IMF chief urges public sector to push on in digital currencies development

SINGAPORE – The chief of the International Monetary Fund (IMF) has called for the public sector globally to speed up in the area of digital money development, as it could make finance more accessible to people and businesses cut off from it.

Adoption of central bank digital currencies (CBDCs) might be low, but Ms Kristalina Georgieva on Wednesday said 60 per cent of countries are now exploring CBDCs and developing regulation to guide the sector.

But this is only the start, she said, adding that there is much uncertainty over specific situations in which digital currencies could potentially be used.

“This is not the time to turn back. The public sector should keep preparing to deploy CBDCs, and related payment platforms in the future,” Ms Georgieva said in her address at the Singapore Expo on the first day of the three-day Singapore Fintech Festival conference.

She said CBDCs and payment platforms should be designed from the start to facilitate cross-border payments.

“Efficient cross-border payments allow for capital to get quickly to where it is needed. Small businesses can grow beyond borders; households can receive needed funds from abroad,” said Ms Georgieva.

She said the IMF and the World Bank will soon publish a common plan to provide capacity development to countries to enhance cross-border payments.

IMF has also launched on its website a handbook on CBDCs, Ms Georgieva said, adding that the global entity has joined

Singapore’s digital assets innovation initiative

as an observer.

The initiative is called Project Guardian and

was launched in May 2022

to explore the use of public blockchains to enable digital assets to be traded across platforms and liquidity pools.

Cash is costly to distribute, especially in developing island economies, and CBDCs can replace cash, she noted.

Ms Georgieva added that digital currencies can offer resilience in most advanced economies and can improve financial inclusion where few hold bank accounts.

She said artificial intelligence (AI), which is the key theme at 2023’s festival, could amplify some of the benefits of CBDCs.

For instance, AI could provide rapid and accurate credit scoring as well as offer personalised support to people with low financial literacy so that they are not left out.

“To be sure, we need to protect personal privacy and data security, avoid embedded biases so we don’t perpetuate inequality but aim to reduce it. Managed prudently, artificial intelligence can help,” she said.

The benefits and the success of digital currencies rely on a number of elements, including developments in the payments sector, tokenisation of financial assets and how public-private discussions go.

Policies also need to be clear, noted Ms Georgieva, who suggested that platforms allow countries to make capital flows and retain control of their monetary supply.

There must be common rules to fight money laundering and terrorist financing, and to provide data protection, she added.

“We don’t have to decide today what is desirable, but we have to define the contours so we can support the integration and the stability of the international monetary system,” she said. “If we don’t do that, we may have to be fragmented.”

President Tharman Shanmugaratnam, who also spoke at the conference, told participants that the current technological revolution, which includes AI, will have a more profound impact on society and the workforce in the next 10 to 15 years than any previous technological revolution.

For one thing, earlier waves of technology and automation replaced repetitive jobs, while AI could take jobs done by people with better education and better incomes.

President Tharman said AI is good for countries like Singapore, where talent in certain areas like programming and coding is short.

He said AI can take over a large number of programming chores and make it easier for societies that are short of labour, like the Republic.

In healthcare, AI will be a “huge enabler” in both diagnosis and treatment, said Mr Tharman.

But he also flagged concerns in areas of national and global security.

Mr Tharman said AI has the potential for deepfakes and sophisticated false information that can lead to polarisation in a community when combined with social media platforms.

“We have to think about a challenge that we are all going to face in the years to come, which is about politics, the ways in which views are shaped in a democracy, and how AI can be potentially very damaging to democracies,” he added.