Digital currencies backed by central banks are the most reliable form of digital money, according to IMF managing director Kristalina Georgieva. At the same time, it is difficult to regard cryptocurrencies such as bitcoin as money, believes the CEO of the international financial institution.
IMF Chief Georgieva Marks Top Issues for Policymakers Exploring CBDCs
Among the members of the International Monetary Fund (IMF), 110 countries are exploring central bank digital currencies (CBDCs), the fund’s chair and managing director Kristalina Georgieva revealed at an event hosted by Bocconi University in Italy. Speaking from a distance to the audience, she noted that the main challenge for monetary authorities now is to ensure the interoperability of these currencies.
According to Georgieva, a major consideration is whether state-backed digital currencies can serve as a means of exchange trusted by the public, Reuters reported on Tuesday. Other questions for policymakers to answer are whether CBDCs can contribute to national economic stability and how they would fit into international regulatory frameworks introduced by organizations like the Bank for International Settlements (BIS).
The BIS Innovation Hub is leading several projects to test the use of state-issued digital currencies in international transactions such as a collaboration between the Reserve Bank of Australia, Bank Negara Malaysia, the Monetary Authority of Singapore, and the South African Reserve Bank. These also include joint trials conducted by China, Hong Kong, Thailand and the United Arab Emirates as well as a wholesale CBDC test performed by the Banque de France and the Swiss National Bank.
In reference to cooperation between international financial organizations and national monetary authorities regarding CBDCs, Kristalina Georgieva further stated:
[It is] very impressive how the international community, central banks, institutions like ours are now actively engaged to ensure that in this rapidly changing world of digitization, money is a source of trust and helps the economy to function rather than [being] a risk.
The head of the IMF emphasized that she views digital currencies issued by central banks as the most reliable form of digital money while remarking she finds it hard to think of cryptocurrencies as money. “De facto assets” like bitcoin are not backed by assets whose value is stable and can rise and fall sharply, Georgieva explained, insisting:
In the history of money, it is difficult to think of them as money.
In her speech at the Italian university event, the head of the IMF also referred to Europe’s efforts to address the challenges caused by the spread of Covid-19. Kristalina Georgieva noted that the Old Continent is now better prepared to avoid another debt crisis like the one with Greece after the last global financial crisis. However, she stressed that governments need to plan their course carefully as they shift to medium-term fiscal consolidation so they can erase the debt burden related to the pandemic.
