Central bank digital currencies have become one of the most popular topics of discussion among ruling monetary bodies as they are trying to find a way to reduce the impact of private cryptocurrencies. However, the Managing Director of the IMF believes that each country must go its own route, as one type of CBDC will not work in all nations.
not a single solution
Reports are emerging daily of new central banks awaiting the CBDC trend, trying to capitalize on the digitization of money. Cited by Reuters, an investigation by the International Monetary Fund estimated that approximately 100 of these organizations are currently working to launch their own version of digital fiat currency.
The institution has looked at several of these countries, including China, Sweden and the Bahamas, all of which have reported highly advanced products that are close to seeing the light of day.
However, given the different ways in which all these countries are governed, IMF Managing Director Kristalina Georgieva suggested that these early experiences have provided several lessons.
For example, he believes that a “prudently” designed CBDC can provide more resilience to the local financial network while lowering transaction costs.
Georgieva also claimed that such a digital product will be “more secure” than cryptocurrencies, which are “unbacked” and “inherently volatile.” However, she failed to mention that CBDCs will also be highly centralized, as they will be operated by central banks, unlike bitcoin and other crypto assets that do not have a central point of authority.
Ultimately, however, Georgieva stated that “there is no one size fits all” when it comes to a CBDC.
“It’s still early days for CBDCs, and we don’t know exactly how far and how fast they’ll go.” – she concluded.
CBDCs around the world
Apart from the aforementioned countries, other nations that have achieved 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 digital version of the country’s fiat currency will strengthen its economy.
Separately, the second richest man in Russia recently claimed that a CBDC could replace bitcoin. He joined Georgieva in highlighting BTC volatility as a potential roadblock.
Featured image courtesy of BNR
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This post CBDCs could be safer and cheaper than cryptocurrencies
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