“This is not the time to turn back on central bank digital currencies,” Kirstalina Georgieva said. At the same time, Singapore’s central bank is advising the public to “carry some cash” as a contingency for further outages.
As regular readers know, the IMF has been playing a significant behind-the-scenes role advising governments and central banks on how to prepare for/usher in a cashless future. The Fund is deeply involved in the development of central bank digital currencies (CBDCs), mainly by providing technical assistance to its members, much as its sister Bretton Woods institution, the World Bank, is deeply involved in the roll out across the Global South of digital identity systems, which are essentially a prerequisite for CBDCs.
At an event in Morocco in June, the IMF’s Managing Director Kirstalina Georgieva said the Fund is working on developing a global CBDC platform, to ensure interoperability between the different CBDC systems under development across dozens of jurisdictions:
If we are to be successful, CBDCs cannot be fragmented national propositions. To have transactions more efficient and fairer, we need systems that connect countries. In other words, we need interoperability. For this reason, at the IMF we are working hard on the concept of a global CBDC platform to trade and to manage risks.
The irony is that this is all happening at the same time that the global geopolitical order is rapidly fragmenting between US or NATO-aligned countries and much of the rest of the world, as we have already seen play out over the war in Ukraine and the US-EU’s ratcheting sanctions on Russia. That said, most of the BRICS economies, including Russia and China, are further along the path to developing and issuing a CBDC than their counterparts in the so-called collective West.
This Wednesday, Georgieva was in Singapore to deliver the keynote speech at the Singapore Fintech Festival. During that speech, she announced the launch of a CBDC Handbook as well as a soon-to-be-published joint plan with the World Bank to provide CBDC capacity development for national central banks and governments. She also warned public sector institutions that now “is not the time to turn back” on CBDCs. This, I believe, betrays a hint of anxiety about the current state of play with CBDCs, perhaps as a result of recent developments in the US and Nigeria (more on that shortly).
The future of digital cash, she said, depends on how many countries adopt the idea and how obsolete cash becomes as a result. This, she added, will take time, presumably (though she didn’t actually say this) because cash remains a popular means of payment in many countries around the world, including (to name a few) Germany, Switzerland, Austria, Japan, Mexico, Colombia, Slovakia and Spain, and is even staging a comeback in others (e.g. UK and Spain).
This will make cash difficult to fully displace, especially given the instinctive public distrust of central bank digital money. The few public surveys that have been conducted on CBDCs, including in the UK, the US and Spain, suggest the small minority of people who are actually aware of them harbour serious doubts and reservations.
As they well should: CBDCs, as envisaged, will replace money with something fundamentally different — a tokenised, programmable system of money over which government and central banks will have total, centralised control. In the words of the German economist Richard Werner, the CBDC revolution will turn your money into “conditional, potential money,” allowing the “disabling, freezing, cancellation or simple reduction” of your funds. This will all be happening at the same time as digital censorship laws are proliferating throughout the world.
Tellingly, Georgieva did not mention even the notion of CBDCs coexisting with cash, as some central bankers have done in recent months. The ECB, for example, recently announced that it is pushing for an explicit ban on unilateral cash exclusions by businesses in the Euro Area. This stands in stark contrast to the position of the European Commission, which is calling for governments to merely monitor cash exclusion and which, as the German financial journalist Norbert Häring has documented, wants to give decisive preference to the digital version of central bank money through its parallel guidelines on the digital euro and euro cash.
In the US, some central bankers, including Neel Kashkari, the president of the Federal Reserve Bank of Minneapolis, and Michelle Bowman, a Federal Reserve governor, have even questioned the need for a CBDC altogether. Fed supervision chief Randal Quarles went further, describing CBDCs as an embarrassing fad, comparable to the parachute pants made famous in the 1980s by rapper MC Hammer. US lawmakers, including the House of Representatives’ Majority Whip Tom Emmer, are also trying to preemptively prevent the Federal Reserve from issuing a CBDC that would enable the authorities to monitor and track the financial activities of Americans.
This may partly explain Georgieva’s exhortation to public institutions not to turn their back on CBDCs…
Continue reading on Naked Capitalism
Nick Corbishley 