IMF Says Crypto and Central Banks Could Set the Stage for Rich and Diverse Monetary Ecosystem – Here’s How
The International Monetary Fund (IMF) says that collaboration between central banks and crypto technology could create an innovative and efficient monetary ecosystem.
In a new report written by executives from the Bank for International Settlements (BIS), the IMF says the technology behind digital assets and the trust that the public have in central banks together could set the stage for the monetary policy of the future.
“We argue that the monetary system of the future should harness the new technical capabilities demonstrated by crypto but be grounded in the trust central banks provide (BIS 2022).
In other words, any legitimate transaction that can be carried out with crypto can be accomplished better with central bank money. Central bank digital currencies (CBDCs) and other public infrastructure can underpin a rich and diverse monetary ecosystem that supports innovation in the public interest.”
According to the IMF, while the technology behind crypto assets is noteworthy, the industry has many flaws, such as extreme price volatility and lack of regulations and scalability. The IMF says that central banks can help solve these issues.
“Crypto is neither stable nor efficient. It is a largely unregulated sector, and its participants are not accountable to society. Frequent fraud, theft, and scams have raised serious concerns about market integrity.
Crypto has introduced us to the possibilities of innovation. Yet its most useful elements must be put on a sounder footing. By adopting new technical capabilities [by] building on a core of trust, central bank money can provide the foundation for a rich and diverse monetary ecosystem that is scalable and designed with the public interest in mind.”
The report cites real estate tokenization and retail purchases as an examples of how central banks can use digital assets.
“First, wholesale CBDCs (central bank digital assets) – a superior representation of central bank money for use exclusively by banks and other trusted institutions – can offer new technical capabilities…
For instance, the buyer and seller of a house could agree up-front that the tokenized payment and the tokenized title transfer must be simultaneous…
Second, at the retail level, CBDCs have great potential, together with their first cousins, fast payment systems. Retail CBDCs would work as digital cash available to households and businesses, with services provided by private companies.
Central-bank-operated retail fast payment systems are similar to retail CBDCs in that they provide this common platform while ensuring that services are fully connected. Both promise to lower payment costs and enable financial inclusion.”
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Featured Image: Shutterstock/prodigital art/Natalia Siiatovskaia
The post IMF Says Crypto and Central Banks Could Set the Stage for Rich and Diverse Monetary Ecosystem – Here’s How appeared first on The Daily Hodl.
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Author: Daily Hodl Staff
