IMF Explores Having A Global Central Digital Currency Platform

While central banks across the world have been exploring the developments and use cases with central bank Digital currencies, the International Monetary Fund (IMF) also joins the bandwagon.

As per the latest reports, the IMF is working on a global platform for CBDCs in order to enable transactions between countries. Speaking at a conference in Morocco, IMF Managing Director Kristalina Georgieva told about her plans regarding CBDCs.

"CBDCs should not be fragmented national propositions... To have more efficient and fairer transactions we need systems that connect countries: we need interoperability. For this reason at the IMF, we are working on the concept of a global CBDC platform,” she said.

The IMF Director believes that countries should have a “shared infrastructure” which would help to avoid the emergence of settlement blocks. The International Monetary Fund has introduced a plan for a new system to make payments between countries easier. This system uses a single record-keeping system to track transactions using digital currencies issued by central banks. It also includes features like programmability and better management of information.

Unlike public cryptocurrencies that are fully decentralized, the CBDCs are issued by central banks although they would work on the blockchain technology. Nearly 114 countries across the world are at the stage of CBDC exploration with many of them having already made a significant progress. "If countries develop CDBCs only for domestic deployment we are underutilizing their capacity,” said the IMF director.

According to her, CBDCs can play a role in increasing financial access and reducing the cost of sending money abroad. Currently, the average cost of remittances is 6.3%, totaling $44 billion each year.

Georgieva emphasized the importance of CBDCs being supported by assets. She also mentioned that cryptocurrencies can be seen as an investment opportunity when they have asset backing, but without it, they become a speculative investment.

In their FinTech note, IMF also released further details about the platform dubbed XC platform. "XC platforms offer a trusted single ledger – a document representing property rights -- on which standardized digital representations of central bank reserves in any currency can be exchanged,” said IMF.

The XC platform works similarly to central bank digital currencies. It has a settlement layer that allows trading of tokenized central bank reserves. Currently, institutions need a reserve account with their central banks for cross-border operations. With the XC platform, liquidity would come from institutions holding reserve accounts, and access to the platform would be expanded gradually.

The XC platform will have a special layer that allows institutions to create new and customized services. There will also be a layer to ensure privacy and trust. The platform won't need central bank digital currencies. Instead, it will help different assets and money from the private sector work together and create safe and reliable financial agreements.