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Financial technology—fintech—opens opportunities, especially for financial inclusion, but policymakers must also address the risks

Countries have broadly embraced the opportunities of financial technology—fintech—to boost economic growth and inclusion and reduce inequality while balancing risks to stability and integrity from cybercrime.

And because of COVID-19, people are using even more online financial services than before.

Whether fintech does more harm than good depends on the actions governments take to preserve trust, integrity, resilience, stability, and consumer protection.

The IMF analyzed digital currencies such as stablecoins to help policymakers identify opportunities and pitfalls. The research showed that digital currencies can be an attractive means of payment, but policymakers need to develop farsighted regulations and legal foundations to minimize the risks.

Requiring stablecoin providers to fully back coins with central bank reserves is one option. This is one way to make digital currencies backed by central banks a reality. Another option is for the central bank to provide its own digital currency to the public directly or through private sector distributors.

All these new technologies depend on connectivity, yet internet usage remains a luxury: half of the world’s population does not have access to the internet. The digital divide—the gap between those who have internet access and those who don’t—is more like a chasm, both within and between countries.

Part of the IMF’s work examined solutions in Asia to enhance connectivity to promote financial inclusion, enhance financial sector development, and increase inclusive growth potential, thereby reducing poverty.

Harnessing fintech requires closing the digital divide by bringing internet access to the half of the world’s population that now lacks it.

More people online and working from home during the pandemic has created more opportunities for cybercrime. Improved global collaboration, more consistent regulations, and stronger supervision, combined with better crisis preparation and recovery planning, will help countries address such risks.

The IMF’s capacity development work supports the fight against cybercrime by helping countries develop the skills and expertise needed to recognize and mitigate cybersecurity threats.

The IMF will continue to analyze and deepen the coverage of fintech in its annual checkups on the health of countries’ economies and in regular Financial Sector Assessment Programs.

The best memorial we can build to the people who have died in the pandemic is a greener, smarter, and fairer world.”
Kristalina Georgieva
IMF Managing Director
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