The development would benefit emerging economies and unbanked people
Whilst the boom of digital currencies causes some banks to fear to lose their monetary policies, others seem interested in creating their own cryptocurrencies to conduct digital transactions and respond to the demands of their users. During this debate, and given the characteristics of the projects presented until now, the International Monetary Fund (IMF) considers that central banks will issue their own digital currencies in the future.
The financial entity issued its opinion recently through a statement. According to the document, the IMF and the World Bank conducted a survey related to Financial Technology (FinTech) that requested responses from the financial institutions of all its member countries. The IMF’s conclusions are based basically on the 96 responses it received.
Countries Looking Forward to Launching their Digital Currency
According to the document, several central banks of different countries are considering the possibility of implementing some type of Central Bank Digital Currencies (CBDC). Reportedly, Uruguay has already launched a CBDC pilot program, whilst the Bahamas, the Eastern Caribbean Currency Union, Sweden, and Ukraine are “ready” to test their systems.
The report also details that several central banks have been conducting research related to aspects such as the potential impact of CBDCs on financial stability, the structure of the banking sector, the opportunity of non-banking financial institutions and the transmission of monetary policy.
The reasons to offer a CBDC varies, according to the report. It explains that both emerging economies and developed economies are considering the options of the CBDC since it tries to offer an alternative to cash as its frequency of use decreases.
Benefits for Emerging Economies
For the emerging markets of developing countries, the main result of applying CBDC would be the reduction of bank costs, as well as the possibility that banks are more accessible to citizens who do not have bank accounts.
The IMF report also concludes that most central banks are not interested in issuing an anonymous CBDC. These institutions want to allow the authorities to track transactions when necessary. However, some banks are considering to divide a subset of reserved tokens in order to make transactions verifiable.
A few months ago, IMF President, Christine Lagarde, recommended the creation of digital currencies as a way for states, through central banks, to “provide money to the digital economy”.
Development Projects
Up to now, wholesale CBDCs, comprised of restricted access digital settlement tokens, have been implemented through concept tests for applications based on Distributed Ledger Technology (DLT).
Examples of wholesale CBDC projects include UBIN, which consists of issuing a national cryptocurrency in Singapore for all affiliated banks that achieve digitization of the Singapore dollar, and Jasper, which aims to show how DLT could transform the future of payments in Canada with the issuance of the CADcoin token.
Recently, the Central Bank of Paraguay warned investors and the public in general that cryptocurrencies, whilst they are not issued by a Central Bank, have no legal value. This means that the financial institution is not responsible, so far, if these means of payment are successful or not.
The process of adoption of cryptocurrencies and the decisions related to them, continue changing, and it is difficult to predict. Users continue alert at the expectation of cryptocurrencies regulation progress.
By María Rodríguez
