Kristalina Georgieva, Managing Director, International Monetary Fund (IMF) says the world is witnessing a revolution in digital money that can make remittances easier, faster and cheaper.
She said this on Wednesday in Washington, D.C. during her opening remarks at the iLab Spring Meetings Virtual Workshop.
According to her, after a long period of development, the field is on the edge of major changes that have the potential to reshape cross-border payments and remittances.
She added that new forms of digital money could provide a parallel boost to the vital lifelines that remittances provided to the poor and to developing economies.
Also, within the right framework, peer-to-peer transfers of central bank digital currencies or privately issued stablecoins could lead to shorter payment chains, faster transactions and more competition among remittance providers.
Georgieva said remittances had always played a key role in improving the lives of people in developing economies and supporting economic activity.
She added that the biggest beneficiaries would be vulnerable people sending small value remittances; those most at risk from being left behind by the pandemic.
“As we look for ways to address the challenges of economic divergences across countries, 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,” she said.
She, however, said efforts were underway to improve cross-border payment systems under the Financial Stability Board’s 2020 roadmap.
According to her, with such digital disruption also comes risks which can be addressed by focusing 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,” she noted.
The managing director said countries needed to maintain control over monetary policy, financial conditions, capital account openness and foreign exchange regimes.
She added that payment systems must grow increasingly integrated and must work for all countries to avoid a digital divide, while reserve currency configurations and backstops must evolve smoothly.
“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.
“In doing so, we will continue our close collaboration with key stakeholders, including the Financial Stability Board, the Bank for International Settlements, the World Bank and industry players like those here today and each must leverage its comparative advantages.”
For the IMF, she said that included using its expertise and experience in surveillance, capacity development and policy development.
Also, that it was near-universal membership, meant it could act as a transmission line of learning and best practice across economies of all sizes.
The digital money is a currency that exists purely in digital form.
It is not a tangible asset like cash or other commodities like gold or oil and can include but is not limited to cryptocurrencies.