IMF Report Suggests Bitcoin Could Lower Demand for Central Bank Money
The IMF (International Monetary Fund) has recently released a report on global monetary policy in the digital era, according to which, crypto assets may lower the demand for central bank currency one day.
The study on the topic conducted by a number of IMF researchers states:
“We cannot rule out the possibility that some crypto assets will eventually be more widely adopted and fulfill more of the functions of money in some regions or private e-commerce networks.”
The study talks about bank bailouts and the global financial crisis, and how they have increased skepticism in some parts of the world. According to the report, crypto assets can possibly affect the global monetary policies in future. It also talks about the ‘payment shift’ that could soon take place in many parts of the world where cryptocurrencies would replace fiat currency. The IMF report further explains:
“Economists continue to debate the origins of money, and why monetary systems seem to have alternated between commodity and credit money throughout history. If crypto assets indeed lead to a more prominent role for commodity money in the digital age, the demand for central bank money is likely to decline.”
The IMF report also details how central banks should respond to this with competitive pressure and solidify cryptocurrencies as the standard unit of account. However, cryptocurrencies mostly have a hard time becoming the standard unit of account because of their volatility, the report explains. It goes on to say that the central banks must focus on regaining public trust if they wish to remain relevant in the digital age. They could also choose to launch their own digital currencies, IMF says.
The report concluded that banks can continue to remain relevant by seeking more stable units of account, and providing the same to the public. Banks need to make central bank money more attractive than cryptocurrencies in this digital economy if they wish to enjoy their current position.
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