Digital money can reshape cross-border payments and remittances, IMF says
Technological advances will make payments easier, faster and cheaper, fund’s managing director says
Advances made in digital money can help reshape cross-border payments and remittances, making them “easier, faster and cheaper”, according to Kristalina Georgieva, managing director of the International Monetary Fund.
Divergences in economic recovery, access to vaccines and plans for a digital future are challenges the world must address, Ms Georgieva said on Wednesday during an online workshop on how digital money can promote remittances.
Remittances have played an important role in supporting economic activity and improving the lives of people in developing economies 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,” said Ms Georgieva.
The biggest beneficiaries in the adoption of digital currencies in remittances would be vulnerable people sending small amounts, she said.
Ms Georgieva’s comments came on the same day Coinbase made its debut on Wall Street.
The digital currency exchange’s stock opened 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 are also stepping up efforts to develop their own 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,” said Ms Georgieva.
She said 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,” she 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 said.
However, the adoption of digital currencies can present some risks but they can be addressed in three ways, she 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 towards ensuring the international monetary system remains stable and efficient.”
The risk of a “growing digital divide” requires that all countries benefit from the latest innovations in digital money and payments, said Ms Georgieva.
“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 fund will continue to collaborate with key stakeholders such as the Financial Stability Board, the Bank for International Settlements, the World Bank and industry players, said Ms Georgieva.
The biggest beneficiaries in the adoption of digital currencies in remittances will be vulnerable people sending small amounts