Well, the International Monetary Fund (IMF) seems to think that the world’s central banks should consider digital currencies and the DLT (distributed ledger technology) that goes along with it. Uh, earth to IMF. Its already under way and being led by China (as usual). The IMF thinks costs could be reduced, transaction speed increased and even make such things as payments more transparent and secure. Again, uh IMF, its been out there for a while. Guess those fancy meetings take up a lot of time and inhibit keeping up with the globe.
“Central bank-issued digital currencies would reduce the risk of using blockchain for cross-border payments and should be studied in more detail by global authorities, the International Monetary Fund says in a new paper examining the impact of fintech on the financial system.”
With banks around the world testing blockchains such as Ripple for sending money overseas, the IMF found distributed ledger technology (DLT) could reduce international payment costs and barriers to entry, while increasing speed and traceability while making payments more secure.
But the “potentially erratic valuation of virtual currencies” is reducing the attractiveness of using distributed ledgers for international payments because fiat currencies need to be exchanged into some crypto-currency token to move across the network, and then out into another fiat currency at the receiving end.
Issues of trust
ASIC chairman Greg Medcraft is advising the IMF on fintech disruption. Louise Kennerley
The IMF also cited a “lack of interoperability among networks” and trust issues around the issuers of virtual currencies.
Such risks could be reduced if central banks offer digital national currencies, which the IMF defines as a “widely available DLT-based representation of fiat money”.
Such a move would allow central banks to retain control of monetary policy should privately issued virtual currencies gain significant traction, help stabilise exchange rates, increase the security of global settlement systems, and boost the efficiency of the new, decentralised service economy, according to the paper.
However, the IMF observed the issue of central bank digital currencies is “deeply political and complex” and will require many tough decisions, including around distribution and access, warranting a gradual approach.
Britain, Canada, China and Singapore are among those studying central bank-issued digital currencies…”
Source: Financial Review