IMF has been pro-CBDC for a while, and the Central Banks from all around the world have been looking to digital currencies to replace cash and many have come a long way. Recently, IMF President Kristalina Georgieva acknowledged the recent movement towards CBDCs and re-stated their support to them by saying:
“We know that the move towards CBDCs is gaining momentum, driven by the ingenuity of Central Banks. All told, around 100 countries are exploring CBDCs at one level or another. Some researching, some testing, and a few already distributing CBDC to the public.”
Georgieva further elaborated:
“As you might expect, the IMF is deeply involved in this issue, including through providing technical assistance to many members. An important role for the Fund is to promote the exchange of experience and support the interoperability of CBDCs.”
Amongst the 100 countries President Georgieva mentioned, many are at the stage of development. However, there are some like Mexico who are still considering whether or not to invest in launching their own digital currency.
Amongst the ones who are at the stage of development, Canada started working on their CBDC in 2019, and Russia and India have been working to launch their digital own digital currency. The Federal Reserve, the European Central Bank, the Bank of Japan, and the Bank of England are also investing in the development of their CBDCs.
On the other hand, three CBDCs were actually launched in the past two years: DCash in the Eastern Caribbean, the Sand Dollar in the Bahamas, and the eNaira in Nigeria. However, they were not as successful as China’s digital currency, even though it is only at the pilot phase.
The State Council of the People’s Republic of China started the development of the digital renminbi (digital RMB) in 2016 and included Chinese tech giants like Tencent, Alibaba, Huawei, JD.com, and UnionPay in the development phase. As of April 2021, digital RMB was launched as a pilot in ten cities and regions. Within 6 months, digital RMB was used to conduct more than $9.7 billion worth of transactions.
Benefits of CBDCs
CBDCs have multiple benefits for Central Banks and governments, as President Georgieva also acknowledged:
“If CBDCs are designed prudently, they can potentially offer more resilience, more safety, greater availability, and lower costs than private forms of digital money. That is clearly the case when compared to unbacked crypto assets that are inherently volatile. And even the better managed and regulated stablecoins may not be quite a match against a stable and well-designed central bank digital currency.”
However, the public is not as inclined to embrace CBDCs as the IMF. While the lower volatility and higher safety might be perceived as benefits, a recent survey showed that many fear the idea of involving authorities in cryptocurrencies due to privacy concerns.
These concerns were also backed by the former chairman of Banco de Mexico where he said:
“We don’t know who’s using a $100 bill today and we don’t know who’s using a 1,000 peso bill today. The key difference with the CBDC is the central bank will have absolute control on the rules and regulations that will determine the use of that expression of central bank digital liability, and also we will have the technology to enforce that.”
Given that the hesitations of the society are not properly addressed by the Central Banks, the question of “What kind of CBDCs do we need?” seems like hanging in the air.
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