Davos: IMF chief Kristalina Georgieva on Monday cautioned against confusing crypto products with currencies and said anything not backed by a sovereign guarantee can be an asset class but not a currency, as she asserted that Bitcoin cannot be ‘money’ just because it has got ‘coin’ in its name.
Speaking at a session on central bank digital currencies here at the World Economic Forum Annual Meeting, she said crypto products may be offering faster services at a much lower cost and better inclusivity, but for that also there was a need to separate apples from bananas and regulation would be key there.
At the same session, Central Bank of France Governor Francois Villeroy de Galhau said the banknotes also proved to be a great technological advancement when they were introduced.
“I always speak of crypto as assets and not as currencies. For any currency, someone has to take the responsibility, but there is no one in case of so-called cryptocurrencies. Also, currencies need to have a lot of trust and they need to be universally acceptable,” he said.
“We cannot have currency on one side and the trust on the other side. They need to be together,” he said.
When asked about the loss of trust of people in central banks, he responded, “My impression is that the people are losing trust in crypto also and that loss of trust is more than that in central banks.”
On CBDCs, he said they would simply be modes of payments and not investment assets.
The governor further said there was a reason why the last word in CBDC was ‘currency’ and not ‘coin’.
He also said the world would still rely on banknotes for the next century despite the advent of CBDCs.
The IMF chief also appeared optimistic about the future of banknotes, alongside the digital money, and cited an example that when the Ukraine war started, there was a huge surge in demand for banknotes due to the fear of cyberattacks.
Experts believe Central Bank Digital Currencies (CBDCs) have the potential to reshape financial systems, changing the landscape of payments and banking. More countries are experimenting with CBDCs and some are beginning to bring them to market, potentially offering lessons for the rest of the world.
The panellists discussed what are the macroeconomic and geopolitical implications surrounding the roll-out of CBDCs and how can the public and private sectors work together to ensure that CBDC development ultimately benefits consumers and minimizes risks to financial stability.