“Just A Matter Of Time Before We See Massive Disruption” Says IMF Director On Digital Currencies
The world’s finance ministers and central bankers along with the heads of the main international economic institutions are coming together this week in Washington for the annual meetings of the World Bank and the International Monetary Fund (IMF).
“In the U.S., and other countries around the world, it is just a matter of time before we see massive disruption,’’ Tobias Adrian, the director of the IMF’s monetary and capital markets department said in an interview.
“There is at least the potential that new technology might lead to a new global payment system fairly rapidly,” Adrian added.
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The G-7 will be releasing broad guidelines for regulating money on Thursday. They will further discuss if the central banks should issue their own digital currency. Adrian’s team is continuing to this report.
The US Looking at Central Bank Digital Currency
As we have seen Sweden has already begun working on its e-krona project in 2017 and has also published two reports on the topic. China has been researching on central bank digital currency for the past five years and is very close to launching its CBDC. The Bank of Canada has also launched a formal research project in partnership with other monetary authorities.
The US central bank, however, is currently focused on updating the domestic payment system to real-time settlements to move money instantly. However, a top Federal Reserve official on Wednesday said the Fed is, in fact, “actively looking at and debating” issuance of its own digital currency amidst the concerns about the dollar being at risk of losing its world reserve currency status.
“We have not at the Fed decided to pursue or drive to develop a digital currency, but it’s something we’re actively looking at and debating,” said Federal Reserve Bank of Dallas President Rob Kaplan during a local business event in Austin, Texas.
He further talked about how people around the world are “working really hard” to find alternatives to the dollar, as such, “it’s something we’re watching very closely.”
Although “dollar may not be the world’s reserve currency forever,” he has confidence in the dollar for the “foreseeable future.”
Stablecoins “Could Disintermediate The Role Of Banks In Payments”
The US central bank, however, isn’t looking to be a first mover in the space as there haven't been any formal digital currency research efforts from the Fed. It is rather focused on building its real-time payment system FedNow.
A digital currency “is really about the industrial organization of the payment system,’’ said former Richmond Fed President Jeffrey Lacker. “The Fed has always aligned itself with the banking system, and FedNow is about preserving the privileged place banks have in that system.’’
Meanwhile, on Wednesday Fed Governor Lael Brainard spoke about the challenges of stablecoins — “whose widespread migration to one or more global stablecoin networks could disintermediate the role of banks in payments.”
Adrian says, when it comes to the digital currency, the central bankers often argue, “What problem are you trying to fix?” Primarily, its changing payments needs and expensive and slow legal services, he said.
As economists, “we like innovation and we like competition,” the IMF director said.