IMF Official Presents Blueprint for Cross-Border CBDCs

The organization wants to help cut the cost of cross-border transactions without abandoning compliance checks or capital controls, Tobias Adrian, director of IMF’s monetary and capital markets department said.

AccessTimeIconJun 19, 2023 at 1:00 p.m. UTC
Updated Jun 21, 2023 at 9:20 p.m. UTC
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New platforms for cross-border central bank digital currencies (CBDCs) could be more efficient and safe, while still ensuring countries can impose compliance checks and capital controls, an official from the International Monetary Fund said on Monday.

Tobias Adrian, director of the IMF’s monetary and capital markets department reckons one global CBDC platform that will allow for capital controls could cut payment costs – but such a vision is a far cry from crypto enthusiasts' dream for decentralized financial systems.

“Our blueprint for a new class of platforms would enhance and ensure greater interoperability, efficiency, and safety in cross-border payments, as well as in domestic financial markets,” Adrian said in a speech given in Rabat, Morocco. “The cost, sluggishness, and opacity of cross-border payments comes from limited infrastructure.”

Earlier Monday, Managing Director Kristalina Georgieva said the IMF was "working hard" on a global infrastructure to enable different CBDCs to work with each other, according to Bloomberg.

The new system, also outlined in an IMF Fintech Note published Monday, could program payments without payees giving precious private information to intermediaries, and saving liquidity by letting contracts be pledged as collateral – without changing the fully fungible nature of money, Adrian said. Adrian first proposed the idea of a CBDC platform in September.

“The ledger would be controlled by the platform operator,” Adrian added, apparently rejecting more innovative ideas such as blockchain-based validation. “The single ledger would ensure there is a unique description of who owns what, so no double spending can occur.”

A document published alongside Adrian’s speech said blockchain had “important limitations” in terms of validator costs, security, efficiency and privacy. Bitcoin-style proof-of-work technology consumes a lot of energy while Ethereum’s proof-of-stake is costly and untested, it said.

Governments would keep the right to limit their citizens’ transactions in foreign currency and impose anti-money laundering checks, Adrian said – with the IMF keen not to undermine the kinds of capital measures often imposed on countries facing a financial crisis.

Crypto proponents often cite easier cross-border payments as a major benefit – but there’s plenty of competition against free-floating blockchain solutions being used for that purpose, not least as standard-setters don't want to undermine government controls. The Bank for International Settlements and private players such as SWIFT are both looking at options involving state-backed CBDCs.

The Committee on Payments and Market Infrastructures, a standard-setter linked to the Bank for International Settlements, is looking at the impact of stablecoins – tokens tied to the value of a fiat currency – while a report from the European Central Bank last year poured cold water on the idea crypto can cut international payment costs.

UPDATE (June 19, 14:06 UTC): Adds comments from accompanying document on blockchain in seventh paragraph.

Edited by Sandali Handagama.


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Jack Schickler

Jack Schickler is a CoinDesk reporter focused on crypto regulations, based in Brussels, Belgium. He doesn’t own any crypto.

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