Remarks by Bo Li, IMF Deputy Managing Director At the seminar “Central Bank Digital Currency and Crypto Assets” in celebration of the 20-year Anniversary of the African Regional Technical Assistance Centre (AFRITAC) East

IMF News, April 5, 2022

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Remarks by Bo Li, IMF Deputy Managing Director At the seminar “Central Bank Digital Currency and Crypto Assets” in celebration of the 20-year Anniversary of the African Regional Technical Assistance Centre (AFRITAC) East

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• Published: April 5, 2022

AFRITAC East: role, achievements, and priorities

• Occasion: 20th anniversary of AFRITAC East; conference organized jointly by the IMF and the Bank of Tanzania.
• Key accomplishments and features:
  • First of six IMF regional capacity development centers in Africa.
  • Provides prompt, tailored, and sustained hands-on support through its location in the region.
  • Promotes mutual learning, regional harmonization, and integration via workshops and peer-to-peer visit programs.
  • Operates an inclusive governance structure that makes member countries a key part of the venture.
  • Coordinates closely with development partners to minimize duplicative capacity development efforts.
• Recent adaptation and evolving priorities:
  • Demonstrated quick adaptation to countries’ evolving needs during the COVID-19 pandemic.
  • Collaborating with IMF headquarters to step up support on emerging issues, including:
  • building resilience to climate change;
  • promoting inclusive growth;
  • leveraging fintech and digital transformation.
• Forward-looking emphasis: center must remain agile and continue assisting members with realities they face.

Crypto assets: scope, recent growth, and risks

• Definition:
  • Crypto assets are privately issued digital tokens that use cryptographic techniques. Example cited: Bitcoin.
• Market size and regional activity:
  • Market capitalization reached US$2.3 trillion by end-2021.
  • Noted substantial action in the region in countries such as Kenya, Nigeria, South Africa, Ghana, and Tanzania.
• Risks highlighted:
  • Correlation with other financial instruments could lead to amplification of shocks.
  • Potential to replace local currency as medium of exchange, store of value, and unit of account — described as “cryptoization.”
  • Misuse risks: money laundering, terrorist financing, and other illegal activities.
• Regulatory landscape:
  • Countries have adopted varying approaches: completely hands-off, licensing regimes of various restrictiveness, and outright bans.
  • Active global debate on appropriate regulatory and supervisory options.
  • IMF position: strong call for a comprehensive, consistent, and coordinated global regulatory framework for crypto assets.

Central Bank Digital Currencies (CBDCs): characteristics, design considerations, and findings

• Fundamental distinction:
  • CBDCs are issued by central banks and recorded as a liability of the central bank (unlike crypto assets).
• Potential benefits:
  • Could improve the efficiency and safety of payment systems.
  • If designed prudently, could reduce incentives for adopting crypto assets and support public policy objectives such as efficiency and stability of payment systems in the digital age.
• IMF stocktaking of six countries with advanced CBDC pilots — three broad themes emerged:

1. Objectives and needs vary across jurisdictions

• Examples of differing objectives:
• Financial inclusion (e.g., island nations where cash delivery is costly and difficult).
• Enhancing resilience as a backup if private sector solutions fail.
• Promoting market competition where private sector service providers are dominant.
• Implication: central banks should tailor CBDC design to specific objectives and country circumstances; no “one size fits all” approach.

2. Financial stability and privacy considerations are paramount

• Financial stability measures observed:
• CBDCs in the studied countries are not interest-bearing.
• Limits on holdings across active CBDC projects to prevent sudden outflows of bank deposits into CBDC.
• Privacy trade-offs:
• Cash offers relative privacy; CBDCs need some privacy to be attractive, but excessive privacy can facilitate illicit financial flows.
• Proposed balance: a “tiered wallet” CBDC design offering greater anonymity at lower levels of CBDC holdings.
• Tiered design benefits: may promote financial inclusion by allowing simpler customer onboarding and documentation at lower thresholds.
• Policy imperative: policymakers must balance protecting privacy, promoting financial inclusion, and ensuring financial integrity.

3. Complexity and resource requirements

• Introducing a CBDC is a complex process requiring appropriate resources and capacity.
• Areas for further efforts include:
• new legal frameworks;
• new regulation;
• public-private partnerships to ensure successful adoption or to build additional features.

International coordination, IMF role, and closing remarks

• Conference objective: share country experiences and understanding about effective regulation of crypto assets and CBDC design, and identify pitfalls to avoid.
• International coordination: described as vital in these rapidly evolving areas.
• IMF engagement:
  • Playing a part in international efforts to develop appropriate policies, regulations, and standards.
  • Gearing up to provide capacity development support to members.
• Closing: Speaker expressed best wishes for a successful conference and looked forward to the next twenty years of AFRITAC East’s journey.

Remarks by Bo Li, IMF Deputy Managing Director; As prepared for delivery, April 5, 2022

References

• Bo Li
• PRESS CENTER
• https://www.imf.org/en/home