IMF chief sees no universal case for central bank digital currency

There is no universal case for central bank digital currencies, according to International Monetary Fund Managing Director Kristalina Georgieva, who urged policymakers to weigh trade-offs carefully as financial innovation enters a new era. phase.

So-called CBDCs could boost financial inclusion in some countries, while providing a secure backup for payment systems in others, Georgieva said. But she warned that their design must also take into account financial stability and privacy considerations to avoid a possible legislative “deal breaker”.

“Policymakers will have to resolve many open questions, technical hurdles and political compromises,” Georgieva said on Wednesday. “If CBDCs are carefully designed, they can potentially offer more resilience, more security, greater availability, and lower costs than private forms of digital currency” such as “unsecured crypto assets.”

These remarks are accompanied by the publication of an IMF report on digital currencies, which are examined by a hundred countries. Pioneers like the Bahamas and Nigeria have already started allowing the public to use CBDCs, while China is expanding an experience that already includes more than one hundred million users.

A common thread, she said, is central banks’ commitment to minimizing the impact of CBDCs on the financial system. Active projects studied by its staff – in the Bahamas, China and the Eastern Caribbean Currency Union – involve CBDCs that bear no interest, making them less attractive for savings than traditional bank deposits. They also impose limits on holdings.

Tobias Adrian, financial advisor to the IMF’s Monetary and Capital Markets Department, said developing economies could face the risk of their constituents adopting digital currencies from foreign countries.

“Dollarization has always been the fight for countries that are considered unstable,” said Adrian, who is also director of the department. So-called dollarization, or a decision to adopt the currency of a nation with a larger economy, “could be all the faster and more dangerous” in an all-digital world, he said.

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