As more countries issue or develop central bank digital currencies (CBDC), the prospect of a digital currency as part of mainstream finance is increasingly becoming a reality. How will the digital currencies affect the international reserve ecosystem?
A recent paper by the International Monetary Fund (IMF) seeks to provide the answer to that question. This year’s pandemic has already hastened the move toward a reconfiguration of the international reserve system. “COVID-19 could alter the global economic landscape … trigger strategic shifts in reserve holdings … in particular, the emergence of digital currencies and advances in payment systems could speed up the transition to alternative and, perhaps, less stable configurations of reserve currencies.” the paper’s authors write.
- A new IMF paper states that the international reserve ecosystem will become less stable after the introduction of digital currencies.
- The paper’s authors state that the U.S. dollar will retain its dominant status in the international reserve ecosystem even after the introduction of digital currencies.