## 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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## Bibliographic details
- Published: April 5, 2022

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### 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*

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## References

- [Bo Li](https://www.imf.org/en/About/senior-officials/Bios/bo-li)
- [PRESS CENTER](http://presscenter.imf.org/)
- [https://www.imf.org/en/home](https://www.imf.org/en/home)

_Source: https://www.imf.org/en/news/articles/2022/04/05/sp040522-central-bank-digital-currency-and-crypto-assets_