No ‘One Size Fits All’ Solution Exist for CBDCs, Claims IMF Managing Director Kristalina Georgieva

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The International Monetary Fund (IMF) claims that central banks around the world are gearing up to fight cryptocurrencies through Central Bank Digital Currencies (CBDCs), but there is no “one-size-fits-all” solution for all economies. Not there. IMF Managing Director Kristalina Georgieva said during an Atlantic Council event that well-designed CBDCs are more stable than “inherently volatile” cryptocurrency assets. That said, the international financial institution also issued a warning to central banks that even the introduction of new technology could undermine public confidence in the entire financial system.

“There is no universal case for a CBDC because each economy is different. But considerations of financial stability and privacy are paramount to the design of CBDCs,” Georgieva stressed after the IMF released new paper Which examines the future of CBDCs. He added that central banks are committed to mitigating the impact of CBDCs on financial intermediation and loan provisioning.

“The countries we studied offer CBDCs that are not interest-bearing – which makes CBDCs useful, but not as attractive as a vehicle for savings as traditional bank deposits. Introduction is about finding a delicate balance on the design front and development on the policy front,” said the IMF Managing Director.

“Countries are seeking to preserve key aspects of their traditional monetary and financial systems while experimenting with new digital forms of money. For those experiments to be successful, the paper we are releasing today shows that policymakers will need to address many open questions, technical constraints and policy tradeoffs,” said Kristalina Georgieva.

The IMF paper, which focuses on the efforts of several central banks and their efforts to develop CBDCs, found that there are several common issues facing digital currencies including their technology base and the tension between traditional fiat money and the digital version. .

One reason central banks are looking to digital currencies is that people will not have to go through their bank to transfer cash between themselves and businesses, reducing costs for financial transactions.

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

Kristalina Georgieva claims that if CBDC Discreetly designed, they could offer greater security, greater availability and allow for lower costs than private forms of digital currency such as cryptocurrency,

The IMF paper comes at a time when a handful of countries have already started developing or have already introduced CBDCs. as opposed to cryptocurrencies or stable coinsWhich are private and based on blockchain technology, a CBDC is a digital version of the national currency and is financially backed by a country’s central bank.

Indian Finance Minister Nirmala Sitharaman recently announced in her Budget 2022 address that the Reserve Bank of India (RBI) – the country’s central bank – is planning to launch its own. digital rupee In the financial year 2022-23. Meanwhile, the Bahamas has a CBDC called Sand while China’s central bank is testing e-yuan. Athletes at the Beijing Winter Olympics have been able to use virtual currency at sporting venues across the city.


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