IMF Spring Meetings: Digital Money Is Imminent, But No Decentralization in Sight

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Notably, he argued that not only the decentralized forms of money underlain by permissionless public ledgers would benefit from the internet-like open design, but sovereign digital money would as well.

Cœuré - the same ECB official who once had reportedly called bitcoin "The evil spawn of the financial crisis" - expressed confidence that central bank-issued digital money would be prominent in the financial system of the future, but warned that "Decentralization, if not properly managed, can introduce fragility" to the system.

"New Economy Talk: CBDC: Should Central Banks Issue Digital Currencies?" was another event among the Spring Meetings germane to the domain of crypto.

Moderated by Tommaso Mancini-Griffoli - the deputy division chief in the IMF's Money and Capital Markets Department - the event had Deputy Governor Cecilia Skingsley of the Swedish Riksbank and Bank of Canada's Deputy Governor Timothy Lane pondering the prospects of digitizing sovereign money.

When talking about the possible design and functionality of central bank digital currencies, Riksbank's Skingsley contended that such an instrument will have to be highly functional and the best at fulfilling citizens' needs - otherwise, "Other versions of money could come in, perhaps cryptocurrency," implying that government-issued digital money would stand in direct competition with its decentralized counterpart.

By and large, the discussion proceeded along the lines of designing a convenient digital reincarnation of fiat money rather than envisioning paradigmatic changes in the nature of state-issued money that a crypto-libertarian would welcome.

The ideas on digital money that most of the financial world's notables expressed on the floor of the IMF-hosted forum largely resonate with those articulated in the June 2018 issue of the organization's quarterly magazine, "Finance and Development," dedicated almost entirely to the future of currency, and heavily focused on the threats and promises of blockchain.

In their primer on cryptocurrencies, economist Antoine Bouveret and the assistant director of the IMF's Strategy, Policy and Review Department, Vikram Haksar, point out that such assets are often costly to produce and that "Decentralized issuance implies that there is no entity backing the asset." They also mention that crypto assets might pose a threat to central banks' ability to conduct monetary policy by weakening their centralized control over the money supply.

His solution? Make fiat money - digital or not - a more attractive unit of account and settlement tool, naturally.

The incumbents have resources to make digital fiat appealing to consumers and the regulatory power to limit competition from potential decentralized alternatives, so it may take a while before blockchain-powered, peer-to-peer financial networks have a chance to give central banks a run for their money.

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