The International Monetary Fund (IMF) is spearheading a project to create a global platform that would facilitate transactions between nations via central bank digital currencies (CBDCs). This was made public by IMF Managing Director, Kristalina Georgieva during a gathering of African central banks in Rabat, Morocco on Monday.
The imperative of a unified approach to CBDCs
According to Georgieva, the mission is to ensure that CBDCs do not remain fragmented national initiatives. The primary aim is to bolster more efficient and equitable transactions requiring systems that promote cross-border interoperability. This has driven the IMF to conceptually work on a global CBDC platform.
The IMF’s key goal is to bring central banks onto a shared regulatory playing field for digital currencies to ensure global compatibility. Georgieva warned that the lack of a common framework might leave a gap, making room for decentralized cryptocurrencies to take the lead.
Unlike cryptocurrencies which are predominantly decentralized, CBDCs are digital currencies under the strict purview of the central banks. At the moment, approximately 114 central banks are already exploring the concept of CBDCs, with 10 having successfully launched their own.
Exploring the full potential of CBDCs
Georgieva expressed concern that if CBDCs were only developed for domestic use, it would significantly underutilize their potential. In addition to facilitating cross-border transactions, she noted that CBDCs could play a vital role in promoting financial inclusion and reducing remittance costs.
In her words, the average cost of transferring money currently stands at a staggering 6.3%, which translates to an annual sum of $44 billion. With CBDCs in play, these figures could witness a drastic reduction.
While advocating for CBDCs, Georgieva maintained that these digital currencies should be asset-backed. Cryptocurrencies, when backed by tangible assets, can serve as viable investment opportunities. However, without this backing, they primarily become speculative investments.
As we delve into this new frontier of digital currencies, we are keen to hear your thoughts. How do you feel about the IMF’s initiative towards a global CBDC platform? Please share your thoughts with us in the comment section below!
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