IMF Predicts Central Banks Will Issue Digital Currencies
Cryptocurrency assets backed by central banks are likely to become a reality, according to a survey of central banks, finance ministries and other government agencies in 189 countries.
About 20 percent of respondents in an International Monetary Fund survey said they are exploring the possibility of issuing digital currencies with work in early stages. Four pilots were reported.
“The financial establishment is panicking,” @IvanFranciscovi tweeted.
Survey respondents cited competition, lowering costs and increased efficiency as some of the main reasons why they will likely be issuing digital assets in the future, according to the IMF report entitled “Five Facts on Fintech.”
The survey polled 96 financial institutions in IMF member countries. Respondents’ views varied broadly on the future of cryptocurrencies but there was a clear belief that central banks will move away from pure fiat, according to the report.
Central banks cited the following as the main reasons why they’re in favor of issuing digital currencies:
- Lowering costs
- Increasing efficiency of implementing monetary policy
- Competition from cryptocurrencies
- Ensuring contestability of the payment market
- Offering a risk-free payment instrument to the public
“Bitcoin and other cryptocurrencies have historically been viewed as antithetical to financial security by economic powers,” Cryptoglobe reported. “However, central banks adopting digital currencies is one way for them to get ahead of the growing trend in issuing digital tokens, such as the stir created by Facebook over Libra.”
Facebook’s Libra, with a hoped-for 2020 launch, will be pegged to government central bank-issued currencies, the tech giant said. That is expected to help make its digital currency more stable than bitcoin and avoid the crazy market swings endured by other cryptocurrencies.
The Bank for International Settlements (BIS) in Basel, Switzerland, is considered the central bankers’ bank — “the stodgiest of stodgy institutions, Quartz reported. BIS has not been hot for cryptocurrency in the past but now appears to be warming up after Facebook’s announcement that it plans to issue a digital currency called Libra.
In March, BIS chief Agustín Carstens said that central banks were “not seeing the value” in creating a central bank digital currency. In its June 30 annual report, a quarter of chapters were devoted to the role of big tech in finance. Carstens told the Financial Times that the BIS is working with central banks that are developing digital currencies. “Many central banks are working on it; we are working on it … it might be that it is sooner than we think that there is a market and we need to be able to provide central bank digital currencies.”
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In the same IMF report, Sub-Saharan Africa was cited as a global leader in mobile money innovation, adoption, and use. “The region leads the world in mobile money accounts per capita (both registered and active accounts), mobile money outlets, and volume of mobile money transactions,” IMF reported. “Close to 10 percent of GDP in transactions are occurring through mobile money, compared with just 7 percent of GDP in Asia and less than 2 percent of GDP in other regions. Across Africa, the adoption and use of technology in the provision of financial services is changing the way in which financial service providers operate and deliver products and services to their customers.”
“Central Bank digital currency will do more for making folks feel familiar with cryptocurrency,” a reader commented at Cryptoglobe.