For a long time, the IMF has been pro-CBDC, and Central Banks all over the world have been looking to digital currencies to replace cash, and many have come a long way. IMF President Kristalina Georgieva recently acknowledged the recent push toward CBDCs and reaffirmed the IMF’s support for them, saying:
“We know that the movement toward CBDCs is gaining traction, thanks to the inventiveness of Central Banks.” In total, about 100 countries are investigating CBDCs at some degree. Some are studying, some are testing, and a few are currently selling CBDC to the general public.”
Georgieva went on to say:
“As you might anticipate, the IMF is deeply involved in this problem, including by giving technical help to a number of members.” The Fund’s role in promoting experience exchange and supporting CBDC interoperability is critical.”
Many of the 100 countries identified by President Georgieva are in the process of development. However, several countries, such as Mexico, are still debating whether or not to develop their own digital currency.
Among others in the development stage, Canada began working on their CBDC in 2019, and Russia and India have been working to introduce their own digital currency. The Federal Reserve, the European Central Bank, the Bank of Japan, and the Bank of England are all investing in CBDC development.
Three CBDCs, on the other hand, have been launched in the last two years: DCash in the Eastern Caribbean, Sand Dollar in the Bahamas, and eNaira in Nigeria. They were, however, not as successful as China’s digital money, despite the fact that it is still in the experimental phase.
The People’s Republic of China’s State Council initiated the creation of the digital renminbi (digital RMB) in 2016 and included Chinese IT heavyweights such as Tencent, Alibaba, Huawei, JD.com, and UnionPay in the development phase. Digital RMB was started as a trial program in ten cities and regions in April 2021. Within six months, digital RMB was utilized to perform transactions totaling more than $9.7 billion.
CBDCs have a number of advantages for central banks and governments, as President Georgieva acknowledged:
“If CBDCs are constructed wisely, they have the potential to provide better resilience, safety, availability, and cheaper prices than private forms of digital money.” When opposed to unbacked crypto assets, which are intrinsically volatile, this is undeniably true. Even the best-managed and regulated stablecoins may fall short of a stable and well-designed central bank digital currency.”
The public, on the other hand, is not as enthusiastic about CBDCs as the IMF. While lower volatility and increased safety may be regarded as advantages, a recent study found that many people are concerned about the prospect of involving authorities in cryptocurrency due to privacy concerns.
These worries were echoed by the previous chairman of Banco de Mexico, who stated:
“We have no idea who is using a $100 note today, and we have no idea who is using a 1,000 peso bill today.” The major distinction with the CBDC is that the central bank will have complete control over the rules and regulations that govern the use of that expression of central bank digital liability, and we will also have the capability to enforce it.”
Given that the Central Banks are not adequately addressing society’s concerns, the question of “What kind of CBDCs do we need?” arises. It appears to be suspended in mid-air.