G-20 News

IMF and World Bank advocate for benefits of central bank-issued digital currencies at G20



The G20 logo is pictured on June 28, 2021 on a balcony overlooking Matera on the eve of a meeting of G20 Foreign and Development ministers held in the city. (Photo by Alberto PIZZOLI / AFP) (Photo by ALBERTO PIZZOLI / AFP via Getty Images)

The International Monetary Fund (IMF) and the World Bank argued on Friday for the cross-border benefits of digital currencies issued by the central bank, suggesting that projects like a digital dollar in the United States would support global development.

The two global bodies released a report alongside the Bank for International Settlements (BIS) claiming coordination on digital currencies would upset the status quo of having to rely on expensive and slow transfer services to send money across. the whole 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.

Sir Jon Cunliffe, Deputy Governor for Financial Stability at the Bank of England, said the technology offers “the opportunity to start with a ‘clean slate'” to improve the payments system.

The IMF, World Bank and BIS prepared the report for a G20 meeting in Italy welcoming finance ministers and central bankers from the world’s largest economies.

The report envisions a central bank digital currency ecosystem where currencies could be exchanged with each other instantly and at any time. In the same way that central banks offer swap lines to each other (to ensure, for example, that US dollars are readily available for exchange), digital currencies could offer the same services to retail users.

‘Don’t hurt’

In the United States, the Federal Reserve is exploring possible designs for a digital dollar, but it is not clear whether the central bank will ultimately adopt a digital greenback.

A senior Fed official recently expressed skepticism about the usefulness of a digital currency issued by the Fed, arguing that private sector stablecoins would better facilitate cross-border payments

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

The G20 report acknowledged the risks associated with issuing a digital currency, noting that exchange rate controls and monetary policy independence in some central bank regimes could be compromised by reducing barriers to currency substitution. The report also warned that easier cross-border transactions “all other things being equal, could increase the risk of a rush on domestic banking sectors and currencies.”

At the World Bank, Gill said the risks are particularly pronounced for emerging markets and developing economies, noting that regulatory and policy concerns “will require a lot of work.”

Nonetheless, the report stressed that its main objective was to study the international implications of such technology, leaving it up to each country to decide on the national pros and cons of ultimately 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 Fed is Planning on the publication this summer of an article on the possibility of issuing a digital dollar, after which the Fed will seek advice from the public and Congress.

Brian Cheung is a reporter covering Fed, Economics and Banking for Yahoo Finance. You can follow him on Twitter @bcheungz.

Read the latest financial and business news from Yahoo Finance

Follow Yahoo Finance on Twitter, Facebook, Instagram, Flipboard, SmartNews, LinkedIn, Youtube, and reddit