IMF Official: Multiple Reserve Currencies Help Achieve Global Stability, Cryptocurrencies Are Too Young to Become Global Reserves

An IMF official says cryptocurrencies are too young and too volatile to become global reserves.

IMF Official: Multiple Reserve Currencies Help Achieve Global Stability, Cryptocurrencies Are Too Young to Become Global Reserves

International Monetary Fund (IMF) official Tommaso Mancini-Griffoli believes the world will be more stable if reserve currencies are diversified. And cryptocurrencies are still too young and too volatile to become a global reserve.

At Coindesk’s Consensus 2021 Summit, CoinDesk Managing Director Emily Parker posed the question: Should the U.S. be concerned that China’s central bank digital currency (CBDC) could threaten the U.S. dollar’s dominance as a global reserve currency?

As head of the IMF’s Monetary and Capital Markets Payments and Infrastructure Department, Mancini-Griffoli explained, “I’m not saying that’s the case with the dollar. It’s just a theoretical argument – that supporting the use of multiple reserve currencies can lead to greater global stability. So from an international perspective, I think multiple reserve currencies is a popular proposition”. Mancini-Griffoli added that the world already has multiple reserve currencies, including the U.S. dollar, the euro and the yen.

China has already begun testing a digital yuan. In March, Agustín Carsten, managing director of the Bank for International Settlements (BIS), said China could gain a “first mover advantage” over the United States by issuing a CBDC, as previously reported in BIT. And Federal Reserve Chairman Jerome Powell (Jerome Powell) believes that the priority advancement of the digital yuan will not stimulate the United States to enter the digital currency race.

Mancini-Griffoli also said crypto assets are still too small to be a significant source of financial stability risk.

“For crypto assets to pose a significant risk to central banks, one would need to have a large number of currency alternatives. In this case, countries would have to (theoretically) use a more stable cryptocurrency instead of or in addition to their national currencies.”

Mancini-Griffoli added that alternative currencies are a big issue internationally, with countries with weak institutions, high inflation and volatile exchange rates having an increasing degree of currency substitution, thus including not only crypto-assets but also stablecoins and CBDCs: “These are exactly the types of problems that need to be solved by international cooperation. “

The IMF official also argued that while cryptocurrencies can often be created in a very short period of time, they are not necessarily ideal for a global reserve currency.

I just want to take this opportunity to clarify that while bitcoin, dogcoin and other similar tokens may be created ‘at the snap of a finger’ and relatively quickly, and may be widely adopted and gain significant market capitalization relatively quickly, doing so can neither serve the purpose of an international reserve currency purposes, nor can it be considered an international reserve currency.”

Mancini added that a global reserve currency must be able to store value in a stable manner. Digital assets are too volatile, and cryptocurrencies are closer to investment assets than currencies.

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