Central bank-backed digital currencies are the most reliable form of digital money, according to the Managing Director of the International Monetary Fund, Kristalina Georgieva. At the same time, it is difficult to think of cryptocurrencies such as bitcoin as money, the CEO of the international financial institution believes.
IMF chief Georgieva outlines top issues for policymakers to explore central bank digital currencies
IMF President and Managing Director Kristalina Georgieva revealed at an event hosted by Bocconi University in Italy, among the members of the International Monetary Fund (IMF), that 110 countries are exploring central bank digital currencies (CBDCs). Speaking remotely to the audience, she indicated that the main challenge for monetary authorities now is to ensure the interoperability of these currencies.
According to Georgieva, the main consideration is whether state-backed digital currencies can serve as a medium of exchange that the public can trust, Reuters reported on Tuesday. Other questions that policy makers need to answer are whether digital central bank currencies can contribute to domestic economic stability and how they can fit within the international regulatory frameworks provided by organizations such as the Bank for International Settlements (BIS).
The BIS Innovation Hub is leading several projects to test the use of state-issued digital currencies in international transactions such as the collaboration between the Reserve Bank of Australia, Bank Negara Malaysia, the Monetary Authority of Singapore and the Reserve Bank of South Africa. These also include the joint testing of China, Hong Kong, Thailand and the United Arab Emirates as well as the wholesale CBDC test conducted by the Banque de France and the Swiss National Bank.
Referring to the cooperation between international financial organizations and national monetary authorities regarding central bank digital currencies, Kristalina Georgieva further stated:
[It is] Very impressive how much the international community, central banks and institutions like us are now actively involved to make sure that in this fast-moving world of digitization, money is a source of trust and helps the economy to function instead of [being] risk.
The head of the International Monetary Fund emphasized that she views digital currencies issued by central banks as the most reliable form of digital money, while noting that she finds it difficult to think of cryptocurrencies as money. Georgieva explained that “physical assets” like bitcoin are not backed by assets that keep their value stable and can rise and fall sharply, and insists:
In the history of money, it is difficult to consider it money.
In her speech at the Italian academic event, the IMF chief also spoke about Europe’s efforts to deal with the challenges brought about by the spread of Covid-19. Kristalina Georgieva pointed out that the old continent is now more prepared to avoid another debt crisis such as that of Greece after the recent global financial crisis. She stressed, however, that governments need to carefully plan their path as they transition to fiscal consolidation over the medium term so that they can erase the debt burden associated with the pandemic.
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