Top IMF Official Calls For Synthetic Central Bank Digital Currencies (CBDC) Development
In a new Zoom-streamed talk show by Jeremy Allaire, CEO of Circle, ‘The Money Movement’, deputy director from the International Monetary Fund (IMF), Tommaso Mancini-Griffoli, spoke of the possibilities and advantages of a central bank partnership with the private institutions in the development of a synthetic CBDC.
A synthetic CBDC is a central bank-controlled and regulated digital currency with the partnership of private firms in development. These digital currencies are backed by the central banks’ monetary policies and liabilities but issued through a private institution.
Mancini-Griffoli believes that the challenges central banks face in technical developments could be solved by private partnerships in CBDC projects across governments.
While the development and regulation of a system integrating the public-private relationship is a hard nut to crack, Mancini believes this would be the best way to introduce CBDC’s.
IMF support in CBDC’s development
Earlier in 2019, Tobias Adrian, the IMF’s director of the Monetary and Capital Markets Department, said the separation of powers between the central bank and private firms in creating a CBDC will provide an advantage for both parties. Central banks concentrate on providing settlement and regulations while private firms focus on development. Mancini said:
“This public-private partnership [of a synthetic CBDC] is intended to conserve the competitive advantages of the private sector: to interface with clients and innovate, and the comparative advantage of the central bank: to regulate and provide trust.”
On the flip side, Mancini explains that the private firms will be tasked with the “day-to-day operations” of CBDC in use. The companies will focus their efforts on the technical designs of the synthetic CBDC, client screening and customer services etc.
Strong views on public-private partnerships
Officials and statements from the IMF itself have been leaning towards a regulated central bank digital currency.
Adrian, who is Mancini’s boss, in October 2019, spoke ahead of the annual meetings of the World Bank and the IMF saying the digital currency industry will explode in the coming years urging the involvement of central banks.
Despite IMF’s chief economist, Gita Gopinath, sharing similar views on the growth and the possibilities digital currencies offer, she believes the dollar is still in firm control in global trade systems and it’ll take digital currencies a while to replace it.