Exclusive interpretation: frequent high-level voices, what is the IMF's attitude towards central banks' digital currencies?

Recently, IMF Chief Economist Jita Gopinas published an article in the Financial Times, arguing that digital currencies and the so-called "synthetic hegemonic currency" cannot replace the dollar's dominant position.

Earlier, Tobias Adrian, head of the IMF's money and capital market department, and others published several articles on the IMF's blog about central bank digital currencies and stablecoins, explaining the IMF's attitude towards stablecoins. And put forward a comprehensive CBDC (sCBDC ) concept.

Although his article "expressed the views of the author and does not necessarily represent the IMF", the identity and influence of the author of the article must necessarily represent to a certain extent the IMF's attitude and countermeasures towards the digital currency trend in the world. The content of the signal is worth interpreting.

I. It is the responsibility of the IMF to pay attention to and participate in the decision of central bank digital currencies (CBDC )

Tobias Adrian and others believe that in the presence of multiple CBDCs, cross-border payment issues will inevitably be involved, which will have an impact on the international monetary system. The main responsibility of the IMF is to formulate and supervise between member states. In order to maintain the international exchange rate order, face the new situation, and actively participate in the discussion and decision-making of the CBDC policies of various countries, it is the role it should assume.

"In a world where there may be multiple CBDCs, it will raise important questions about cross-border payments and the international monetary system, which is the core of the IMF's responsibility." (Tobias Adrian & Tommaso Mancini-Griffoli, 2019)

2. There are benefits to implementing CBDC , but there are also many risks.

IMF officials acknowledged that the implementation of CBDC will bring benefits such as reducing cash operating costs, improving financial inclusion, breaking the monopoly of the payment market, increasing market competitiveness, and responding to the impact of private cryptocurrencies, but also stressed that the issuance of CBDC may bring the following: risk:

Adrian believes that the issuance of the CBDC will bring about the problem of disintermediation of banks . In order to deal with deposit removal, bank costs will inevitably rise, or raising deposit and loan interest rates, may lose more customers. The high credit and liquidity of the CBDC during the crisis will accelerate bank runs and cause "blood loss". The increase or decrease in CBDC demand directly affects the central bank's balance sheet changes, and providing liquidity support for banking institutions will also bring the risk of political intervention . The cross-border payment of CBDC by strong currency countries may exacerbate the currency substitution effect of high inflation countries. In addition, failures in communication with CBDC customers, building front-end wallets, selecting and maintaining technology, monitoring transactions, and AML / CFT can all seriously damage the reputation of the central bank . Some of these challenges can be addressed by design, and the IMF is conducting research in this area.

3. Private or central bank digital currencies (including synthetic hegemonic currencies) are unlikely to impact the dominance of the US dollar in the short term (no one can challenge the hegemony of the US dollar for the time being)

Gopinas believes that digital currencies (or digital payment methods) issued by large technology companies such as Facebook, Alipay or Wechat have certain payment advantages. From an international regulatory and judicial perspective, independent accounting units decoupled from fiat currencies , Is not optimistic about its development prospects.

And the " synthetic hegemonic currency " proposed by the former Governor of the Bank of England Mark Carney, Gopinas believes that the prospects are equally slim, not enough to challenge the dominant position of the US dollar:

"In order for this publicly synthesized alternative to work, central banks, which are the basis of their currencies, will have to work together to ensure their stability and reduce perceived risks. But global demand may be in line with domestic monetary policy goals. Conflict, which will greatly reduce the attractiveness of currency participation in major countries. "(Gita Gopinath, 2020)

In fact, think about the euro, which is the single currency of the 19 countries in the euro area, and implement a single currency system without national sovereignty in the super-state organization under various development states, which will inevitably bring problems of inconsistency with its various policies. Britain Brexit to a certain extent illustrates the plight of this currency union product.

Fourth, the impact of the RMB on the US dollar's dominance is small, but it can be expected in the future

According to the report released by the IMF for the third quarter of 2019, although compared with 2014, the US dollar ’s share of foreign exchange reserves as a global foreign exchange reserve fell from 66% to 61.8%, but compared with the second largest euro (20%) and the third The yen (5.6%) is still riding. In the global payment and settlement market, the US dollar accounts for more than 40%. In addition, two-thirds of US dollar cash is distributed outside the United States.

2014Q3-2019Q3 U.S. dollar and euro share of global foreign exchange reserves

From October 2016, the RMB was included in the IMF's special drawing rights basket. It is no longer the "other currency" category in the IMF's COFER statistics, and has officially become the world's major reserve currency. It has surpassed the Swiss franc, the Australian dollar, and the Canadian dollar, and by the third quarter of 2019, the proportion of the yuan in global foreign exchange reserves had risen to 2.0%.

The rapid development of RMB internationalization has attracted great attention from Western countries. Mark Carney said in a speech last year:

"A multipolar global economy ultimately requires a new international monetary and financial system … Transitions between global reserve currencies are rare, and this complementarity helps to consolidate the position of the dominant currency. It is most likely to obtain a true reserve currency The currency of status, the renminbi, has a long way to go to be prepared to take on this task. "

Gopinas believes that due to the financial division, insufficient fiscal risk sharing, and the slow progress of the euro area governance framework, the impact of the euro on the dollar's dominant position can only be described as mild. In recent years, China has introduced various policy promotion and liquidity support measures, including establishing extensive currency swap agreements with dozens of foreign central banks, designating overseas RMB clearing banks including the United States, and establishing a payment basis for cross-border RMB payments. Facilities, the international development of the renminbi has achieved some success, but there are still some problems in terms of system security, rule of law construction and investor protection. But in the future "the world will also benefit from a more balanced system in which the euro and the yuan will play a greater role."

V. Stablecoin gave birth to comprehensive CBDC considerations

In recent years, stable currencies such as USDT have appeared. Libra coin launched by Facebook is also a stable currency, which is characterized by centralized, private issuance, and issuance with traditional assets, crypto assets or algorithms as guarantees. Its low cost, global coverage, and transaction speed The open architecture provides new options for cross-border payments for global users. Currently USDT coins can be traded in 4 legal currencies and 396 other cryptocurrencies can be traded, but the IMF believes that other privately issued cryptocurrencies have other risks.

Adrian talked about the risks of stablecoins in another blog "The Rise of Stablecoins", some of which are similar to the risks of CBDC issuance: deintermediation of banks, the monopoly of customer data by technology giants, and the possibility of forming new currencies for weak currency countries "Dollarization" helped illegal activities, mintage loss, and issuance of mortgages affected by bank runs .

Gopinas acknowledged that the settlement of cross-border remittances under the current international monetary system is slow and costly, placing a heavy burden on those with low incomes, and indeed needs improvement.

Adrian proposed the concept of "comprehensive CBDC" in the article "From stablecoins to central bank digital currencies" (2019):

"The integrated CBDC model envisages the issuance of digital currencies (either account-based or distributed account-based tokens) by private companies to the public. These companies are responsible for what they do best: innovation and communication with customers. The central bank requires digital The currency is fully supported by central bank reserves and supervises the currency issuers to provide trust in the system. This solution reflects the advantages of both private companies and central banks, and introduces competition between private companies, which can provide more attractive figures Currency and interface. It also reduces central bank costs and risks. "

IMF researchers believe that the possibility of implementing a comprehensive CBDC , the risks of stablecoins , and their impact on the macro economy deserve further study.