Governments around the world are looking to central bank digital currencies (CBDCs) as a way to enhance the existing fiat ecosystem. Cryptocurrency technical prowess backed by underlying central bank confidence is key to enabling a rich monetary ecosystem, suggests a publication from the International Monetary Fund (IMF).
“Digital technologies promise a bright future for the monetary system,” reads the publication attributed to IMF Deputy Managing Director Agustín Carstens and BIS leaders Jon Frost and Hyun Song Shin.
A June BIS study found that cryptocurrencies outperform fiat ecosystems when it comes to achieving the high-level goals of a future monetary system.
Some of the most significant flaws preventing current cryptocurrencies from mainstream adoption, highlighted by BIS leaders, are bottleneck congestion in decentralized finance (DeFi) and reliance on cryptocurrencies. regard to volatile assets.
Wholesale and retail CBDCs can potentially inherit capabilities from the crypto ecosystem that benefit end users, the post pointed out:
“By embracing the core of trust provided by central bank money, the private sector can adopt the best new technologies to foster a rich and diverse monetary ecosystem.”
He further recommended that central banks use innovations such as tokenization to enable purchases using multiple fiat currencies, which further benefits merchants and customers.
Related: India cooperates with IMF on crypto consultation paper
The IMF’s gloomy forecast of a global economic slowdown has raised fears of an impending recession in the crypto markets. Cointelegraph has previously reported that Bitcoin (BTC) markets are likely to rally as uncertainty regarding 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 like Celsius, Three Arrows Capital and Voyager Digital Holdings had only a minor impact on traditional financial systems.