CBDCs Could Replace Cash in Global Finance, Says IMF

The International Monetary Fund’s (IMF) managing director laid out a bold vision during a speech in Singapore yesterday: Central bank digital currencies (CBDCs) could replace cash in the global financial system.

“Countries are investigating CBDCs and are developing regulations to guide digital money developments,” Kristalina Georgieva said while speaking at the Singapore Fintech Festival yesterday.

While the adoption of CBDCs is not immediate, about 60% of countries are exploring them and recognizing their potential to enhance financial inclusion, she said—especially in regions where traditional banking is scarce. The IMF’s own—and newly released— CBDC Virtual Handbook echoes this sentiment, noting that CBDCs, if well-designed, could help bridge financial divides and promote more inclusive growth.

Georgieva highlighted the importance of cross-border payments. To that end, she added, the IMF and World Bank are poised to publish a plan to support countries in enhancing cross-border payments.

Technological advancements such as AI and blockchain could amplify the benefits of CBDCs, she said, by helping boost financial inclusion and making it easier and faster to generate credit reports. She said she is also bullish on the tokenization of financial assets, which opens doors for CBDCs to be used in wholesale transactions.

Optimism for the tokenization of real-world assets has picked up a lot of momentum. For example, tokenized asset firm Backed launched a tokenized BlackRock ETF on the Base layer-2 network in October.

Georgieva last commented on CBDCs in February 2022. “If CBDCs are designed prudently, they can potentially offer more resilience, more safety, greater availability, and lower costs than private forms of digital money,” she said at the time.

The IMF has had a much easier time embracing CBDCs than it has the broader cryptocurrency industry. In the early days, the IMF viewed the asset class with caution and skepticism. And as recently as September, the organization outlined a roadmap for addressing the risks that crypto poses to financial stability.

Editor’s note: This article was written with the assistance of AI. Edited and fact-checked by Stacy Elliott.