The International Monetary Fund (IMF) and the World Bank issued a joint statement with the Bank for International Settlements (BIS) this Friday (09), in which they defended the functionalities of the digital currencies of central banks (CBDCs), highlighting their use for cross-border transactions. According to the document, these cryptocurrencies can support the development of the global financial system.
CBDCs have the potential for international transactions
International organizations argued in the document that coordination between multiple countries is necessary to allow international movements with the digital currencies of central banks. However, it was highlighted that this technology has the potential to create a transaction service between countries that does not depend on third parties and has high fees.
“Faster, cheaper, transparent and inclusive cross-border payment services would deliver benefits to citizens, businesses and economies around the world,” said Indermit Gill, vice president of growth, finance and institutions at the World Bank.
The IMF, BIS and World Bank jointly prepared this report for a G20 meeting in Italy, which brought together finance ministers and central bank officials from the world’s largest economies. “CBDCs have the potential to increase the efficiency of international payments,” highlighted the study.
Major Economies Discuss Digital Currency Creation
The document envisages the creation of a structure of state cryptocurrencies in which they could be exchanged instantly at any time and anywhere in the world. Essentially, it is a project to digitize money and develop a universal payments system.
Just as central banks offer direct exchange agreements with each other (to ensure, for example, that US dollars are readily available), digital currencies could offer the same services to retail users.
The world’s largest economies are already developing or researching central bank digital currencies. China has its digital yuan operating at the forefront of CBDCs. The European Union is discussing the possibility of a digital euro, while countries like France are already thinking about their own cryptocurrency. The Federal Reserve (Fed) is still resistant to the creation of a digital dollar, but the possibility remains on the agenda in the US Congress.
However, there are also risks
However, international bodies also recognize that there are several risks in implementing CBDCs in the global economy. The G20 report noted that exchange controls and monetary policy independence in some central bank regimes could be undermined by lowering barriers to currency substitution.
The document also warned that easier international transactions could help criminal activities. Another concern is about user privacy and data, which cannot be exposed on the network. Therefore, it is a global consensus that the new digitalized financial system must include the most complete regulations and tools to avoid all these problems.
The World Bank’s Gill said the risks are particularly pronounced for emerging markets and developing economies, noting that policy and regulatory issues “will require a lot of work.” In addition, the report emphasized that its main focus is to study the international implications of this technology, leaving it to each country to decide the pros and cons of issuing CBDCs.
With information: CoinDesk