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.
Key Takeaways
- 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.
