June 25, 2024

The IMF outlined the potential benefits and risks of digital currencies of central banks

The International Monetary Fund (IMF) talked about their role in the development of digital currencies of central banks (CBDC), and also mentioned the possible advantages and risks of such an invention.

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The IMF offered central banks assistance in three areas: providing relevant information for debates regarding the appropriateness of CBDC,organizing meetings of regulators and other involved / interested parties, as well as advising in the development of legislation.

The organization is exploring potential development.cross-border payments when multiple CBDCs occur, and also provides communication between governments, investors, entrepreneurs, and the academic fintech community.

The IMF identified the following strengths of CBDC:

  • Reducing the costs of managing cash flows: this is especially true for large countries, as well as remote areas like small islands;
  • Greater public involvement: CBDC will not require opening bank accounts to make payments;
  • Stability of payments: a national alternative to large foreign payment systems;
  • Increasing competitiveness in the payment market;
  • An alternative to digital currencies from the corporate sector;
  • Cost reduction in exchange and over-the-counter settlements: some central banks consider the introduction of CBDC only for institutions;
  • Fighting negative rates during economic crises.

The organization is convinced that the risks associated with the digital currencies of central banks.

  • The mass withdrawal of deposits from commercial banks to CBDCs will force them to attract deposits fromAn alternative scenario is an increase in interest rates on loans.The level of competition with banks will depend on whetherwhether CBDC holders receive dividends;
  • Risk of loss of liquidity by commercial banks due to outflow of deposits at CBDC;
  • The danger of political interference in lending decisions of certain banks that have lost liquidity due to the outflow of funds;
  • Risk of increased dollarization of high inflation economies due to CBDC from the USA;
  • Risks to the reputation of central banks, whichit will be necessary to support the entire technological infrastructure for CBDC, including user interfaces. A failure to ensure security will greatly affect the authority of regulators.

The latter problem can be solved within the framework of synthetic CBDC, where part of the support falls on the shoulders of the private sector, relieving the central bank of responsibility, the IMF suggested.

A well-known economist in the community, the author of "A Brief History of Money" Seifedin Ammous is confident that the IMF will borrowideas "on the creation of shitcoins from the Bitcointalk forum from 2013 and from the statements of the leaders of the ICO boom in 2017."

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Recall earlier in the ECB proposed a solution to ensure partial anonymity of CBDC.