International Monetary Fund (IMF) report: Electronic money may replace traditional currency

According to a report by Coindesk on July 17, a recent report released by the International Monetary Fund (IMF) pointed out that as digital currencies and cryptocurrencies linked to the law are more widely used, cash and bank deposits may gradually lose their Original advantage.

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On Monday, the International Monetary Fund released a financial technology report called "Rise of Digital Money," which focuses on how technology companies will compete more broadly with major banks and credit card companies in the future. The author wrote in the introduction:

Nowadays, more and more consumers are beginning to use digital currency, and at the same time, more and more policy makers are also concerned about cryptocurrencies. E-currency is constantly challenging cash and bank deposits, which are monetary values ​​that are electronically stored and anchored in currencies such as the euro or the US dollar.

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The report warned that cash and bank deposits would eventually “be faced with fierce competition from digital currencies and could even be surpassed by these new forms of value transfer”. The report reads:

With the increasing popularity of electronic money, electronic money forms like stable currency 'may be more convenient as a means of payment'.

But at the same time, the author further questioned the stability of its value:

After all, from an economic perspective, it is redeemed with a face value as a guarantee, similar to a private investment fund. If you charge 10 euros and the current one is still 10 euros, the issuer must be able to deliver on this promise.

In addition, the report also pointed out that banks should be able to counter such new types of payment methods, such as providing better services or similar e-money products, but policy makers have also warned that the banking industry may be affected by the emergence of digital currency. Great impact. But even so, banks are likely to continue to exist, as companies offering these new payment methods may be transformed into banks and use their data advantages to provide targeted credit to customers. The report also introduces different types of new payment mechanisms, including “i-money”: it “is equivalent to electronic money, but unlike other digital currencies, it provides variable value currency redemption, so it is A stock-like tool.” The report uses Facebook's cryptocurrency project Libra as an example of i-money (the project is expected to be linked to a basket of fiat currencies and government bonds) and writes:

Libra can be converted into legal currency at any time in exchange for investors' share of the portfolio without any price guarantee. The transfer of Libra's main reserve shares will include a payment.

In terms of regulation, the central bank will play an “important role” in shaping the future of electronic money. They have the ability to make rules and have a major impact on the adoption of electronic money. The report reads:

One solution is to provide a channel for selected new e-money providers to access central bank reserve funds, but with strict screening criteria. Doing so increases the risk, but it also has various benefits. Importantly, central banks in some countries can work with providers of electronic money to effectively provide 'central digital currency (CBDC)', a digital version of cash.

In addition, the report also proposes a different public-private partnership solution called “synthetic CBDC” (sCBDC), according to which the central bank will provide electronic money providers with settlement services including the use of central bank reserves. . However, “all other functions will be the responsibility of the private e-money provider under supervision.”

According to the report, sCBDC will be a lower-cost, lower-risk model that will allow the private sector to “make good interactions with customers while innovating” and bring “trust and efficiency” to the central bank.

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