Retail CBDCs could open a can of worms for central banks: IMF director

The International Monetary Fund (IMF) continues to eye retail central bank digital currencies (CBDCs) skeptically, with the latest swipe coming from its managing director, Kristalina Georgieva.

Georgieva confirmed the IMF’s stance at the Milken Institute’s annual conference dubbed “The State of the Global Financial System,” where she pointed out that retail CBDCs could threaten financial stability worldwide. Georgieva told attendees that despite the plethora of pilots, retail CBDCs could result in a “myriad of unforeseeable consequences.”

“We think that wholesale CBDCs can be put in place with fairly little space for undesirable surprise, whereas retail CBDCs completely transform the financial system in a way we don’t quite know what consequences it could bring,” Georgieva said.

The argument for retail CBDCs has been fueled by concerns about the increasing “cryptoization” of local economies and the need to halt the advance of stablecoins. Several central banks have taken things up a notch by exploring the possibilities of a cross-border payment functionality to reduce the cost of international remittances.

Amid the frantic rush by central banks to float retail CBDCs, the IMF has announced its intention to guide countries interested in the offering. The IMF confirmed that since 2020 it had offered technical assistance to nearly 50 central banks globally looking to launch CBDCs.

The IMF is inching toward a planned launch of a CBDC handbook to serve as a quick guide for central banks seeking its guidelines. IMF Deputy Managing Director Bo Li revealed mid-April that the handbook will offer details on empirical findings and viable frameworks for evaluating CBDCs.

“The Handbook will be a compendium of knowledge and experience on CBDC,” Li said. “It will be the basis for capacity development and hopefully help countries make as well-informed decisions as possible when taking the major step to design and issue their own CBDC.”

Retail CBDCs gains steam

Despite the concerns of the IMF toward retail CBDCs, several central banks are steaming toward a potential launch on the backs of several pilots. The People’s Bank of China (PBoC) is nearing a full-scale launch for its digital yuan after expanding the pilot to more provinces in the country.

India is juggling both retail and wholesale CBDC experiments, notably onboarding 50,000 users and 5,000 merchants in the first stage of studies. Russia, the European Union, Ukraine, Thailand, Sweden, and Uruguay are all experimenting with retail CBDCs for their financial systems.

To learn more about central bank digital currencies and some of the design decisions that need to be considered when creating and launching it, read nChain’s CBDC playbook.

Watch: Central Bank Digital Currencies and Blockchain: The view from the Swiss National Bank