The International Monetary Fund (IMF) is actively developing a global platform for Central Bank Digital Currencies (CBDCs).
Unlike decentralized cryptocurrencies, CBDCs are digital currencies controlled by central banks.
During a conference attended by African central banks in Rabat, Morocco, IMF Managing Director Kristalina Georgieva emphasized the need for interoperability between countries stating that CBDCs should transcend national boundaries and not remain fragmented propositions within individual countries.
To achieve this, she said that the IMF has been working towards a common regulatory framework that will enable seamless global interoperability for CBDCs. Failure to establish such a platform could create a void that cryptocurrencies will likely fill, she added.
Georgieva highlighted that 114 central banks worldwide are already exploring CBDCs, with approximately 10 having made substantial progress in their implementation.
She also stressed that the potential of CBDCs would be underutilized if they were solely developed for domestic use. By connecting countries and facilitating cross-border transactions, she claimed that CBDCs could enhance financial inclusion and reduce the costs of remittances.
Currently, the average cost of money transfers amounts to 6.3 per cent, equivalent to $44 billion annually.
Bragging about their progress, the rise in CBDC exploration has gone from 35 countries in May of 2020 to 114 countries—representing over 95 per cent of global GDP—actively considering or advancing CBDC projects.
The imposition of financial sanctions on Russia has spurred countries to seek alternative payment systems that circumvent the dominance of the U.S. dollar.
However, the implementation of CBDC that transcend boundaries and bring about global interoperability will expose countries to international pressure and regulation.
One of the many concerns for the implementation of CBDCs is that they would undoubtedly lead to increased surveillance of financial transactions, which already raises privacy and security concerns. Additionally, the implementation of CBDCs would be costly and complex, with many risks associated with the integration of CBDCs into existing payment systems, especially with developing nations who are the target of this campaign.
Whoever controls the global financial system would have unfettered access to whatever data the central banks of nations collect.
With increasing security and privacy concerns, and increasing distrust across borders, many continue to wonder if global CBDCs are the way to go.