Global Stablecoins Could Eventually Become Reserve Currencies: IMF Paper

Global Stablecoins Could Eventually Become Reserve Currencies: IMF Paper

December 17, 2020

Private stablecoins such as Libra (now rebranded as Diem) could emerge as international reserve currencies, according to an International Monetary Fund (IMF) report.

  • Titled “Reserve Currencies in an Evolving International Monetary System,” the departmental paper looks at shifts in the global monetary system and factors that might influence the U.S. dollar’s role as the dominant reserve currency, including new payments systems and digital currency.
  • While their study concluded overall that the dollar is safe for now, the authors said the reserve currency landscape would likely shift.
  • They posited that private digital currencies could “emerge as important international currencies,” with Libra/Diem possibly becoming the first example of a global stablecoin.
  • Global stablecoins (or GSCs) could also increase the demand for reserve fiat currencies they’re backed by, according to the paper.
  • “But GSCs do not need to be backed by existing fiat reserve currencies and could themselves attain reserve currency status,” the authors write. “It is also conceivable that more than one global stablecoin could become a reserve asset.”
  • The paper theorizes that rather than be differentiated by macroeconomic factors, digital currency competition would differentiate along network lines and by users.
  • And while digital currency “may cut across borders in ways that existing currencies do not,” different regulatory frameworks might lead to increased fragmentation, said the IMF.

See also: IMF, World Bank, G20 Countries to Create Central Bank Digital Currency Rules

Source: Read Full Article