IMF Advises Banks to Create Own Cryptos To Withstand Digital Assets

IMF Advises Banks to Create Own Cryptos To Withstand Digital Assets

According to a reсent IMF report concerning the monetary policy in the entire world in the era of digitalization, here is a probability that one day cyber assets will decrease the need in money, emitted by central banks.

Interestingly, the IMF document was released after the organization’s members discussed that one day cryptos could do that via shifting the demand from “credit money” to “commodity money.”

Here are more details on the study.

Broader Support of Digital Assets. Will it Be?

Nowadays, the IMF has more and more reasons to talk about DLT and bitcoin in particular. Earlier the Managing Director of the fund, Christine Lagarde, has said pretty optimistic things about virtual money, even though before she stated that crypto-mining was a concern when it came to the environmental issues.

Also, the IMF presented some information on its official site concerning the evolution of BTC on par with fiat.

This time, the organization has published a study, in which the researchers noted:

“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.”

Changes In Payment

In the document, it is also stated that the worldwide financial slump, as well as bank fracture, have refurbished critical attitude in some parts of the world, so there’s the likelihood that virtual money can make an impact on the classical worldwide monetary policies.

Meanwhile, the paper also indicates a “payment shift,” according to which cryptos could substitute public currencies in some areas of the world. Particularly, it is said that such alteration can herald other changes. For example, how money is generated in the era of digitalization: "[...] we may move full circle back to where we were in the Renaissance.”

Specialists in the field of economics keep arguing on the origin of money. Another topic for dispute is why monetary systems appear to have alternated between credit money and commodity in the frames of history.

Thus, if digital assets end up heading to a more significant role for commodity money in the era of digitalization, the interest for money issued by central banks might decrease.

How Do Banks Have to Respond to This?

The study also tells about the ways financial institutions should follow to react to such a challenge. For instance, banks should showcase rival pressure and keep strengthening public currencies as a unit of accounts.

However, the IMF stated that there are challenging times for cryptos to become a standard unit of account. The reason for this is, according to the fund, in the volatility of cyber-assets.

Another serious piece of advice for banks is they should produce their own virtual coins to be able to withstand the popularity of the independent ones. But there is one obstacle: before banks do it, they need to gain people’s trust to stay relevant on par with cryptos. At the same time, they should offer people cryptos, which are less volatile than those which are already on the market, the report reads.