IMF chief Kristalina Georgieva warns of ‘negative consequences’ of retail CBDCs

The launch of retail central bank digital currencies (CBDC) would lead to “a multitude of unintended consequences,” said Kristalina Georgieva, the IMF’s managing director.

Wholesale CBDCs are less prone to potential mistakes, Georgieva said.

• Wholesale CBDCs are central bank digital currencies issued for use by financial institutions to hold deposits;

• Retail CBDCs are the same technology designed for consumers as well as small and medium-sized enterprises.

According to the statement, the IMF is working with roughly 50 countries to “ensure the adoption of best practices,” which the agency expects will have a significant impact on banks and the economy.

“Even in the United States, where [CBDC] had attracted little attention, interest in the technology is now emerging, and there is a strong case for it. The future has arrived,” Georgieva said.

In February, the IMF advocated regulating digital assets rather than banning them. However, the agency did not rule out possible restrictions if higher risks to financial stability arise.

In March, the IMF warned about the negative impact of cryptocurrencies on financial institutions. The fund believes that the spread of digital assets could lead to a loss of bank deposits and a reduction in lending.