IMF: 15 Central Banks Explore Digital Assets
A recent report by the IMF shows that digital asset technologies are not being dismissed by traditional finance institutions.
According to the report, the presence of alternative means of payment may shrink the importance of cash. Some central banks are looking at a cashless society in the future, and see that a fully digitized means of payment that is also secure is a way forward. The technology itself, which involves a faster and easier transfer of assets, remains important. In a globalized world joined together by technology, international remittances still lag, and distributed ledgers and blockchain technology is seen as an answer.
The report, cited by the Washington Post, finds that People’s Bank of China is especially active in exploring the various aspects of digital currencies. Sweden’s and Norway’s banks are interested in creating a cashless society, potentially using blockchain technology. A separate news report by Amwal Al Ghad showed that the Central Bank of Egypt is also interested in issuing a digital currency.
Previously, the European Central Bank has explored Bitcoin and blockchain technology, but concluded that the approach is too limited to serve the real needs of the finance sector. Blockchains still seek solutions to scalability and the ability to handle multiple transactions per second in a secure manner.
Increased interest in digital currencies is seen in countries where fintech apps are booming in order to achieve fast and secure mobile payments.
The involvement of central banks is a sign of mainstream adoption, but also goes against the perception of digital currencies as a form of freedom from centralized control. Central banks, which are “lenders of last resort” to commercial banks, set a standard for monetary policy, usually with the aim of encouraging or cooling down the economy. Digital currencies, however, aim to work as “sound money” with a fixed supply, thus having a simple and automatic monetary policy. Critics of this model see sound money as obsolete, while digital coin proponents still believe this is a better approach to inflationary money.