Navigating a Financially More Fluid World — Remarks by Kristalina Georgieva, IMF Managing Director, at the Jackson Hole Economic Policy Symposium; August 28, 2026
IMF News, August 28, 2026
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- Published: August 28, 2026
Overview and framing
- Speech focus: how stablecoins, tokenization, and financial innovation could create a more fluid global financial system and the policies needed to manage risks and safeguard financial stability.
- Key premises:
- Historical context: financial innovation since the 1980s has improved domestic payments—speed, ease, cost—with egalitarian effects benefiting poor people and poor countries.
- Cross-border payments remain uneven: transactions often too costly and too slow.
- Two reasons for prioritizing more efficient cross-border payments:
- Restrictions on correspondent banking and high transaction costs limit economic participation and can divert payments to informal channels.
- More efficient cross-border payments can boost growth prospects in a world where cross-border trade in digital services (e.g., AI) may be pivotal.
- Ongoing projects cited as promising connectors of national payment systems: ECB’s TIPS; ASEAN’s Project Nexus; Southern African Development Community’s TCIB; BIS’s Project Agora.
- Central question: can private-sector innovation—especially distributed ledger technology, tokenization, and stablecoins—deliver systemic transformation of cross-border payments?
Major findings on financial innovation and systemic implications
- Potential positive effects:
- Tokenization and stablecoins could “fluidify” global finance, making large-value cross-border payments cheaper and faster.
- Competition spurred by innovation can push banks to upgrade services and extend benefits widely.
- Risk dynamics in a more fluid system:
- Faster transmission of risks and larger penalties for policy error.
- Operational risks transform as tokenization automates margin calls and back-office functions—reaction times shrink.
- Trust is central for stablecoins: redeemability at par in all states of the world.
- Risk of excessive bank disintermediation, which could raise funding costs and impair economy-wide credit, given banks’ role as main lenders to households and SMEs.
- Migration of activity to less-regulated nonbank space increases regulatory complexity; anonymity and non-traceability in some payment systems have emerged.
- Specific macro-relevant challenges linked to stablecoins:
- Vehicle for tax evasion, reducing tax revenue.
- Promotion of currency substitution, impairing monetary policy transmission.
- Increased porosity of capital controls—complicating the roughly one-quarter of IMF membership that still shields itself behind capital controls, and the subset relying on financial repression.
Policy requirements and recommendations — financial regulation and international cooperation
- Central regulatory goal: keep up with innovation to prevent problems while allowing positive change and fair competition.
- Specific policy prescriptions:
- Strict rules on reserve pools for stablecoins to ensure safety and liquidity, ideally harmonized internationally to support a single, recognizable asset class.
- Similar norms for similar financial instruments to guarantee fair competition and limit incentives for regulatory arbitrage.
- Modernize regulatory frameworks to bring large volumes of financial activity out of less-regulated nonbank spaces.
- Supervisory actions by central banks to ensure a sound domestic banking system and appropriate regulation of domestic stablecoin intermediaries.
- International cooperation needs:
- Gather and share data.
- Align national legal and regulatory frameworks.
- Secure inter-operability of different cross-border payments channels.
- Reduce contagion risks.
Policy requirements and recommendations — emerging market and developing countries
- Challenges and recommended responses:
- Increase foreign exchange buffers.
- Maintain strict policy discipline.
- Undertake fundamental fiscal adjustment: broaden tax bases and deliver smaller primary deficits.
- Strengthen supervisory regulation of domestic stablecoin intermediaries.
- Rationale:
- Perforation of capital controls exposes countries to currency substitution risks, capital flow volatility, exchange rate instability, and reduced monetary sovereignty.
- As financial repression becomes harder to rely on, governments must pursue credible fiscal consolidation to preserve trust in local currency.
- Observations on resilience:
- Many emerging markets have strengthened policy frameworks and institutions—fiscal rules and independent central banks—building resilience.
- Political economy constraint: public appetite for consolidation may be low after years of generous fiscal support; delaying consolidation would be costly.
Policy requirements and recommendations — issuer countries, fiscal discipline, and global spillovers
- Definition and stakes:
- “Issuer countries” are those that issue reserve assets to back stablecoins; the U.S. is identified as the dominant provider of stablecoin backing.
- Issuer countries have a self-interest in system design that limits adverse spillovers and safeguards the international monetary system.
- Quantified point:
- Ken Rogoff’s estimate cited: a worldwide stock of dollars outside the U.S. estimated at some $15 trillion.
- Potential effects and limits:
- Dollar-backed stablecoins may help issuer countries tap a broader global investor pool and, other things equal, reduce fiscal funding costs—only on the margin.
- Possible adverse effect: higher borrowing costs in other countries if investors substitute away from their bonds.
- Savings from broader investor access are not a substitute for responsible macroeconomic policy.
- Fiscal pressures and monetary policy interaction:
- Example: U.S., French, and Japanese 10‑year sovereign bond yields are currently at their highest levels since 2007, 2008, and 1996 respectively.
- Rising benchmark borrowing costs lift global yield curves and can more than fully offset spread compression in some emerging markets.
- Central banks must prioritize price stability; there is “little room for anything but a rock-solid commitment to price stability.”
- Warning against “monetary policy cowboys” riding to the fiscal rescue via lower-than-optimal policy rates or new asset purchase programs.
- Imperative: fiscal heavy lifting—difficult choices between lower primary expenditures and higher taxes to deliver credible medium-term fiscal consolidation. “Delay no longer.”
Conclusion
- Technology tends to stitch fragmented worlds together; examples cited: air travel, the internet, GPS.
- While sweeping transformation of cross-border payments has not yet occurred, economic logic suggests it will; policy must create the right conditions to reap benefits and manage risks.
- Final optimistic note: financial innovations can benefit people everywhere by increasing financial and economic freedom and incentivizing better policies.
- Closing: “Thank you and back to you, Kristin.”
As prepared for delivery on August 28, 2026 — Remarks by Kristalina Georgieva, IMF Managing Director.
