Governments across the globe see central bank digital currencies (CBDC) as a means to improve the existing fiat ecosystem. Cryptocurrency’s technical prowess supported by the central bank’s underlying trust is key to enabling a rich monetary ecosystem, suggests an International Monetary Fund (IMF) publication.
“Digital technologies promise a bright future for the monetary system,” reads the publication attributed to IMF deputy managing director Agustín Carstens and BIS executives Jon Frost and Hyun Song Shin.
A BIS study from June revealed that cryptocurrencies outdo fiat ecosystems when it comes to achieving the high-level goals of a future monetary system.
Some of the most significant flaws preventing present-day cryptocurrencies from mainstream adoption, pointed out by the BIS execs, are bottleneck congestion in decentralized finance (DeFi) and the reliance on volatile assets.
Both wholesale and retail CBDCs can potentially inherit abilities from the crypto ecosystem that benefit end users, the post highlighted:
“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.”
It further recommended central banks utilize innovations such as tokenization to allow purchases using multiple fiat currencies — further benefiting merchants and customers.
Related: India cooperates with IMF on crypto consultation paper
The IMF’s gloomy forecast predicting a global economic slowdown raised concerns about an incoming recession in the crypto markets. Cointelegraph previously reported that Bitcoin (BTC) markets were likely to recover when the uncertainty about the current state of the economy and geopolitical tensions are resolved.
However, the IMF pointed out that the various liquidations, bankruptcies and losses at major firms like Celsius, Three Arrows Capital and Voyager Digital Holdings had only a minor impact on traditional financial systems.