IMF Shows True Colors About Crypto As CBDCs Off To A Slow Start

South Koreans will have the opportunity in the coming year to utilize deposit tokens based on a CBDC (Central Bank Digital Currency) through a pilot initiative overseen by the Bank of Korea (BOK). The pilot program will reportedly enable 100,000 individuals to make purchases using deposit tokens issued by commercial banks in the form of CBDCs, functioning akin to a voucher at retail establishments.

The announcement by the BOK occurs shortly after Kristalina Georgieva, Managing Director of the International Monetary Fund (IMF), advocated for countries to take a more proactive stance toward CBDCs. 11 countries, including some in the Caribbean and Nigeria, have already launched CBDCs, while over 120 countries are exploring their implementation.

CBDC adoption remains slow

During a speech in Singapore, Georgieva emphasized the need for the public sector to provide guidance to act as a catalyst, ensuring safety, efficiency, and countering fragmentation. Despite her efforts, several countries implementing CBDCs have experienced limited adoption. Georgieva likened the efforts to a nautical journey, urging an increase in speed to keep pace with the rapidly changing world.

The IMF, concerned about the lack of agreement on a common CBDC platform, warns that a vacuum could potentially be filled by cryptocurrencies like Bitcoin (BTC) and Ethereum (ETH). The organization has also released a virtual handbook to assist countries in implementing interoperable CBDCs.

An underlying fear

As cryptocurrencies are decentralized and not tied to any government or central authority, they could become a preferred means of international trade, potentially revolutionizing the global financial system. The IMF cautions that this shift could lead to market manipulation and criminal activities, however the cryptocurrency community was quick to answer back by saying these illicit operations have been a recurring issue in several other markets even before crypto existed.

Nevertheless, the IMF, expressing palpable concern, emphasizes the need for strong cryptocurrency regulation. Georgieva suggests that if regulation fails, banning these assets to prevent financial stability risks should be considered. While these varied views on cryptocurrencies may stem via concerns about money laundering, terrorist financing, consumer protection, and market volatility, experts believe that the underlying fear of the IMF may be that crypto can be used to improve financial services and promote financial inclusion in a way that CBDCs and centralized institutions cannot.