International Monetary Fund’s (IMF) chief economist, Gita Gopinath, said on Tuesday that digital currencies aren’t threatening the US dollar’s role in the global trade.
She also mentioned that while cryptocurrencies seem to offer intriguing possibilities, they still aren’t globally accepted and lack the infrastructure they need to defeat the US dollar in order to become a global reserve currency. Many voices in the financial sector have expressed the notion that virtual currency may challenge the power of the US dollar, including Mark Carney, Bank of England’s governor. Gopinath thinks that even if SHCs would rebalance the global trade, they’d need to be accepted on the global market, and this isn’t very likely to happen.
Many Central Banks Talking about Releasing Their Own Digital Currency in 2019
As reported by IMF, the US dollar represented more than 60% of the global exchange reserves in the third quarter of 2019, while the Euro comprised 20% of the same reserves. Also last year, many central banks have openly spoke of launching digital currencies, with People’s Bank of China (PBOC) noting this past summer it’s intention of issuing the digital Yuan in order to compete with private initiatives such as Libra.
Federal Reserve Chairman Jay Powell mentioned in Nov 2019 that even the US central bank is looking into how a digital dollar would bring benefits to the country’s economy, not to mention that Christine Lagarde, European Central Bank’s chief, has talked about a potential digital Euro.
The IMF Is Researching Digital Currencies
Back when Christine Lagarde was running the IMF in 2018, she said central banks should be serious about exploring the possibility of issuing CBDCs that would permit financial inclusion and increase payments’ privacy. However, the same IMF said CBDCs shouldn’t be adopted prematurely either.
Back in Sept 2018, it advised Marshall Islands officials to rethink the launch of a digital currency that would work together with the US dollar, as the country needed to introduce stricter anti-money laundering regulations. IMF mentioned that in case this wouldn’t happen, banking relationships with US banks would be lost and access to the US dollar decreased, which would cut the country from the global financial system.