IMF: Central banks need to compete with cryptocurrencies and upgrade Fiat

IMF: Central banks need to compete with cryptocurrencies and upgrade Fiat

Deputy Director of the Department of monetary and foreign exchange markets the International monetary Fund estimates that Central banks need to offer “improved” Fiat currency, to reflect any potential competition from cryptocurrencies.

These proposals were made in an article published on Thursday, authored by Deputy Director of Dong Hae. In the article, under the loud name “Monetary policy in the digital age”, Dong Hae argues that Central banks should consider some of the concepts, to “prevent competitive pressures by improving cryptocurrency with Fiat currency and the application of modern technology”

Arguments Dong Hae is based on the possible wider adoption of cryptocurrencies. In his opinion, it is likely that Central banks will lose the ability to influence the economy through tactics, for example, changes in interest rates.

The Deputy Director suggested that tighter regulation could be an incentive for Central banks.

“The government needs to regulate the use of crypto-currency assets to prevent regulated arbitration, and any unfair competitive advantages of cryptocurrencies derived from lighter regulation. This means strict application of measures to prevent money laundering and financing of terrorism, strengthening the protection of consumers and the efficient taxation of cryptocurrency transactions.”

Dong Hae suggested that the Central banks will create their own digital assets:

“For example, they could make money of the Central Bank comfortable in the digital world, releasing their own tokens to Supplement physical cash and Bank reserves. This digital currency from the Central Bank (CBDC) could share in a decentralized p2p way, as crypto-currencies”— says the article.

This idea already explores a number of Central banks, although opinions about the impact of these proposals diverge. For example, the official representative of the monetary authority of Hong Kong (de facto Central Bank of the region) said that he currently has no plans to release the digital currency, despite all the research in this area.

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