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Retail CBDCs introduce uncertain ‘implications’ for the financial system, according to IMF director.
A multitude of unpredictable “consequences” will arise from retail central bank digital currencies (CBDCs), asserted the managing director of the International Monetary Fund (IMF).
The IMF’s Kristalina Georgieva expressed caution regarding retail CBDCs during a May 1 interview at the Milken Institute’s 2023 Global Conference.
Georgieva clarified that the IMF views retail CBDCs as having significantly more potential for error compared to wholesale CBDCs.
“We believe that wholesale CBDCs can be implemented with relatively little risk of undesirable surprises, whereas retail CBDCs fundamentally alter the financial system in ways that we do not fully understand the implications of.”
Retail CBDCs are government-backed digital currencies issued by central banks intended for use by consumers and businesses.
Wholesale CBDCs are also issued by central banks but are tailored for financial institutions to manage reserve deposits with a central bank.
The IMF is working with approximately 50 countries to promote the adoption of best practices, Georgieva stated, which she anticipates will significantly impact banks and economies in the future.
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My message to the @MilkenInstitute Global Conference: ‘Consider the unimaginable!’ Following the pandemic and Russia’s conflict with Ukraine, we must prepare for what seems impossible to foresee.
Thank you @MyStephanomics for an engaging discussion. #MIGlobal pic.twitter.com/Q2y4A6iKWH— Kristalina Georgieva (@KGeorgieva) May 1, 2023
“We are collaborating with nations; we are currently working with around 50 countries on this very subject,” the IMF executive remarked.
“We will witness a substantial transformation resulting from CBDCs.”
Related: IMF investigates CBDC design in relation to Islamic banking, identifies some amplified risks
Georgieva pointed out that “even” the United States is now involved in CBDC development, leading her to conclude that “the future” of CBDCs is already upon us:
“Even in the U.S., where this was previously a topic of limited interest, there is now engagement, and for valid reasons. The future has arrived.”
The IMF announced on April 12 that it will release a CBDC handbook to assist central banks with CBDC design and implementation. The financial agency of the United Nations indicated that this decision followed “unprecedented” levels of interest from countries globally.
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