A myriad of unpredictable “consequences” will be wrought by retail central bank digital currencies (CBDCs), the managing director of the International Monetary Fund (IMF) has said.
IMF’s Kristalina Georgieva cautioned against retail CBDCs in May 1 statement interview at the 2023 Milken Institute Global Conference.
Georgieva explained that the IMF considers retail CBDCs to have much more room for error than wholesale CBDCs.
“We believe that wholesale CBDCs can be implemented with relatively little room for nasty surprises, whereas retail CBDCs completely transform the financial system in ways that we’re not sure what consequences that might bring. “
Retail CBDCs are state-backed virtual currencies issued by central banks for use by consumers and businesses.
Wholesale CBDCs are also issued by the central bank, but are designed to allow financial institutions to make reserve deposits with a central bank.
The IMF works with about 50 countries to ensure adoption of best practices, said Georgieva, which she believes will have a huge influence on banks and economies in the future.
My message to @MilkenInstitute World Conference: ‘Think the Unthinkable!’ After the pandemic and Russia’s war on Ukraine, we must be ready for the unimaginable.
THANKS @MyStephanomics for a fascinating conversation. #MIGlobal pic.twitter.com/Q2y4A6iKWH
— Kristalina Georgieva (@KGeorgieva) May 1, 2023
“We are engaging with countries, we are currently working with about 50 countries on this same subject,” the IMF chief said.
“We will see a very significant transformation that will come from CBDCs.”
Related: IMF Reviews Design of CBDCs in Islamic Banking Context, Finds Some Risks Are Amplified
Georgieva noted that “even” the United States is now engaging in the development of CBDCs, leading her to conclude that the “future” of CBDCs is now here:
“Even in the United States, where for a while it was a topic of little interest, there is now engagement, and for good reason. The future has arrived.”
The IMF announced on April 12 that it will release a CBDC Handbook to assist central banks in the design and implementation of CBDCs. The UN financial agency said the decision was made following “unprecedented” levels of interest from nations around the world.
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