Business & FinanceSpotlight

IMF Favors Cryptos? Says Digital Currencies are Part of the Future

Digital currencies are here to stay and the fact that the International Monetary Fund (IMF) has recognized them as a part of the future, cements their standing further. In its recent report, IMF believes that central banks around the globe may start issuing digital currencies in the future.

IMF, along with World Bank conducted a survey focused on fintech, which gathered insights and answers from financial institutions of all the 189 member countries on a variety of topics that come under fintech. The ultimate results of the report were drawn from 96 responses.

The resulting report is quite extensive, but it majorly covers arou nd five interesting trends that emerged in the survey and the first is related to cyber security. The report suggests that “foremost is all countries; minds in cyber security”. It further goes on to explain that risks associated with cyber security and data protection are not restricted by boundaries instead they tend to spillover into different jurisdictions and even in countries.

Secondly, results of the survey suggest that Asia is leading other regions in many aspects of fintech. The report specifically mentions two countries from the region, China and India. China flourished in the fintech sector particularly prior to its strict regulations regarding the technology. Meanwhile India, despite being unfriendly towards cryptocurrency, is fairing pretty well in large-scale adoption of mobile payments.

READ ALSO: Even IMF Hints at Bitcoin to be the World’s ‘Savior’

Thirdly and surprisingly so, the Sub-Saharan Africa is emerging as a global leader in mobile money innovation and its usage. According to the report, the region is actually leading the world in mobile money accounts per capita, mobile money outlets, and volume of mobile money transactions. In fact nearly 10 percent of GDP in transactions are occurring through mobile money.

Another finding that emerged from the survey is that Europe is not unified in the case of fintech adoption despite the fact that the region has a lot of potential in this area. But due to regional difference on aspects such as the adoption of digital finance, the prevalence of cash-based payments, account ownership usage, and savings and credit in the region, a significant gap exists in Europe.

READ ALSO: By Over-Regulating Crypto and Blockchain, Europe Will Give Another Excuse for Failure

Lastly, the survey reveals that digital currencies backed by central banks could become a reality soon. Per the paper, numerous central banks are either considering or already working on Central Bank Digital Currency (CBDC). In fact some countries around the world have already adopted CBDC, including:

Tunisia

Tunisia happens to be the first country in the world to have issued a digital national currency. The eDinar — also known as Digicash and BitDinar, was launched as early as 2015. As in the case of the traditional currency, eDinar’s distribution and issuance is overseen by a government body called La Poste, or La Poste Tunisian (LPT).

Tunisians can make instant money transfers via their smartphones, like paying for goods and services online and in person, sending remittance, paying salaries and bills, and managing official government identification documents.

Venezula

Another country that is already on board with CBDC is Venezuela, which launched a national cryptocurrency called dubbed the Petro, or Petromoneda back February 2018. The currency is backed by the country’s oil, gold and mineral reserves, and saw the largest initial coin offering (ICO) that reportedly totaled to $5 billion dollars, leaving behind he $2 billion Telegram ICO and $1 billion token sale of EOS.

Aside from the acceptors of CBDC, there are several other countries experimenting with the prospects of a digital currency backed by the central bank.

READ ALSO: Bitcoin to Lose – Venezuela Hyperinflation is Already on Steroids

Uruguay

Uruguay is amongst the countries that have reportedly put in a significant amount of effort in testing the concept of CBDC. The central bank of the country, BCU, presented a pilot plan for the issuance and use of the digital version of the Uruguayan peso, spanning to six months. However it wasn’t a new currency per se, the agency stressed on the fact that it was the same as the Uruguayan peso that instead of having physical support had technical support. According to the head of BCU:

It is very much in the vanguard of virtual currencies development. It will be a process of trial and error, success and failures[…]

Dubai

The extravagant Dubai has been stirring up the blockchain and crypto space with its head on approach to the new technology. Back in September 2017, it was announced that Emcredit, a subsidiary of Dubai Economy would collaborate with the U.K.-based startup Object Tech Grp Ltd to create “an encrypted digital currency” called emCash.

However, a specific timeline was not provided for the digital currency, so it’s safe to assume that the project is still very much in its drafting phase. But the Ali Ibrahim, Deputy Director General of Dubai Economy, did specify some of the use cases of the proposed token. Purportedly it will be considered legal tender “for various government and non-government services, from daily coffee and children’s school fee to utility charges and money transfers.

Coming back to the IMF report, the motivation behind offering CBDC varies from country to country. It is evident that the option for a central bank- backed digital currency, is being considered by both emerging as well as developed countries. It is likely that the developed economies are exploring CBDC in order to provide an alternative to cash.

On the other hand, in the case of emerging economies, the main reason for launching CBDC is likely to reduce banking costs. Another reason, per the report, could be making banks more available for the unbanked population, an aim that is starkly similar to Facebook’s Project Libra.

READ ALSO: Facebook Crypto Woes Persists – Libra Facing Regulatory Hurdles

Tags

Abeer Anwaar

Abeer holds a Bachelors degree in Media studies and covers blockchain startups for BlockPublisher. An optimist, excels in the art of the written word and swears by the joy of all things sweet. Contact the editor at editor.startups@blockpublisher.com

Leave a Reply

This site uses Akismet to reduce spam. Learn how your comment data is processed.