IMF | Money at a Crossroad: Public or Private Digital Money?

Digital money is reaching a crossroad, where today’s policy and regulatory choices will affect the evolution of the monetary and payments landscape. Should future money in circulation be mostly publicly issued in the form of central bank digital currency (CBDC) or privately issued, or is there space for a healthy balance of the two? How do trends in “private” crypto assets affect plans to develop CBDC? This seminar will explore these and other questions with high-level policymakers from around the world.

EVENT RECORDING HERE (April 18, 2022)

Digital money is reaching a crossroad. The seminar discussed the prospects of digital public and private money and policymakers’ considerations in supporting and regulating their development.

Key Points:

• Future of digital money. Georgieva recognized that digital money would play a bigger role in the future with innovations driven by the private sector and trust built by the participation of central banks, regulators, and standard setters. Sitharaman noted that digital money can improve financial inclusion and facilitate more targeted government transfers. Menon noted that the most revolutionary future is to build a tokenized economy that monetizes previously unmonetizable assets and records them on a distributed ledger.
• Digital money in emerging markets. Sitharaman noted that the Indian government has been focusing on building digital platforms as public goods to embrace more innovation in this field. Campos Neto highlighted that the Central Bank of Brazil is closely following developments in digital money, including the vertical integration of the payment, content and messaging functions by Big Techs, as well as the new protocols based on which the private digital money is operating.
• CBDC. Georgieva noted that CBDC is being considered by over 100 countries based on an IMF survey. Menon and Campos Neto recognized that wholesale CBDC could facilitate cross-border payments. Campos Neto emphasized that enhancing interoperability of CBDCs and coordination among CBDC-issuing countries would be key for their success.
• Regulation. Campos Neto noted that regulation needs to be forward-looking as the development of digital money is fast and non-linear. Sitharaman stressed the need to have a global and technology-driven approach to regulate digital money.

Quotes:

“We are at the crossroads around how fast, how far, and in what proportions, but I see this as a one-way street in which digital money is going to play a bigger role.” Kristalina Georgieva

“What people need is something [as money] that has five characteristics: fast, cheap, secure, transparent, and open.” Roberto Campos Neto

“We should look at the underlying activity, and the nature and quality of the crypto assets, to determine specific risks they pose and the right-size regulation to address those risks.” Ravi Menon

“Regulation using technology will have to be so adaptive and nimble that it has to not be behind the curve, but be sure that is it on the top of it.” Nirmala Sitharaman

Compliments of the IMF.