Kristalina Georgieva, managing director of the International Monetary Fund (IMF), said Wednesday that private cryptocurrencies and stablecoins may not be as practical as well-designed central bank digital currencies (CBDCs).
In her speech delivered at an event hosted by the Atlantic Council, an American think tank, Georgieva argued that CBDCs could “potentially offer more resilience, more safety, greater availability and lower costs” than stablecoins and “unbacked crypto assets that are inherently volatile.”
As Georgieva pointed out, there has been a global explosion of interest in CBDCs, with nearly 100 countries currently exploring CBDCs at either a research, testing or distribution phase. Georgieva said that the IMF has been “deeply involved” in CBDC research, and has provided “technical assistance” to many member countries as they pursue the development of their own CBDCs.
Through the IMFs involvement in CBDC development around the world, Georgieva said the organization has learned three lessons.
First, CBDCs arent a one-size-fits-all technology. Georgieva told attendees that because each economy is different, CBDCs will play a different role in every country. In nations that are less economically developed, Georgieva suggested that CBDCs could help with financial inclusion, and in others, they could act as a backup payment method.
Second, Georgieva told attendees that the IMF sees both privacy and financial stability as “paramount” to the design of CBDCs. She touted the benefits of CBDCs that are not interest bearing in order to prevent a decline in use of traditional banks, as well as the utility of placing limits on holdings of CBDCs to “prevent sudden outflows of bank deposits into CBDC.”
“In many countries, privacy concerns are a potential deal breaker when it comes to CBDC legislation and adoption,” Georgieva added. “So its vital that policymakers get the mix right.”
Privacy concerns around Chinas digital yuan – which Georgieva spotlighted in her speech as being one of the six central banks at the “frontier” of CBDC development – did not factor into her speech.
Finally, Georgieva concluded by urging central banks to find “balance” between the design and policy of CBDCs, to consider public-private partnerships to work on features of the CBDCs and to keep financial stability in mind.
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