IMF reviews digital currencies, says Georgieva

IMF Managing Director Kristalina Georgieva discredits Bitcoin and other cryptocurrencies as forms of money, preferring stable coins

IMF Managing Director Kristalina Georgieva told a virtual conference at Bocconi University in Italy yesterday that more than 100 countries worldwide are at some stage in the development of a central bank digital currency, even if they face the great challenge of ensuring the interoperability of these assets.

“We conducted a survey among our members, and the result was very impressive: 110 countries are in the process of engaging with CBDCs”, she said.

She praised the impact CBDCs have on simplifying and reducing the cost of money transfers, and described them as the most reliable digital asset because they are compliant with regulations and supported by the government.

The head of the IMF also considered that stablecoins perfectly fill the gap in privately issued money. However, her comments on Bitcoin and other cryptocurrencies were in stark contrast to this. It took the view that the digital assets could not constitute money because they lack the protection necessary to stabilise their value.

She repeated what she had already said in July in a conversation with John Rolle, the governor of the Central Bank of the Bahamas. The Bahamas recently became the first country to introduce a CBDC – the sand dollar.

Georgieva said policymakers felt it was important for digital currencies to serve as a medium of exchange that the public trusts. She added that digital currencies should contribute to economic stability and that it is necessary to know how they fit into the international regulatory framework, for example that of the Bank for International Settlements.

“It is very impressive how much the international community, central banks and institutions like ours are now actively working to ensure that money is a source of confidence in this fast-moving world of digitization and helps the economy to function rather than be a risk.”

In the interview with Rolle in July, Georgieva had stated that Bitcoin had to be widely accepted before it could be a currency. She criticized El Salvador’s Bitcoin decision due to the volatility of the coin, which she said would affect tax collection, financial planning and pricing of goods and services, not to mention high energy consumption.

“How do we justify the very energy-intensive mining of something for which there are much better, stable and reliable substitutes?”

Not so long ago, the IMF urged developing countries to consider the possibility of issuing CBDCs as a way to achieve financial stability. In a report that cited impressive returns, lower costs and higher transaction speed as the main reasons for adopting cryptocurrencies, the IMF said that CBDCs would help manage the risks associated with the increasing global adoption of cryptocurrencies.

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