[Insight] Federal Reserve and IMF Also Admit Digital Assets are Inevitable

The Bitcoin market that has been a trend recently is now having a break due to the recent adjustment. However, since Bitcoin is getting shaped due to the issues such as partaking by institutional investors, the formal sector is now becoming aware of digital assets. Federal Reserve that is managing overall currency policies in the U.S. did make a direct comment related to the digital USD last February 24 (local time). Before this, on February 18, International Monetary Fund (IMF) announced through their blog saying, “Legal tenders issued by central banks encountered a crisis in the digital era.” The two most esteemed institutions in the world share in common are this: The coming of digital assets is ‘inevitable.’

Chairman of Federal Reserve “Specific Studies related to Digital Currencies are on Going… There will be Some Preconditions”

In the last 24th, Jerome Powell, Chairman of Federal Reserve officially announced that “We have been performing specific studies related to digital currencies some times ago.” He stated that digital currencies are an inevitable stream of the era, and USD should also be digitalized for this purpose.

Also, Federal Reserve recently emphasized five preconditions for the issuance of Digital USD through an official paper. According to the paper issued in a form of a thesis, the preconditions are the following: △Determined policy target; △Wide supports from the interested party; △Solid legal foundation; △High technology; and △Matured market environment.

According to the paper, “In order to create an environment for circulating Central Bank’s Digital Currency (CBDC) in the U.S., it should meet the preconditions mentioned above. Pushing CBDC ahead requires many preparations in advance. It should be able to communicate with multiple interested parties and observe the situation thoroughly. And collecting enough data for establishing a determined policy target is not an option but essential.” It seems that it is not the right time to launch a digital currency.

Federal Reserve added, “The thesis itself is for further discussion related to CBDC, not the suggestion for the future policy of the U.S. Federal Reserve.”

IMF “Central Bank’s Legal Tenders are in Crisis… Need to Prepare for Coexistence with Private Currencies”

On the other hand, IMF wrote on its blog on the last 18th that central banks should transform like other IT companies in the future. IMF mentioned the coming of digital currencies as one of the reasons. Currently, most of the Big Tech companies are running their own financial services with concrete legal tender systems on a digital basis. Some IT firms have even introduced digital assets into their systems recently.

IMF said, “In a world that is changing rapidly like this, we can’t expect the current legal tenders can function as intended,” and added, “It must be difficult for central banks to keep up with the new demands from the private sector born out of technological changes. They should establish a system that can transfer assets in the private sector into central bank’s legal tender.”

Also, IMF forecasted that the central bank alone will not be enough for the upcoming new era. IMF expected that central banks should establish a dual currency system coexisting with the private sector. IMF commented, “The systems that are existing in private currencies only are dangerous. Central banks should establish a dual currency system with central bank’s legal tenders as a resale option.” IMF also mentioned, “If central banks of each country are about to issue digital currencies, they should put ‘How to utilize the private sector’ into consideration. Central bank’s currencies are essential for the financial order, even in an era of upcoming private currencies. In such a process, private currencies of each country shall be managed differently according to the regulatory system established by each central bank.”

CBDC? Or Private Digital Asset?

The emergence of the digital currency era is a common point that Federal Reserve and IMF share. However, their opinions were different. While Federal Reserve wanted a currency system with legal tenders at its core, IMF expected a system that legal tenders and private currencies are coexisting in harmony.

What kind of future is waiting for us? A world led by CBDC while private currencies are regulated? Or a world that two currencies coexisting in harmony, just like IMF is saying? We can’t figure out what kind of world it will be, but it seems this currency tug-of-war between the government and the private sector will continue. Maybe, the traditional digital asset market led by the private sector has to go through some hardships. But in such conflicts, new opportunities will keep rising. Those investors who can catch up to these points and constantly study international news or words related to digital assets will be able to take the sweetest fruit that no era could have offered before.

*This research and analysis document has been prepared for the purpose of providing information that can be used as a reference based on our reliable data and information, but we cannot guarantee its accuracy or completeness.

*The document has reflected the individual’s opinion, and it may not be consistent with the company’s official point of view.