IMF Boss Says Cash Will Be Replaced Due to Expensive Tech – 5 hours ago

Jakarta, CNBC Indonesia – Central bank digital currencies (CBDC) can replace cash, especially in island countries or countries with low levels of financial inclusion.

IMF Managing Director Kristalina Georgieva said CBDC, which is a digital currency released using technology similar to cryptocurrencies and bitcoin, could be a solution to the expensive distribution of cash.

“CBDCs can replace cash which costs a lot of money to distribute in island economies. They can also create resilience in developed economies. Then, they can also help increase financial inclusion in economies where many people don’t have bank accounts,” he said at the Singapore Fintech Festival, quoted from CNBC International, Thursday (16/11/2023).

CBDC is not an alternative currency to a currency recognized by a country such as crypto currency or bitcoin, but is fiat money in digital form. Because CBDCs are built on blockchain technology, central banks can make payments directly to individuals.

“CBDC offers a safer and cheaper alternative [dari uang tunai]. “They can also bridge different currencies while comparing their values, just like cash we can withdraw at a bank,” said Georgieva.

The IMF once revealed that currently 60 percent of countries around the world, or more than 100 countries, are studying the use of CBDC.

According to a BIS survey, 93 percent of 86 central banks surveyed in 2022 said they were reviewing the use of CBDC. Around 58 percent of the 86 central banks even believe they can release a CBDC in the short to medium term.

Data from the Atlantic Council states that currently 11 countries have adopted CBDC, 53 countries are in the advanced development stage, and 46 countries are in the research stage.

CBDC Functions

Some countries that have released CBDC to consumer level are the Bahamas, Jamaica, and Nigeria.

Singapore’s central bank (Monetary Authority of Singapore) once stated that cash is basically “incompatible” with the digital economy. In 2021, MAS estimates that demand for cash will continue to decline.

Bank Indonesia has also released a guidebook for developing CBDC in Indonesia, which is known as the digital rupiah.

According to BIS, the use of CBDC for cross-border payments will reduce the costs of buying, holding and spending foreign currency.

Georgieva added the potential for using artificial intelligence (AI) together with CBDC to produce highly accurate credit scores and provide financial assistance according to each individual’s needs.

“This can develop financial inclusion by quickly providing accurate credit scores based on a variety of data. It can also provide personalized support for citizens with low levels of financial literacy,” said Georgieva. “Of course we also have to protect personal data and ensure data security, as well as avoid bias.”

[Gambas:Video CNBC]