This was posted on the IMF website under one of their ‘speech’ pages. It is a summary of some comments made by Kristalina Georgieva, IMF Managing Director, in opening remarks at iLab Spring Meetings Virtual Workshop about the title topic.
Remittances are a key way that wealth gets distributed from developed economies to developing ones, by virtue of foreign labor returning funds to family or merchants for various things, including paying for rent or basic services like electricity. CBDCs will eventually play a key role here.
‘The eminent MIT economist Rudy Dornbusch famously said: “In economics things take longer to happen than you think they will, and then they happen faster than you thought they could”…Digital money is a perfect illustration of this maxim, where after a long period of development, the field is on the cusp of major changes that have the potential to reshape cross-border payments and remittances.…For example, last October The Bahamas launched the Sand Dollar, the world’s first central bank digital currency. Many other economies are exploring their own pilot programs. Other forms of digital money, such as privately issued stablecoins, are increasingly being used for cross-border payments. We are witnessing a revolution in digital money that could make remittances easier, faster, and cheaper.’
We recently reviewed the crypto world updated in member research and pointed out that substantial work is already underway in the CBDC space, as 80% of BIS surveyed central banks are engaged in some form of CBDC initiative, which includes use for wholesale (direct bank and corporate) and general purpose (consumer usage) cases. Some of the impetus for the steep jump in engagement during 2019 was the Libra initiative.
This continues obviously and although we don’t know the full agenda for this particular particular workshop, the opening remarks are all about cross-border capabilities and making sure things are done equitably as the world’s most vulnerable are more highly impacted by the pandemic.
‘The biggest beneficiaries would be vulnerable people sending small value remittances: those most at risk from being left behind by the pandemic.
With such digital disruption, however, also comes risk. We can address the risks posed by digital money by focusing our efforts in three areas.
First, new forms of money must remain trustworthy. They must protect consumers, be safe and anchored in sound legal frameworks, and support financial integrity.
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. Countries need to maintain control over monetary policy, financial conditions, capital account openness, and foreign exchange regimes. Payment systems must grow increasingly integrated, and must work for all countries to avoid a digital divide. Reserve currency configurations and backstops must evolve smoothly.’
Overview by Steve Murphy, Director, Commercial and Enterprise Payments Advisory Service at Mercator Advisory Group