The International Monetary Fund (IMF) and the World Bank advocated for the cross-border benefits of central bank-issued digital currencies, suggesting that projects like a digital dollar in the U.S. would support global development.
The two global bodies released a report alongside the Bank for International Settlements (BIS) arguing that coordination on digital currencies would shake up the status quo of having to rely on expensive and slow transfer services to send money around the world.
"Faster, cheaper, more transparent and more inclusive cross-border payment services would deliver benefits for citizens, businesses, and economies worldwide," said Indermit Gill, World Bank Group vice president of equitable growth, finance and institutions.
Sir Jon Cunliffe, deputy governor for financial stability of the Bank of England, said the technology offers "the opportunity to start with a 'clean slate'" on improving the payments system.
The IMF, World Bank, and BIS prepared the report for a G20 meeting in Italy hosting the finance ministers and central bankers of the world's largest economies.
The report envisions a central bank digital currency ecosystem where currencies could be exchanged with one another instantly and at all times. In the same way that central banks offer swap lines to one another (to ensure, for example, that U.S. dollars are readily available for exchange), digital currencies could offer the same services to retail users.
In the United States, the Federal Reserve is studying possible designs for a digital dollar, but it is unclear if the central bank will ultimately adopt a digital greenback.
A top Fed official recently expressed his skepticism over the usefulness of a Fed-issued digital currency, arguing that private-sector stablecoins would better facilitate cross-border payment.
"Bad actors might try to steal CBDC, compromise the CBDC network, or target non-public information about holders of CBDC," Fed Vice Chairman of Supervision Randal Quarles said on June 28.
The report to the G20 acknowledged the risks of issuing a digital currency, noting that exchange rate controls and monetary policy independence in some central banking regimes could be undermined by reduced barriers to currency substitution. The report also warned that easier cross-border transactions "all else equal, might increase risks for runs on both domestic banking sectors and currencies."
At the World Bank, Gill said the risks are particularly pronounced for emerging market and developing economies, noting that regulatory and policy concerns will "require a lot of work."
Still, the report emphasized that its main focus was studying the international implications of such technology, leaving it up to each country to decide the domestic pros and cons of ultimately issuing anything.
"CBDCs have the potential to enhance the efficiency of cross-border payments, as long as their design follows the 'Hippocratic Oath for CBDC design' and its premise to 'do no harm,'" the report reads.
The Fed is planning on publishing a paper this summer on the possibility of issuing a digital dollar, after which the Fed will ask for input from the public and Congress.
