Central bank digital currencies have the potential to replace cash, but adoption could take time, said Kristalina Georgieva, managing director of the International Monetary Fund on Wednesday.
“CBDCs can replace cash which is costly to distribute in island economies,” she said Wednesday at the Singapore FinTech Festival. “They can offer resilience in more advanced economies. And they can improve financial inclusion where few hold bank accounts.”
CBDCs are the digital form of a country’s fiat currency, which are regulated by the country’s central bank. They are powered by blockchain technology, allowing central banks to channel government payments directly to households.
“CBDCs would offer a safe and low-cost alternative [to cash]. They would also offer a bridge to go between private monies and a yardstick to measure their value, just like cash today which we can withdraw from our banks,” the IMF chief said.
The IMF has said that more than 100 countries are exploring CBDCs – or approximately 60% of countries in the world.
“The level of global interest in CBDCs is unprecedented. Several central banks have already launched pilots or even issued a CBDC,” the IMF said in a September report.
According to a 2022 survey conducted by the Bank for International Settlements, of the 86 central banks surveyed, 93% said they were exploring CBDCs, while 58% said they were likely to or may possibly issue a retail CBDC in either the short or medium term.
But as of June, only 11 countries have adopted CBDCs, with an additional 53 in advanced planning stages and 46 researching the topic, according to data from the Atlantic Council.
Referring to a 2018 speech by her predecessor Christine Lagarde, when the former IMF chief encouraged policymakers to follow the “winds of change” and explore the use of CBDCs, Georgieva said: “Five years on, I’m here to provide an update on that voyage.”
“First, countries did set sail. Many are investigating CBDCs and are developing regulation to guide digital money developments,” said Georgieva referring to the speech.
On Wednesday, the fund launched a CBDC handbook as a reference guide for policymakers around the world. Georgieva said many countries are investigating CBDCs and developing regulation to guide digital money developments.