IMF announces the merger of CBDCs with the social credit system
According to the fund’s representatives, this will allow monitoring of the use of targeted payments and assess the creditworthiness of citizens
20.10.2022 - 10:50
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What’s new? On October 14, the International Monetary Fund (IMF) held a meeting titled “Central Bank Digital Currencies for Financial Inclusion: Risks and Rewards.” As part of the discussion, the IMF representatives suggested that CBDCs should be programmed in such a way that they are used alongside the social credit system. Subsequently, the transaction data can be used by financial institutions in assessing the creditworthiness of citizens, and regulators will have the opportunity to monitor the targeted spending of funds provided as welfare payments.
The full recording of the IMF’s meeting
What other statements were made? The issue of global financial inclusion was raised at the meeting. Currently, almost a quarter of the world’s adults still do not have bank accounts. Digital currencies, meanwhile, can become a widely available and secure instrument to solve this issue.
According to Bo Li, the Deputy Managing Director of the IMF, CBDCs should be programmed along Chinese lines, which involve a link to the social credit system. And each individual transaction should be monitored for compliance.
Transaction data could then be used by financial service providers to generate a CBDC user’s credit score. Li explained that based on such a rating, institutions would be able to provide loans to customers, bypassing the personal verification stage.
Li believes that smart contracts will allow for social payments and the issuance of consumption coupons and food stamps, while CBDCs will help monitor the targeted use of these funds. For example, if in question are food stamps, the payments cannot be spent on any services or purchases other than food. Also, because of the asset’s potential programmability, government agencies will be able to precisely target support packages to those in need.
In September, the IMF acknowledged the importance of the digital asset industry. According to the fund’s report, crypto assets evolved from “niche products” to widespread financial instruments over the past few years. However, IMF capital markets director Aditya Narain and assistant director Marina Moretti note that digital assets have begun to be used more frequently for speculative purposes, which has caused the need for enhanced comprehensive regulation of the space.
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