Two officials at the International Monetary Fund (IMF) have said that a “synthetic” central bank digital currency (CBDC), in which public and private sectors collaborate, is the better option than a public-focused CBDC.
Tobias Adrian, director of the IMF's monetary and capital markets department, and Tommaso Mancini-Griffoli, a deputy division chief of the department, wrote in a blog post on Thursday that a synthetic CBDC or “sCBDC” offers “significant” benefits over a commercial CBDC, which requires getting involved in many of the steps of the payments chain that can be costly and risky for central banks.
“In the sCBDC model, which is a public-private partnership, central banks would focus on their core function: providing trust and efficiency. The private sector, as providers of stablecoins, would be left to satisfy the remaining steps under appropriate supervision and oversight, and to do what they do best: innovate and interact with customers,” the officials said.
Central banks looking to issue a CBDC should, therefore, consider sCBDC as a “potentially attractive option,” Adrian and Mancini-Griffoli said, adding: “The world of fiat money is in flux, and innovation will transform the landscape of banking and money. You can bet your bottom dollar on it.”
Last week, the officials also wrote a piece on stablecoins, saying that while these offer potential benefits such as low-cost and fast global money transfers, they also pose many challenges including promoting illicit activities, a threat to banks and currencies. “Policymakers will need to innovate and collaborate across countries” to fight those challenges, the official said at the time.