IMF: There is no one-size-fits-all model for central bank-issued digital currencies

IMF: There is no one-size-fits-all model for central bank-issued digital currencies

The Director-General of the IMF believes that a central bank-issued digital currency (CBDC) brings many benefits, but also poses many risks.

According to Kristalina Georgieva, Director General of the International Monetary Fund (IMF), there is no one-size-fits-all model for central bank-issued digital currencies (CBDCs). new phase.

The central bank-issued digital currency could boost financial inclusion in some countries and provide a safe haven for the financial system in others, Bloomberg News reported. However, the head of the IMF warned that when designing CBDCs, financial stability and security issues must be carefully considered to avoid the risk of objections when they are presented to Parliament.

“Policymakers will have to address many outstanding issues, technical hurdles, and policy tradeoffs,” Ms said. “If designed wisely, CBDCs can offer more robustness, security, inclusion, and lower costs than private-sector cryptocurrencies such as unsecured cryptoassets .”

The above statement was made by the Director General of the IMF when the institution released a report on cryptocurrencies that was reviewed by about 100 countries around the world. Pioneers in issuing CBDCs like the Bahamas and Nigeria have started to allow the public to use this form of digital currency. China expands its CBDC study to now more than 100 million users.

Ms. Georgieva pointed out that one thing CBDC issuers have in common is the central bank’s commitment to minimizing the impact of CBDCs on the financial system.

CBDC projects that the IMF is working on, including the Bahamas, China and the Eastern Caribbean Monetary Union (ECCU), are interest-free digital currencies. This makes these CBDCs less attractive to people as savings deposits compared to traditional bank deposits. Additionally, these CBDCs also limit the amount a person can hold.

Tobias Adrian, financial legal adviser in the IMF’s Money and Financial Markets Department, said developing countries could be at risk of people using foreign digital currencies.

“Dollarization is inherently a challenge for countries that are considered unstable,” Adrian said. Therefore, dollarization, or switching to the currency of another country with a larger economy, “could happen much faster and become more dangerous” in a fully digital world, Mr. Adrian pointed out.

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