As published on thenationalnews.com, Thursday 15 April, 2021.
Advances made in digital money can help reshape cross-border payments and remittances making them “easier, faster and cheaper”, Kristalina Georgieva, managing director of the International Monetary Fund, said.
Divergences in access to vaccines, in recoveries from the pandemic and access to a digital future are challenges the world must address, Ms Georgieva said at a virtual workshop on how digital money can facilitate remittances.
Remittances have played a key role in improving the lives of people in developing economies and supporting economic activity, and can benefit from the "revolution" in digital money, she said.
“We need to use every tool we can to support those most affected by the pandemic. And with the risk of a growing digital divide between rich and poor countries, we must also ensure that all countries can benefit from the latest innovations in digital money and payments, particularly remittances,” Ms Georgieva said.
The biggest beneficiaries of adopting digital currencies in remittances would be vulnerable people sending small value amounts, the IMF chief said.
The IMF chief’s comments came on the same day as Coinbase’s debut on Wall Street on Wednesday, with the digital currency exchange’s stock opening at $381, giving it a market value of $100 billion. The company’s listing on a public stock exchange is seen by some as a watershed event for digital currencies.
Central banks across the world are also stepping up efforts to develop digital currencies to modernise financial systems, speed up payments and counter a possible threat from cryptocurrencies.
“Last October, The Bahamas launched the Sand Dollar, the world’s first central bank digital currency. Many other economies are exploring their pilot programmes,” Ms Georgieva said.
She added that other forms of digital money, such as privately issued stable coins, are increasingly being used for cross-border payments.
“New forms of digital money could provide a parallel boost to the vital lifelines that remittances provide to the poor and to developing economies,” Ms Georgieva said.
The right frameworks are required for peer-to-peer transfers of central bank digital currencies or privately-issued stable coins, which “could lead to shorter payment chains, faster transactions and more competition among remittance providers”, she added.
However, the adoption of digital currencies can present some risks, but they can be addressed in three ways, Ms Georgieva said.
“First, new forms of money must remain trustworthy. They must protect consumers, be safe and anchored in sound legal frameworks, and support financial integrity,” she said.
“Second, domestic economic and financial stability must be protected by carefully designed public-private partnerships that underpin the provision of digital money, including fair competition. Third, frameworks should be geared toward ensuring the international monetary system remains stable and efficient.”
The risk of a "growing digital divide" necessitates that all countries can benefit from the latest innovations in digital money and payments, Ms Georgieva said.
“With our mandate to safeguard monetary and financial stability, the IMF has an important role to play in supporting our members to deliver on these priorities, and we are ramping up our capacity,” she said.
The IMF will continue close collaboration with key stakeholders – including the Financial Stability Board, the Bank for International Settlements, the World Bank and industry players, Ms Georgieva added.