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An IMF expert believes that a CBDC involving the public and private sectors would offer the best of both worlds

May 28, 2020

Tommaso Mancini-Griffoli, representative of the International Monetary Fund (IMF), believe that a public-private partnership It can be the best way to get ahead for the central bank’s digital currencies (CBDC).

Mancini-Griffoli, vice president of the IMF’s Capital Markets Department, attended the recent money movement concert on May 26.

He also said that the idea of ​​creating a CBDC that is only covered by a central bank reserve and it’s completely out of control under his control.

An IMF expert believes that a CBDC involving the public and private sectors would offer the best of both worldsAn IMF expert believes that a CBDC involving the public and private sectors would offer the best of both worlds

A CBDC synthetic, through a Unification of the public and private sectors, is gaining popularity and popularity in the world of digital currencies will allow the private sector to innovate further with for example the Blockchain-based stablecoins.

He suggested that the private sector focus on innovation, interface design and customer management. The public sector continues to focus on Regulation and trust building. This will promote the continuation of innovation, but within a regulated framework for financial stability.

Regulation plays a key role

According to Mancini-Griffoa, contrary to the original CBDC idea, that requires central banks to issue a liability directly to the public, A synthetic CBDC enables the private sector to issue a liability that is used by individuals to purchase assets for payment.

liabilities would be fully supported from the central bank reserves. The central banks also issue licenses for liabilities that would help regulate and monitor companies and institutions.

A regulated environment can offer the same conditions for all innovators in the stable coin private sector to continue growing. He believes that too could mitigate potential risks to financial stability they pose. He explained that:

“There are different stable coins. It is difficult for consumers to know which are fully compatible and which actually entitle them to the underlying reserves and how liquid and secure these reserves are and whether they are liquid and safe enough in every country in the world . “

The associated costs and risks

The public-private partnership for a CBDC would also promote competition between providers of digital currencies and would preserve comparative advantages, says Mancini-Griffoa.

Much of the cost and risk to the public sector, such as B. technology options, customer management, customer detection and monitoring, including verification processes How Know your customer (Know-Your-Client, KYC in English), anti Money Laundering (Anti-money laundering, AML) and regulatory compliance. Data management would be transferred to the private sector.

Public-private partnership challenges

Synthetic CBDC gains momentum, but the challenges remain. Mancini-Griffoa noted that the best way to build a public-private partnership is to have an ongoing debate and decision Who should have the capacity issue the above tokens. He added:

“The question is, where do you draw the line between what the public sector does and what the private sector does. The basic question concerns the topic. Are the public and private sectors distributed or do we also allow the private sector to issue?

Cooperation between stable coins and banks looks promising

Mancini-Griffoa emphasizes this The intention is not to “shake the pot” in the banking world:

“The banking sector is largely funded by wholesalers and there would be a large shift in bank deposits to a new payment system.”

However, innovative banks You will adopt many of the new technologies. like blockchain-compatible stablecoins. These stable currencies are irreversible, secure, fast and able to process transactions with global reach for the settlement of final payments. According to Mancini-Griffoa, there is likely to be a link between banking and payment services.

As Cointelegraph previously reported, the Bank of China seems to believe that the digital yuan could eventually replace the money. Stablecoin experts found that data protection, custody and financial stability would be the three biggest challenges for a CBDC.