The International Monetary Fund (IMF) is “working hard” on a “global CBDC (Central Bank Digital Currency) platform,” the IMF managing director announced Monday.
“If we are to be successful, CBDCs could not be fragmented national propositions,” Kristalina Georgieva said during a policy roundtable discussion with Bank Al-Maghrib in Rabat, Morocco on CBDCs.
“To have transactions more efficient and fairer, we need systems that connect countries. In other words, we need interoperability,” she said in reference to a global CBDC.
“For this reason, at the IMF we are working hard on the concept of a global CBDC platform to trade and to manage risks,” she continued.
Georgieva touted CBDCs as “giving more people access to financial services, and at a lower cost, enhancing payment system “efficiency” and “resilience,” and making cross-border payments “cheaper and quicker” while reducing the number of needed intermediaries.
She cautioned, however, that “easy access to foreign CBDCs could lead to risks of currency substitution and capital flow volatility,” suggesting that a global CBDC would enhance “international economic stability,” a goal the IMF has tasked itself with promoting, she noted in a press release statement on the roundtable discussion.
Asked whether she thought “economic integration” could happen without CBDCs, Georgieva admitted that progress on the matter could be made either way but said, without delving into specifics, that if CBDCs are only used domestically, “we are under-utilizing their capacity.”
Georgieva was also asked what kind of timeline for a global CBDC platform could be expected but did not address the question.
She pointed out that 114 central banks are at one stage or another of exploring CBDCs and that about 10 have already “crossed the finish line,” adding, with a smile, that the largest CBDC pilot program is taking place in China, with 118 million participants.
Georgieva listed three main “policy” challenges in bringing about cross-border CBDC payments: “Common settlement asset,” “common legal and regulatory frameworks,” and “shared infrastructure,” suggesting global governance can aid the rollout of a global CBDC.
In April, the IMF announced that it was creating a CBDC handbook to help central banks and governments across the world with their CBDC rollouts, with former People’s Bank of China deputy governor and current IMF deputy managing director Bo Li saying the handbook would “hopefully help countries make as well-informed decisions as possible” regarding their CBDCs.
He boldly proposed that CBDC transactional data could be used like it is in China to create social credit scores.
“Those transaction data in terms of how many coffees I drink every day, where I buy coffee, do I use UBER every day and what kind of working hours I have. Those non-traditional data can be very useful for financial service providers to give me a credit score,” Li said in October.
Sam Callahan, a lead analyst for Swan Bitcoin, has pointed out on Twitter that the Bank of International Settlements (BIS) has been designing an international CBDC program, or “multi-CBDC system,” since 2020, with “ongoing pilot projects” like Project mBridge” that are “exploring how one common system can be used to control & facilitate the flow of international payments.”
Callahan noted that while “no one can control the protocol” in Bitcoin — which he argued solves problems that CBDCs are ostensibly meant to address — with a multi-CBDC system, the model proposed by the BIS would be governed by a centralized body, which Callahan describes as “a group of unelected bureaucrats.”
“The BIS isn’t interested in an already functioning solution like Bitcoin because it removes the need for intermediaries altogether, disrupting their entire business model when it comes to international payments. Bitcoin takes power away from institutions like the IMF and BIS.”
So the design the BIS has chosen to run with, and which lies at the heart of all of its ongoing pilot programs, is CBDC “Model 3”. Model 3 is the most centralized of all of the BIS designs, is governed by one rulebook, & gives governance power to a “single set of participants.”
He further highlighted the fact that “in the various BIS CBDC pilot projects, it is the BIS itself who is appointed as the platform operator,” even while the BIS has acknowledged the risk that “public authorities,” including central banks, “would use CBDC systems as an instrument for state surveillance and control.”
Earlier this month, the World Economic Forum (WEF) issued a report titled “Reimagining Digital ID” in which it framed digital ID as a necessary component of CBDCs.
“Some nations are beginning to understand digital ID as a prerequisite to developing a central bank digital currency (CBDC) and other payment innovations,” stated the document, according to The Sociable.
The report admitted that “the greatest risks arising from digital ID are exclusion, marginalization and oppression,” and further notes that, even if digital IDs are not mandated by law, citizens could still be coerced into using them as they would otherwise be excluded from many parts of society.
“As an ID system expands, the consequences of not participating in it can become so severe as to make registration effectively unavoidable,” the report states. “When access to a good or service is conditioned upon the possession of a form of ID, and that ID is widespread, individuals may be effectively coerced into obtaining that form of identification, even if there is no legal basis for requiring it.”
This is something that many suffered firsthand during the COVID crisis, as the unvaccinated were in many countries banned from entering restaurants, stores, cultural events, and even their workplaces in an attempt to coerce them into taking the COVID shots.
The Atlantic Council has published on its website a Digital Currency Tracker by which the CBDC status and progress of countries around the world can be monitored. As of June 20, 2023, 11 countries have fully launched a CBDC, 18 have begun pilot testing, and 32 are in the process of developing a CBDC, including the U.S. and most of Europe.
