(BlockBar)IMF’s latest report on the development of digital currencies shows that E-money is on the rise and the composite version of “Central Bank Digital Currency” is on the way.
Alipay, WeChat Pay, Libra, M-Pesa, Paxos, Stablecoins, Swish, Zelle… Various payment instruments emerge in endlessly all over the world, which not only increase the payment convenience, but also arouse the deep concern of policy makers. On July 15, 2019, the IMF released a special report entitled The Rise of Digital Money, which first proposed a framework for the classification of digital money, comparing its advantages and potential risks. It focused on the possible impact of e-money on the commercial banking sector, and envisaged the future possibilities of B-money and e-money. Finally, considering the impact of e-money on the central bank, they boldly envisage the possibility that the central bank and electronic money providers cooperate in issuing CBDC (central bank digital currency).
The report classifies existing means of payment into five categories: central bank currency, encrypted currency, b-money, e-money and i-money. B-money is issued by banks, while e-money is issued by the private sectors. I-money is abbreviated as investment money, which is issued by private equity funds. It is worth mentioning that the report classifies Libra, which has recently attracted widespread attention, as i-money.
The report presents an idea of synthesizing central bank digital currency (sCBDC). The sCBDC model is issued in cooperation with the government and the private sectors. The central bank is only responsible for examining the qualifications of the payment institutions that open the central bank reserve and the settlement transactions of the reserve in the central bank accounts. Private e-money suppliers will be responsible for investigations of customers, providing or checking wallets, developing or selecting basic technologies, providing settlement platforms, managing customer data, monitoring transactions, and interacting with customers.
Of course, users should be aware that sCBDC is not entirely the product of the central bank, and the central bank is partly responsible, just like today’s commercial banks hold reserves. Fraud or technical failures related to personal debit cards should not be attributed to the central bank. In this way, even if there are problems, the reputation of the central bank will not be damaged.
Therefore, compared with the fully mature CBDC independently developed by the central bank, sCBDC is an effective way with lower cost and less risk. It not only maintains the private sector’s advantages in technological innovation and customer interaction, but also maintains the central bank’s advantages in providing trust and improving efficiency.
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