These eyebrow-raising events can no longer be dismissed as fringe activities given the scope of multilateral development organizations such as the IMF and their direct challenges to authority.
After the slow start, the IMF is a little more angry with the fight and is pushing for a flat-linked synthetic digital currency, or the Central Bank Digital Currency (CBDC), as a Bitcoin counterweight.
“Carefully and accurately designing digital currencies, maximizing their profits and assembling adoption within legal and regulatory systems that minimize risk can be at stake in an era of fulfilling the promise of change. Tobias Adrian, director of the IMF’s currency and capital markets, told the Digital Breton Woods Forum with the London Stock Exchange Group in April 2022.
Adrian suggested two major ways central banks, government sponsors and Bretton Woods executives can use technology to improve the utility of money and put their position in the sandbags.
One way is to use the type of smartphone-based eMoney already issued by groups such as WeChat Pay and Alipay in China, or M-Pesa in Kenya.
According to the IMF, this type of eMoney (as a digital representation of Fiat) is conceptually stable because it allows users to pre-fund their mobile wallet and take advantage of cheaper rates than mobile payment services. Similar to a coin.
According to the IMF, to explain the rise of eMoney, Chinese tech giants processed $ 18.7 trillion in eMoney transactions a year. This exceeded the total transaction volume processed by Visa and Mastercard over the same period.
Adrian said smartphone-based eMoney could be an acceptable model for synthetic central bank digital currencies as users trade on central bank debt with relevant oversight and regulation. I did.
According to the IMF, this model is superior to central banks issuing their own digital currencies because it promotes competition between eMoney providers for the provision of services and innovation while maintaining a single account unit.
Another option, according to Adrian, is for central banks to issue their own CBDCs to increase financial inclusion in emerging markets and reduce transaction costs.
However, IMF policymakers have warned that this model could hurt commercial banks. That is because “it can lead to a reduction in bank margins or an increase in lending rates, which in turn can reduce credit to the economy.”
Private and public crypto
In many respects, the IMF and Fiat policymakers are at the mercy of the risks that private cryptocurrencies pose to their missions in front of their faces.
In May, a $ 26 billion self-proclaimed private stablecoin named Terra collapsed to zero After the suspicious peg used to tie its value to the US dollar broke.
Although Tetherstablecoin boasts a market capitalization of $ 74 billion, powerless regulatory agencies are not guaranteed to be fully backed by cash or cash-equivalent reserves.
Stablecoin is commonly used in the crypto siled decentralized finance (DeFi) world, and the IMF now also wants DeFi regulation.
“DeFi’s anonymity, lack of centralized governance bodies, and legal uncertainties invalidate traditional approaches to regulation,” admitted in a April paper on financial stability. “As DeFi, Stablecoin and traditional financial institutions are more interconnected than ever, requiring enhanced regulatory oversight and a globally consistent regulatory framework.”
To be clear, the horse is bolted. Closing the stable doors of private crypto is now impossible and the story is cheap.
Fortunately for the IMF, cryptocurrencies cannot replace government-sponsored money as a source of liquidity or as a unit of stable accounts for pricing goods and services. Something like table coins can challenge it as a way to buy and sell things.
The Bretton Woods facility probably wants to see eMoney as a crypto killer, but to do that, the game needs to be dramatically boosted.