- According to the director of the international credit body, stablecoins and all other forms of private digital money might not be up to par with central bank currencies.
- So far there are about 100 countries around the world testing CBDCs whose development is at different stages, the IMF notes.
The International Monetary Fund (IMF) considers that central bank digital currencies (CBDC), which are currently in different exploratory and testing phases in a hundred countries, can offer greater security and stability than digital currencies such as Bitcoin.
This was indicated by the managing director of the IMF, Kristalina Georgieva, in a report published on Thursday in which she points out that:
“If CBDCs are designed prudently, they can potentially offer more resilience, more safety, greater availability, and lower costs than private forms of digital money.” Giorgieva argued that crypto assets are unbacked and “inherently volatile.” But even when compared to stablecoins, CBDCs could be far superior.
There is still a long way to go
“The better managed and regulated stablecoins may not be quite a match against a stable and well‑designed central bank digital currency,” she said in her report titled “The Future of Money: Preparing for Central Bank Digital Currency,” which was presented to the Atlantic Council in Washington. However, the managing director of the IMF acknowledged that CBDCs still have a long way to go, as they are still in the “experimental phase” and it is not known “quite how far or how fast they will go.”
But he said that what is certain “is that central banks are building capacity to harness new technologies—to be ready for what may lie ahead.” Many CBDCs are already operational and circulating in various countries.
Georgieva’s report mentioned the advances of the Bahamian CBDCs with the Sand Dollar. Likewise, the Swedish Riksbank launched the eKrona last year, the second central bank currency digital in the world.
She also highlighted China’s efforts in this regard with the digital yuan (e-CNY), which has managed to incorporate "more than a hundred million individual users and billions of yuan in transactions." The official cited a report from the US Federal Reserve in which she noted that "a CBDC could fundamentally change the structure of the US financial system."
On the Flipside
- The IMF has been changing its perspective on the importance of cryptocurrencies. The organization already recognizes that they are a reality that is here to stay and suggests in its report that central banks only have to compete and be better.
Why You Should Care
- What could be a weakness is also at the same time a strength of Bitcoin and all other cryptocurrencies. It is money that operates in a decentralized network where intermediation is eliminated because transactions are peer-to-peer.
- The other is that cryptocurrencies are currencies recognized around the world and operate in an open system, without the risk of blocking. In the case of CBDCs, is “no one size fits all” as every economy is different, Georgieva admitted.
Georgieva pointed out that “this is very important for the wheels of the economy to work smoothly.”
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