While the International Monetary Fund is skeptical of a private system being created, it is pushing for new ideas regarding state-backed digital currencies.
Thursday’s staff at the International Monetary Fund called for a global platform to facilitate cross-border payments. They also reiterated their calls for regulation of a crypto industry that officials claim is inefficient, unstable and plagued with fraud.
The international organization dedicated its quarterly magazine Finance & Development to the “money revolution”. However, other authors are not optimistic about crypto advocates. Public officials favor state-backed solutions like central bank digital currencies (CBDCs).
The magazine also covered health, fiscal policy, and climate change.
Tobias Adrian is the director of IMF’s capital and monetary markets department. He wants to see the IMF develop a new system that will reduce the cost of international transfers. He stated that the platform would accept CBDC payments and hold them in escrow. Tokens could be issued against them.
Private Sector can benefit from a CBDCadrian stated that “the private sector would have the ability to extend the use of the platform through writing smart contracts.” He also promised further papers about how central banks around the world could collaborate on the project.
According to the IMF, 97 countries are currently researching, testing, or deploying CBDCs. This raises the question of how different CBDCs could work together to allow cross-border payments. It is a process that would not be possible under the traditional financial system known as correspondent banking.
A project that involved Australia and South Africa found that cross-border CBDC platforms were “technically feasible” in March. However, officials are more skeptical about the possibility of a private cryptocurrency firm taking over.
Other international bodies like the Bank for International Settlements (based in Switzerland) are now echoing the IMF’s concern about bitcoin.
Agustin Carstens, BIS General Manager, wrote that any legitimate transaction that can take place with crypto can be made easier with central bank money in a Thursday article. “Crypto is neither efficient nor stable…its participants are not accountable for society. There are serious concerns about the integrity of the market due to frequent fraud, theft, and scams.
These concerns are shared by jurisdictions like Singapore, whose central banking governor Ravi Menon stated that “private cryptocurrency – of which Bitcoin is most well-known – fails as money.”
Menon reiterated previous promises to place further restrictions on crypto access and stated that the case for a CBDC accessible by ordinary citizens is not compelling at this time.
However, with countries such as Japan, the U.S., and the European Union all creating new laws on crypto, there is growing concern about the proliferation of national and regional laws that deal with crypto. Incompatible regulations could cause financial system collapse.
Aditya Narain (deputy director of IMF’s monetary & capital markets department), wrote that “the worry is that the longer it takes, the more national officials will get trapped into different regulatory frameworks.” He called for a coordinated, consistent, and comprehensive global response that covers “all actors” and “all aspects of the crypto ecosystem.