IMF managing director Kristalina Georgieva at the Singapore Fintech Festival on Wednesday. Photo: Handout
Exploration of central bank digital currencies (CBDCs) and financial technology must be expedited to improve cross-border payments.
In her keynote address, “The Digital Finance Voyage: A Case for Public Sector Involvement”, at the Singapore Fintech Festival (SFF), International Monetary Fund managing director Kristalina Georgieva said although there is progress compared to 5 years ago, industry players need to “pick up speed”.
Some 60% of countries are studying CBDCs and developing regulations to guide digital money development.
Georgieva said there are many benefits to CBDCs, including replacing cash, which is costly to distribute in island economies, offering resilience in more advanced economies and improving financial inclusion.
“The success of CBDCs will hinge on policy decisions, how the private sector responds and how technology evolves.
“Artificial Intelligence (AI), for instance, could amplify some of the benefits of CBDCs. It could improve financial inclusion by providing rapid, accurate credit scoring. Another is the tokenisation of financial assets, such as bonds issued on blockchains. This opens another door to CBDC, potentially in wholesale form, to pay for those assets.”
Georgieva said there was a pressing need for CBDCs to facilitate cross-border payments, which remain expensive, slow and inaccessible.
“Efficient cross-border payments allow capital to quickly get to where it is needed. Small businesses can grow beyond borders, and households can receive needed funds from abroad.
“While we see encouraging declines in remittance costs, they remain above Sustainable Development Goal targets (3% of transaction cost).”
“One way to change this is to set the desirable properties of cross-border platforms from a policy standpoint. For example, platforms must allow countries to manage capital flows and retain control over their money supply. We also need common rules on money laundering, terrorism financing and data protection. AI could help. For example, AI-based solutions like regtech could reduce compliance costs.”
At the event, Georgieva also announced the launch of a CBDC handbook.
“The handbook will collect and share knowledge on CBDCs for policymakers around the world — to help them to sail ahead.”
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