Kristalina Georgieva noted that CBDCs adoption in the world may bring a new risk and also suggested central banks keep the wholesale version of CBDC away from financial institutions.
The Central Bank Digital Currency (CBDCs) is a concept of digital form of sovereign fiat money. At the present time, China is at the top in the race for CBDC adoption. To this date, more than 110 countries are in CBDC development and 65 of these countries are in the advanced phase. The concept of CBDC arose after the success of stablecoins in the crypto market.
On 1 May 2023, During the discussion at the Milken Institute Global Conference, the International Monetary Fund (IMF) managing director Kristalina Georgieva said that the IMF can’t ignore all the versions of CBDC, which are under development by several countries.
The IMF managing director explained that before the COVID-19 pandemic, everyone was predicting that the future will rely on digital money and this also happened automatically after the pandemic. Similarly, the IMF official believes that high-level CBDC adoption will also be the future of digital finance.
According to Kristalina CBDCs are posing some big risks, which are not known, and they will be irreversible.
Further, the IMF official explained that the retail version of CBDC is a better idea of the digital financial system at some levels but the wholesale version of CBDC may result in a very big problem.
“We think that wholesale CBDCs can be put in place with fairly little space for undesirable surprises, whereas retail CBDCs completely transform the financial system in a way that we don’t quite know what consequences it could bring,” she explained.
Earlier in late 2022, the IMF agency published a report on CBDC, and through the report global organization addresses the challenges & opportunities with CBDC adoption. The report mainly highlighted that the use of CBDCs in cross order settlement through information sharing between countries will be critical.