Central bank digital currencies have become one of the hottest topics of discussion among monetary governing bodies as they try to find a way to lessen the impact of private cryptocurrencies. However, the Managing Director of the IMF believes that each country must go its own way, as one type of CBDC will not work in all countries.
Not a one-size-fits-all solution
Reports are emerging daily from new central banks hoping on the CBDC trend, trying to capitalize on the digitization of money. Cited by Reuters, research by the International Monetary Fund estimated that around 100 such organizations are currently working on launching their own version of digital fiat currency.
The institution has looked at several such countries, including China, Sweden, and the Bahamas, all of which have reported highly advanced products that are about to see the light of day.
Yet given the different ways in which all these countries are governed, IMF Managing Director – Kristalina Georgieva – suggested that these early experiences provided various lessons.
For example, she believes that a “cautiously” designed CBDC can provide more resilience to the local financial network while reducing transaction costs.
Georgieva also claimed that such a digital product would be “safer” than cryptocurrencies, which are “unbacked” and “inherently volatile.” However, she failed to mention that CBDCs will also be very centralized since they will be managed by central banks, unlike bitcoin and other crypto assets which do not have a central point of authority.
Ultimately, however, Georgieva asserted that “there is no one size fits all” when it comes to a CBDC.
“It’s still early days for CBDCs, and we’re not sure how far and how fast they’ll go.” – she concluded.
CBDCs around the world
Apart from the above-mentioned countries, other countries that have made significant development in launching such products include South Korea, India, Malaysia and others.
And while the US Federal Reserve is still exploring the pros and cons of a CBDC, India’s prime minister believes the country’s digital version of the fiat currency will bolster its economy.
Separately, Russia’s second richest man recently claimed that a CBDC could replace bitcoin. He joined Georgieva in pointing out BTC’s volatility as a potential hurdle.
Featured image courtesy of BNR
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