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IMF Working on Global CBDC Platform to Revolutionize Global Remittances and Trade

Reuters | Ahmed Eljechtimi | Jun 19, 2022

IMF John Harrington - IMF Working on Global CBDC Platform to Revolutionize Global Remittances and Trade

Image: John Harrington

The International Monetary Fund (IMF) is developing a platform for central bank digital currencies (CBDCs), aiming for global interoperability and efficiency in cross-border transactions.

  • CBDCs, being government-issued and having a fixed value equal to the country's fiat currency, provide a stable means of exchanging digital assets, unlike the volatile cryptocurrency market. The platform is designed to support efficiency, transparency, and interoperability of settlements, which could help enable countries to transact with one another more fairly and efficiently​​.
  • Note, there are significant privacy-related and other risks with CBDCs, you can read here.
    • This move by the IMF signifies a major step towards the digitization of currencies on a global scale.
    • It could revolutionize international trade and financial transactions, making them more efficient and cost-effective. For businesses, this means the potential for smoother, quicker, and cheaper international transactions, possibly opening up new markets and opportunities.

See:  Ottawa to review Crypto, Stablecoins and CBDCs; Budget promises more financial cops

  • Financial Inclusion and Cost Reduction
    • CBDCs could promote financial inclusion by providing access to financial services at a lower cost. The adoption of CBDCs can lower costs for those sending remittances and reduce settlement and counterparty risks for banks in cross-border transactions​​ thus boosting profitability with the average cost of money transfers standing at 6.3%, amounting to $44 billion annually.
    • For businesses, this could mean access to a wider customer base, particularly in developing markets.
  • Global Adoption and Governance Challenges
    • Already, 114 countries representing more than 95% of global GDP are exploring CBDCs, with 60 in an advanced phase of development, pilot, or launch. However, if poorly designed, CBDCs could lead to financial stability risks, data privacy and legal challenges, financial integrity and cyber risks, and central bank operational risks. The implementation of CBDCs, especially the legal underpinnings and governance arrangements, is complex and challenging​.

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