February 10, 2022
IMF Backs Nigeria, Others Over Use of Digital Currency
The International Monetary Fund, IMF, has said there is no universal case for central-bank digital currencies, CBDC.
Taking this position yesterday, the IMF Managing Director, Kristalina Georgieva, urged policy makers to carefully weigh trade-offs as financial innovation enters a new phase with Nigeria and Bahamas being pioneers.
Bloomberg quoted Georgieva as saying, “So-called CBDCs could boost financial inclusion in some countries, while providing a secure backup for payment systems in others.”
She, however, cautioned that their design must also take financial-stability and privacy considerations into account to avoid a potential legislative “deal breaker.”
According to Bloomberg, she stated: “Policy makers will need to resolve many open questions, technical obstacles, and policy trade-offs.
“If CBDCs are designed prudently, they can potentially offer more resilience, more safety, greater availability, and lower costs than private forms of digital money” such as “unbacked crypto assets.”
The remarks come alongside the publication of an IMF report on digital currencies, which is being considered by about 100 countries.
Pioneers like the Bahamas and Nigeria have already started allowing the public to use CBDCs, while China is expanding an experiment that already includes more than a hundred million users.
One common strand, she said, is central banks’ commitment to minimizing the impact of CBDCs on the financial system. Active projects studied by her staff — in the Bahamas, China, and the Eastern Caribbean Currency Union — involve CBDCs that aren’t interest-bearing, making them less attractive for savings than traditional bank deposits. They also place limits on holdings.
Tobias Adrian, financial counselor of the IMF’s monetary and capital markets department, said developing economies could face the risk of their constituents adopting the digital currencies of foreign nations.
