IMF Yet Again Rejects Crypto Currencies, We are Not Surprised Though

The study just issued by the International Monetary Fund (IMF) was given the title “A Foundation of Trust.” According to the report, the world’s central banks should take advantage of the technological breakthroughs by cryptocurrencies. (1) Additionally, banks must do so while simultaneously establishing CBDCs to construct a rich and varied monetary system.

The study also brought attention to the problems associated with cryptocurrency. This work was written in collaboration with three members of the Bank for International Settlements (BIS). These individuals include Agustin Carstens, the General Manager, Jon Frost, who is in charge of economics for the Americas. And Hyun Song Shin, is in charge of research and is an economic adviser.

It would appear that there are some flaws

In the article, it was mentioned that cryptocurrencies, due to the technical capabilities they possess, have recently received a lot of interest. These characteristics include the capability to program payments (programmability) and the ability to integrate many processes into a single transaction (composability). Additionally, cryptocurrencies have the potential to generate a digital representation of monetary resources and other things (tokenization).

A safe and stable monetary system that is accountable, productive, and open to all participants is essential. Even though cryptocurrencies’ overarching goal is to function as a replacement for the conventional banking system, their underlying design problems call this goal into question.

In addition, validators need to be compensated to confirm transactions, which results in DeFi congestion, which causes consumers to switch to alternative cryptocurrency platforms regularly. Due to the splintered nature of the DeFi ecosystem, widespread adoption of cryptocurrencies is now impossible.

In addition to that, it is extremely anonymous and decentralized. According to the publication, this is one of the reasons why there is very little responsibility in situations involving fraud or scams.

The issuance of sovereign currencies, the execution of payments to their finality, the facilitation of the smooth running of payment systems, and the regulation of private operations are all responsibilities of central banks. The public’s confidence in the central banks is a direct result of their functions. According to the findings of the research paper, trust is an additional factor essential to the successful operation of a financial system.

Central banks offer CBDCs in the digital world, and these CBDCs use the features of bitcoin described earlier. These characteristics include the ability to program and compose. In addition, they inspire confidence because central banks back them.

Imf Yet Again Rejects Crypto Currencies, We Are Not Surprised Though
The study also makes a case for incorporating the technological breakthroughs made possible by cryptocurrencies into the CBDC implementation process. As a result, this would eliminate volatility and pave the way for transactions based on trust.

BIS Agrees With IMF

In June of 2022, the Bank of International Settlements (BIS) released a paper that expressed views towards cryptocurrency that were comparable to those previously expressed. (2) Given that the decline in value of cryptocurrencies had only started in May of 2022, the research was highly critical of the digital asset class.

In addition, the analysis brought to light what the BIS refers to as the structural faults of bitcoin. Because of these problems, this asset type is not suited for use as the foundation of a monetary system.

In June 2022, the BIS announced that they would launch a market intelligence platform for cryptocurrencies. (3) The platform was established to investigate the effects of cryptocurrencies on market capitalizations, economic activity, and threats to the viability of financial systems.

A recent report concluded that “digital technologies promise a bright future for the monetary system.”

Adopting cutting-edge technology in CBDCs, such as tokenization and the underlying technological architecture that supports it, can contribute significantly to developing robust monetary systems.

Leave A Reply

Your email address will not be published.

Disclaimer: All of the information on our website is posted in good faith and is only meant for general information. If a reader acts on information they find on our website, they do so at their own risk.

This website uses cookies to improve your experience. We'll assume you're ok with this, but you can opt-out if you wish. Accept Read More