The International Monetary Fund (IMF) is working on a global infrastructure for central bank digital currencies (CBDCs) that ensures global interconnectedness or interoperability in payment settlements. The financial institution's Managing Director, Kristalina Georgieva, disclosed this today (Monday) during a conference for African central banks held in Rabat, Morocco, according to Reuters.

Breaking 'Settlement Blocks'

Georgieva said that the platforms underpinning CBDCs should be interconnected to avoid the emergence of ‘settlement blocks’. CBDCs are digital alternatives to currencies issued by central banks. With the growing popularity of crypto, several countries are gaining interest in CBDCs.

"CBDCs should not be fragmented national propositions," Georgieva said. "To have a more efficient and fairer transaction, we need systems that connect countries: we need interoperability."

Besides that, Georgieva stated that the IMF wants central banks globally to agree on a common regulatory framework for CBDCs. Without a common framework, she noted, there would be a vacuum that would likely be filled by cryptocurrencies. The difference between a CBDC and a cryptocurrency is that the former is controlled by a central bank, while the latter is decentralized.

The IMF top executive said that out of 114 central banks exploring CBDCs globally, 10 are about 'crossing the finish line'. She added: "If countries develop CBDCs only for domestic deployment we are underutilizing their capacity."

CBDCs and Financial Inclusion

According to Georgieva, CBDCs promote financial inclusion and can bring down the cost of global money transfers, which currently stand at 6% or more than $44 billion per year worldwide. However, she emphasized that CBDCs should be backed by real assets.

"Our blueprint for a new class of platforms would enhance and ensure greater interoperability, efficiency, and safety in cross-border payments, as well as in domestic financial markets," added Tobia Adrian, the Financial Counsellor and Director of the Monetary and Capital Markets Department at IMF.

Adrian added: "As money, CBDCs provide safety. As infrastructure, CBDCs bring interoperability and efficiency among private networks for digital money and assets." Regarding security, the official said that countries could restrict transactions in foreign currencies and impose anti-money laundering measures.

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