IMF promotes digital currency platform for global transactions.
The International Monetary Fund (IMF) has announced that it is working on a global platform for CBDCs (central bank digital currencies) to facilitate seamless transactions across borders, according to IMF Managing Director Kristalina Georgieva at a conference in Rabat, Morocco. Georgieva stressed the importance of avoiding fragmented CBDC solutions and highlighted the need for systems that connect countries to promote efficiency and fairness through interoperability.
Georgieva further warned that failure to agree on a common platform could lead to a void filled by cryptocurrencies. CBDCs, controlled by central banks, differ from decentralized cryptocurrencies in that they are controlled by an entity.
Over 114 central banks are currently exploring CBDCs, with approximately 10 nearing completion, she added. Georgieva stressed that CBDCs foster financial inclusion by granting more individuals access to cost-effective financial services. She noted that remittances, which currently cost an average of 6.3% or around $44 billion annually, could be made cheaper through CBDCs.
However, she cautioned that CBDCs must be asset-backed to ensure stability, distinguishing them from speculative investments when cryptocurrencies lack such backing.
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The IMF’s proposal for a global CBDC platform aligns with the goal of reducing fragmentation and enhancing cross-border transactions. A standardized platform would bridge the financial divide, strengthen payment systems, and make remittances quicker and less costly. While CBDC benefits are evident, the IMF also underscored risks associated with their design. Poorly designed CBDCs could pose financial stability risks, encounter legal challenges, face cyber risks, and lead to operational risks for central banks.
The IMF’s efforts to establish a unified regulatory framework and develop a global CBDC platform built upon previous discussions held in Jeddah, Saudi Arabia. Recognizing the complex technological and legal aspects, the IMF aims to leverage its expertise to guide the platform’s development, fostering trust and providing oversight.
Additionally, the IMF plans to release two forthcoming papers on CBDCs, sharing insights and analysis from regions such as the Middle East, Central Asia, and Sub-Saharan Africa.
As central banks worldwide continue exploring CBDCs, the IMF’s initiative represents a significant step toward efficient and inclusive international transactions.
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