personalized support to people with low financial literacy. To be sure, we need to protect personal privacy and data security, and avoid embedded biases so we don’t perpetuate inequality but aim to reduce it," she told.
Source: Anadolu Ajansı
