The International Monetary Fund (IMF) is actively working on a global platform to enhance interoperability among Central Bank Digital Currencies (CBDCs) launched by various countries, according to a report by Reuters. The IMF believes that establishing a widespread agreement on such a platform is crucial to prevent private market cryptocurrencies from filling the functional gap left by CBDCs.
IMF Managing Director Kristalina Georgieva stated that the agency's platform aims to facilitate CBDC transactions between countries. During a conference in Rabat, Morocco, she emphasized the need for CBDCs to transcend national boundaries, saying, "CBDCs should not be fragmented national propositions. To have more efficient and fairer transactions, we need systems that connect countries: we need interoperability."
Georgieva further highlighted that cryptocurrencies lacking the characteristics of CBDCs are often speculative investments. CBDCs, on the other hand, are digitally native currencies issued by central banks and can be backed by fiat currency, assets like gold, or treated as equivalents by the central bank.
One of the potential advantages of CBDCs is their ability to promote financial inclusion and reduce payment costs. Currently, average remittance fees amount to 6.3% or $44 billion per year. Georgieva stated, "If countries develop CBDCs only for domestic use, we are underutilizing their capacity."
The IMF Managing Director noted that 114 countries are already exploring CBDCs to some extent, with 10 countries having made significant progress. However, some countries, such as the United States and Canada, are still deliberating on whether it is worthwhile to develop a CBDC.
While decentralized cryptocurrencies like Bitcoin have been lauded for their potential in reducing remittance costs, the IMF has expressed concerns about their impact on economic stability. El Salvador, for instance, made Bitcoin legal tender in 2021 but faced criticism from the IMF regarding the potential destabilization of the country's economy.
Private stablecoins like Tether (USDT) and Circle's USDC have also come under scrutiny due to concerns about their pegging mechanisms and reserves. Earlier this year, the IMF recommended regulating stablecoin issuers similar to banks in a five-point crypto regulation scheme.
The IMF's efforts to establish a global platform for CBDCs demonstrate the organization's recognition of the importance of interoperability in ensuring the effective functioning of digital currencies. As countries continue to explore CBDC development, addressing technical and regulatory challenges will be crucial to unlock the potential benefits of these digital assets and facilitate seamless cross-border transactions.