World Bank and IMF advocate for adoption of CBDC at G20

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On Friday, the International Monetary Fund (IMF) and the World Bank argued for the cross-border benefits of central bank-issued digital currencies (CBDCs), saying projects like the digital United States dollar would help global development.

World Bank and IMF support CBDC

Together with the Bank for International Settlements (BIS), the two global organizations released a document claiming that coordination on digital currencies would upset the status quo of having to rely on expensive and delayed money transfer services to transport money around the world.

“Faster, cheaper, more transparent and more inclusive cross-border payment services would deliver benefits to citizens, businesses and economies around the world,” said Indermit Gill, vice president of equitable growth, finance and World Bank Group institutions.

Technology allows Bank of England Deputy Governor for Financial Stability Sir Jon Cunliffe to “start with a ‘clean slate'” when it comes to strengthening the payments system, he said. added.

The document was drawn up for a G20 summit in Italy, which brought together finance ministers and central bankers from the world’s major nations.

The paper envisions a central bank digital currency environment in which currencies can be exchanged quickly and at any time. Digital currencies could provide the same services to retail clients that central banks provide themselves with swap lines (to ensure, for example, that US dollars are readily available for exchange).

Related article | IMF poll overwhelmingly supports Bitcoin as ‘money’

Federal Reserve studies designs for a digital dollar

The U.S. Federal Reserve is considering various designs for a digital dollar, although it’s not clear whether the central bank would eventually adopt one.

A senior Fed official recently expressed doubts about the usefulness of a digital currency issued by the Fed, saying private sector stablecoins would be more useful for cross-border payments.

“Bad actors could try to steal the CBDC, compromise the CBDC network, or target non-public information on CBDC holders,” Fed Vice Chairman of Supervision Randal Quarles said on June 28.

The G20 study addressed the risks of launching a digital currency, arguing that reducing barriers to currency substitution could undermine exchange rate restrictions and monetary policy independence in some central banking regimes. . Easy cross-border transactions, according to the research, “could increase the risk of a rush on local banking sectors and currencies, all other things being equal.”

The risks are particularly evident for emerging markets and developing countries, according to the World Bank’s Gill, who also noted that regulatory and policy concerns “will need a lot of work.”

Nonetheless, the document stressed that its main objective was to study the international ramifications of such technology, leaving it up to each country to weigh the internal pros and cons of issuing anything.

“CBDCs have the potential to improve the efficiency of cross-border payments, as long as their design follows the ‘Hippocratic Oath for the Design of CBDCs’ and its ‘do no harm’ premise,” the report read. .

The Federal Reserve plans to release a study this summer on the idea of ​​unleashing a digital dollar, after which it will seek comments from the public and Congress.

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Related article | BIS wants “absolute control” of your money through central bank digital currencies

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