No ‘One-size-fits-all’ solution exists for CBDCs, Statement IMF Managing Director Kristalina Georgieva

The International Monetary Fund (IMF) says central banks around the world are preparing to enter the war on cryptocurrencies through Central Bank Digital Currencies (CBDCs), but there is no solution. “fits-all” solutions for all economies. Kristalina Georgieva, Managing Director, IMF, said during an Atlantic Council event, well-designed CBDCs are more stable than “volatile” unbacked crypto assets. “. That said, the international financial institution has also issued a warning to central banks that a foray into new technology could also undermine public confidence in the entire financial system.

“There is no universal case for CBDCs because every economy is different. But financial stability and privacy considerations are paramount to the design of CBDCs,” emphasized Georgieva after the IMF’s announcement. new paper examine the future of CBDCs. She added that central banks are committed to minimizing the impact of CBDCs on financial intermediation and credit provision.

“The countries we studied offer interest-free CBDCs – which makes CBDCs useful, but not as attractive as a means of savings like traditional bank deposits. Introducing CBDC is about finding a delicate balance between developments on the design front and the policy front,” said the IMF Managing Director.

“Countries are looking for ways to preserve key aspects of their traditional monetary and financial systems while experimenting with new forms of digital currency. For those experiments to be successful, the paper we release today shows that policymakers will need to address many open questions, technical hurdles, and policy trade-offs,” added Kristalina Georgieva .

The IMF article, which focuses on the efforts of several central banks and their efforts in developing CBDCs, shows that there are a number of common problems facing digital currencies, including the underlying their technology and the tension between traditional fiat money and the digital version.

One reason central banks are looking at digital currencies is that people won’t have to go through their banks to transfer cash between themselves and businesses, reducing the cost of financial transactions.

The fund said central banks will have to consider trade-offs when looking at digital currencies. These will include anonymity, illicit use of funds, risk reduction and financial inclusion.

Kristalina Georgieva stated that if CBDC Designed with care in mind, they can offer greater security, greater availability, and allow lower costs than private forms of digital currency such as electronic money.

The IMF report also comes at a time when a number of countries have begun to develop or have introduced CBDCs. Unlike cryptocurrencies or stablecoinsPrivate capital and based on blockchain technology, CBDC is a digital version of the national currency and is financially backed by the country’s central bank.

Indian Finance Minister Nirmala Sitharaman recently announced in her Budget 2022 speech that the Reserve Bank of India (RBI) – the country’s central bank – is planning to launch digital rupee in the financial year 2022-23. Meanwhile, the Bahamas has a CBDC called Sand while China’s central bank is experimenting with a digital yuan. Athletes at the Beijing Winter Olympics can use virtual currency at sports venues across the city.

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