Use AI to accelerate adoption of central bank digital currencies, says IMF head

No turning back for cash replacement tokens, especially if they make credit more accessible

The head of the International Monetary Fund (IMF) urged the application of AI technology to speed along the maturity and accelerate adoption of central bank digital currencies (CBDCs) in a speech in Singapore on Wednesday.

"The benefits of CBDCs will depend on how technologies evolve," declared IMF managing director Kirstalina Georgieva.

Georgieva argued that incorporating AI into digital cash could improve financial inclusion by providing both faster credit scoring that incorporates "various data" and personalized support to people with low financial literacy.

"To be sure, we need to protect personal privacy and data security, and avoid embedded biases so we don't perpetuate inequality but aim to reduce it," she caveated. "Managed prudently, AI could help."

The benefits might rely on the technologies, but according to the IMF boss, success relies on policy decisions and the response of the private sector – which she called on to step up its guidance efforts.

Georgieva asserted that "platforms must allow countries to manage capital flows and retain control over their money supply," while maintaining "common rules" on money laundering, terrorist financing, and data protection.

She suggested AI solutions, like RegTech, could reduce the cost of compliance.

"It would be like using priority lanes in airports, skipping over the long queues at security," Georgieva mused.

The IMF head declared that in terms of the development and adoption of CBDCs, "this is not the time to turn back." She advised that the public sector should keep preparing to deploy the digital currencies and their related platforms – which should be designed from the start to allow cross-border payments.

"We've left port and are now on the high seas. This calls for courage and determination," urged Georgieva.

She outlined that 60 percent of countries are exploring CBDCs today and the future of digital cash depends on how many countries adopt the idea and how obsolete cash becomes as a result. She urged her audience to think of cross-border platforms as "next-gen virtual town squares where central banks, commercial banks, and potentially even households and firms, can gather to exchange CBDCs in wholesale or retail form."

"Such platforms can even be built to interface with traditional forms of money and manage risks from payments," she added.

Beneficial use cases cited by Georgieva include island economies where cash is costly, more advanced economies where CBDCs are more resilient than alternatives, and regions needing a boost in financial inclusion.

According to data from the Atlantic Council, 11 countries have launched a CBDC and 21 have pilot programs. Thirty-three have commenced CBDC development.

However, it seems some countries have also abandoned or failed at adopting the technology. Two – Ecuador and Senegal – have outright cancelled their efforts and 16 other countries have inactive CBDCs.

While technically still in use, the eNaira – Nigeria's CBDC – has been widely considered a failure. In part, this is because the anti-money-laundering features of the scheme are viewed by many users as a breach of privacy, and the currency as a whole as giving too much power to centralized government.

Along with Georgieva's speech, IMF announced the launch of a CBDC Handbook and a soon to be published joint plan established with the World Bank to provide CBDC capacity development. ®

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