Governments around the world see Central Bank Digital Currencies (CBDCs) as a means to improve the current fiat ecosystem. The technical prowess of cryptocurrencies, supported by underlying central bank trust, is key to enabling a rich monetary ecosystem, a publication from the International Monetary Fund (IMF) suggests.
“Digital technologies promise a bright future for the monetary system,” according to the post attributed to IMF Deputy Managing Director Agustin Carstens and BIS executives Jon Frost and Hyun Song Shin.
A June BIS study revealed that cryptocurrencies outperform fiat ecosystems when it comes to achieving the high-level goals of a future monetary system.
Some of the biggest flaws preventing widespread adoption of current cryptocurrencies, noted by BIS executives, are congestion bottlenecks in decentralized finance (DeFi) and reliance on volatile assets.
Both wholesale and retail CBDCs can potentially inherit skills from the cryptocurrency ecosystem that benefit end users, the publication noted:
“By embracing the core of trust that central bank money provides, the private sector can embrace the best new technologies to foster a rich and diverse monetary ecosystem.”
Furthermore, it recommended that central banks use innovations such as tokenization to enable purchases using multiple fiat currencies, which would further benefit merchants and customers.
The IMF’s gloomy forecast, which predicts a global economic slowdown, raised concerns about a looming recession in cryptocurrency markets. Cointelegraph previously reported that Bitcoin (BTC) markets are likely to recover as uncertainty over the current state of the economy and geopolitical tensions are resolved.
However, the IMF pointed out that the various liquidations, bankruptcies and losses of large companies such as Celsius, Three Arrows Capital and Voyager Digital Holdings had only a minor impact on traditional financial systems.
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