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IMF Working On Global Platform For CBDCs

AA News - Andrew Throuvalas 2023-06-20 12:45

The International Monetary Fund (IMF) is working on a global platform to make the Central Bank Digital Currencies (CBDCs) launched by numerous world governments more interoperable, reported Reuters on Monday.

The agency believes widespread agreement on such a platform may be necessary to ensure that private market cryptocurrencies don’t fill its functional vacuum. 

Preparing for a World of CBDCs

IMF Managing Director Kristalina Georgieva said on Monday that the agency’s platform is intended to enable CBDC transactions between countries. 

“CBDCs should not be fragmented national propositions,” Georgieva told African central banks at a conference in Rabat, Morocco. “To have more efficient and fairer transactions we need systems that connect countries: we need interoperability,”

“For this reason at the IMF, we are working on the concept of a global CBDC platform,” she added.

A CBDC is a digitally native currency issued by a central bank, much like traditional fiat currencies. They may be backed by fiat currency or other assets like gold, or treated as an equivalent of those assets by the central bank. Georgieva emphasized that when cryptocurrencies are not designed in this manner, they are “speculative investments.”

Some of the purported benefits of CBDCs include promoting financial inclusion and reducing payment costs. Average remittance fees are currently 6.3%, amounting to $44 billion per year. 

“If countries develop CDBCs only for domestic deployment we are underutilizing their capacity,” she added.

The Managing Director noted that there are already 114 countries exploring CBDCs in some capacity, with 10 “already crossing the finish line.” Many are still in early stages, however, with countries like the United States and Canada continuing to question whether or not developing one is worth it.

Opposing Private Cryptos

Classic decentralized cryptos like Bitcoin have also been praised as a potential tool for cheaper remittances. El Salvador made Bitcoin legal tender in 2021 and launched its state-sponsored Chivo wallet with a primary focus on this benefit. 

The IMF has never been a fan of El Salvador’s Bitcoin adoption, however, for fear that the asset’s currency status could destabilize the economy. El Salvador President Nayib Bukele continues to snub their advice. 

Private stablecoins like Tether (USDT) and Circle’s USDC have also come under scrutiny for their ability to depeg, and the risks surrounding their reserves. In a five-point crypto regulation scheme the IMF recommended earlier this year, it noted that stablecoin issuers should be regulated like banks. 

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