MF Explores the Synergies Between Privately Backed Stablecoins and CBDCs

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Governments have finally stood up from the sidelines and are actively embracing the innovation brought about by cryptocurrencies. While their approach is not novel, it is a more secure and efficient way of conducting activity in the same way it is done today. In a relatively in-depth blog post, the IMF explores the advantages behind a privately issued stablecoin that is backed by central bank reserves, September 26, 2019.
Synthetic CBDCs: Cheaper and Safer
Central Banks have begun their journey into exploring cryptocurrency and distributed ledgers with the end goal of launching a fiat backed digital currency to improve ease of transacting.
This route has several problems, the biggest of which is that the government does not have the will or expertise to design platforms with intuitive UIs and efficient engines.
It is unlikely central banks would ever jump on board, but an offering like USDC – or even Libra – if backed by the reserves of the central bank could be a more efficient way to actually use stablecoins for anything more than hedging crypto volatility.
This mechanism would allow the private sector to do what it does best: focus on innovation. But it requires pure centralization, as the reserves used to back the coin can be seen as the public’s trust in authorities. Simply put, this model integrates private sector integration with trust in central authorities.

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