IMF & World Bank Advocate for CBDC Implementation At G20
The World Bank and IMF at the G20 on Friday touted central bank issued digital currencies (CBDC) as an effective solution for cross-border payments, suggesting that projects like the US Digital Dollar could contribute to global economic advancement.
In tandem with the Bank for International Settlements (BIS), the three institutions released a report detailing the strengths of digital currencies and CBDCs in particular over the fiat money, in cross-border payments, with the success of cryptocurrencies like Ripple showing just how cheap and fast cross-border payments can be.
The report, which was put together for the G20 summit in Italy, discusses how the creation of CBDCs would offer a “clean slate” to the global financial system and possibly enable a significant increase in the efficiency of cross border transfers. The G20 summit is a gathering of finance ministers and central bankers from the world’s top nations.
Talking about the perks of the CBDC, Indermit Gill, World Bank Group vice president of equitable growth, finance, and institutions stated, “Faster, cheaper, more transparent and more inclusive cross-border payment services would deliver benefits for citizens, businesses, and economies worldwide,”.
Fed Reserve Consider Digital Dollar Designs
The institutions envision a financial environment of CBDCs where currencies can be swiftly exchanged and transferred at any time. And adopting the system where Central Banks make swap lines available to one another (to ensure currencies are easily accessible for exchange), digital currencies could provide similar services to retail users.
Projects like the Sand Dollar Token and the Petro have been launched in the past, but Ripple’s flagship product remains the most successful in cross-border payments. Ripple’s XRP has proven to be faster and cheaper than ubiquitous cross-border payment platforms like Stripe.
Surely, there are fears that CBDCs might not be flaw-proof. A highly placed Federal official did recently explain that there were uncertainties that a Fed-issued digital currency was stable, or even fool-proof.
“Bad actors might try to steal CBDC,” he said, “or compromise the CBDC network, or target non-public information about holders of CBDC.”
CBDC Network Not Entirely Risk Free
While the Fed has plans to publish a paper this summer discussing the possibility of issuing a digital dollar, and requesting input from the public and Congress, the report to the G20 outlined the risks to follow the issuance of a digital currency.
These include the possibility that a reduced number of obstacles to currency substitution could disrupt exchange rate restrictions and monetary policy independence in some central banking jurisdictions.
Nevertheless, the report emphasized its primary focus, which was to study the global implications of implementing such technology. Each country is expected to carefully consider the direct benefits and aftereffects of choosing to issue anything.
“CBDCs have the potential to enhance the efficiency of cross-border payments,” the report emphasizes, “as long as their design follows the ‘Hippocratic Oath for CBDC design’ and its premise to ‘do no harm.’