IMF “CBDC and private currency can coexist…I need to catch two rabbits with stability and innovation”
The International Monetary Fund (IMF) published an article on its official blog on February 18, 2021 (hereafter local time), stating that public and private currencies can coexist in the digital age.
He said central bank digital currency (CBDC) and privately issued digital currency coexist and complement each other, and central banks do not have to choose between the two options.
The current monetary system has a dual structure in which the private sector, such as banks, telecommunications companies, and special payment companies, provides various currency options based on currencies issued by public sectors such as central banks.
“It is important to balance the two sectors,” the IMF emphasized. “The existing monetary system has many advantages of the stability and efficiency supported by the public sector, plus the innovation and diversity that the private sector provides.
Privately issued currencies are superior to public currencies in terms of △innovation △convenience △user-friendly △adaptability. However, it is recognized as a valid payment method within the scope of guaranteeing repayment in public currency. In recent years, central banks are burdened with technological innovation as they enter the digital age.
The IMF emphasized that “CBDC is similar to a smartphone and operating system (OS).” .
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Central Bank and Private Cooperation Important
The IMF advised that the public sector, which is difficult to keep up with the pace of technological change itself or the competitiveness of the private sector, could cooperate with the private sector in the digital currency sector. Central banks can play a key role in maintaining the stability and efficiency of payment systems as well as supporting regulation and oversight, and private currencies can add innovation and diversity to it.
“The central banks of each country should consider how to use the private sector when promoting the issuance of CBDC,” said the IMF. “The existing dual currency system can be extended into the digital era.”
The IMF also proposed two structures in which CBDC and private currency can coexist.
One is the way private innovation technologies develop around CBDC. It’s the same way app developers develop various functions for smartphones and operating systems. Developers can expand CBDC usability by adding additional functions such as automatic payment and phone number transfer, as well as wallets for CBDC.
The other is how CBDC and private digital currency operate in parallel. It is a method that simultaneously supports CBDC and private digital currency. It will be able to provide users with faster innovation and more options.
The IMF said, “Private currencies that are guaranteed to be valued and reliably redeemed in public currencies will be able to coexist with CBDC. You should be able to do it,” he explained.
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