In 2017, the Wall Street Journal published an article that stated the IMF was looking into the possibility of launching a digital coin. The MD of the IMF at the time suggested that digital coins would one day become the main driver of the global monetary system.
Plans Have Progressed Well Since Then
Since then, the idea for the IMFCoin has received growing attention from the bank. The IMF recently published a Fintench Note discussing digital currencies. It would appear the bank is seriously examining the issue. In the note, the bank noted that the traditional banking sector would continue facing competition from fintechs. As such, it suggested banks should adapt and offer similar products to avoid being edged out. During FiNext 2019, Visionary Financial got to attend where it was stated that JP Morgan was one of the few banks actually keeping up with FinTech.
The Launch of a Quasi-Cryptocurrency
In April 2019, the Financial Times published a report that said the IMF and World Bank had jointly launched a quasi cryptocurrency, which would run on a private blockchain. The bank made it clear that the private coin would not be accessible to the public. According to the bank, they launched the coin to study various use cases for digital currencies such as better transparency and addressing the challenge of money laundering.
The implications of Such a Coin
If the IMF Coin were to launch, it could help to deal with the issue of volatility that exists today due to various trade imbalances. Besides that, the IMF suggests this could help spur economic development globally. Today, most countries are forced to hoard physical currency reserves to maintain their foreign currency reserve. The result is that the global economy sometimes faces contractions. With a digital coin, the IMF would be able to easy increase and decrease the number of digital coins circulating in the global economy, which would be determined by the existing conditions.
Opposition to the Coin
The IMFCoin would face a lot of opposition before it ever became a reality. Some members of the global organization, such as China, would be more inclined to support it. However, this move would face stiff opposition from the United States. This is because the US Dollar is the current global reserve currency. As a result, they might be averse to losing this privilege.
The status of the US dollar gives the US various advantages over other nations such as being able to run on low-interest rates and even maintain a current account deficit. Almost all other nations globally would face economic collapse if they tried that. For other nations, this would help them compete with the US on a fairer playing field since there would no longer be a dominant reserve currency in the world.
In the past, the Governor of the Chinese Central Bank has been a major proponent of such an idea. Chinese officials have, in the past, called for the US dollar to be replaced with the SDR. The SDR (Special Drawing Rights) is a basket of currencies that nations can borrow against using their national reserves. The IMF is well aware of these geopolitical challenges of launching such a coin.
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