Retail CBDCs Could Pose Risks Not Yet Known, IMF Head Says

The IMF is engaged with roughly 50 countries about CBDCs and has increased staff focused on digital money

article-image

WindAwake/Shutterstock modified by Blockworks

share

Central bank digital currencies, also called CBDCs, are the future, according to a leader at the International Monetary Fund, but certain types could pose threats that are thus far unknown.  

During a Monday discussion at the Milken Institute Global Conference, Kristalina Georgieva, a managing director at the global organization, stated that the IMF can no longer overlook digital versions of countries’ fiat currencies.

“We actually rapidly increased our staff that deals with digital money, because we know this is where we are headed; it is not going to be reversed,” Georgieva said. “Before the pandemic we used to say the future is digital, and with the pandemic, the future has arrived.”

Wholesale versus retail CBDCs

Georgieva made a distinction between what she called retail CBDCs — ones that can be held and used by individuals — and wholesale CBDCs, which would be designed only for certain financial institutions.

“We think that wholesale CBDCs can be put in place with fairly little space for undesirable surprises, whereas retail CBDCs completely transform the financial system in a way that we don’t quite know what consequences it could bring,” she explained. 

The comments came after an IMF report published last year called CBDCs “uncharted territory” that raises both challenges and opportunities. The report noted that information sharing between countries conducting CBDC projects will be critical.

Roughly 110 countries are in the midst of studying CBDCs or getting set to implement them, she added. The IMF is engaged in discussions with roughly 50 nations on the topic. 

The Central Bank of the Bahamas launched its CBDC, called the Sand Dollar, in 2020. Some have said emerging markets economies generally are more motivated to explore such options — compared to more developed countries — based on different needs. 

China also has CBDC pilots across many of the country’s provinces. Government employees in the city of Changshu are reportedly set to be paid in the country’s digital yuan starting in June.   

“I can tell you that we will see a very significant transformation that comes from CBDCs, even in the US, where that was, for quite some time, a topic of not great interest,” Georgieva said. “Now there is an engagement, and for the right reason: the future has arrived.”

An executive order signed by President Biden in March 2022 called for “placing urgency” on the research and development of a US CBDC, though there are currently no formal plans to launch one.

The Federal Reserve has plans to roll out a real-time payments service, called FedNow, in July. Presidential candidate Robert Kennedy Jr. claimed FedNow could be the first step toward a CBDC.

Fed Chair Jerome Powell has said the central bank would seek approval from Congress and the government before launching any sort of digital currency.


Don’t miss the next big story – join our free daily newsletter.

Tags

Upcoming Events

Salt Lake City, UT

WED - FRI, OCTOBER 9 - 11, 2024

Pack your bags, anon — we’re heading west! Join us in the beautiful Salt Lake City for the third installment of Permissionless. Come for the alpha, stay for the fresh air. Permissionless III promises unforgettable panels, killer networking opportunities, and mountains […]

recent research

ao cover.jpg

Research

Arweave recently launched the testnet for AO computer, a new messaging protocol that will sit atop a PoS network and aims to become a scalable global compute platform through parallel processing and modularity.

article-image

The “fastest-growing ETF in history” has seen net inflows on every trading day since its Jan. 11 launch

article-image

Relm and Chainproof will provide insurance quotes to distributed validators

article-image

DLC.Link uses a Taproot-based Bitcoin multisig to let institutions mint dlcBTC, starting on Arbitrum

article-image

Pre-seed Bitcoin startup deals rose 360% in 2023, a TVP report shows

article-image

Circle’s new smart contract to allow holders of BlackRock USD Institutional Digital Liquidity Fund to redeem shares for its stablecoin

article-image

Uniswap says it was not surprised to receive a Wells notice given the SEC’s “abusive” use of power as of late