As reported by Bloomberg at the meeting of ministers and central bankers this week in Washington, the International Monetary Fund sent a clear message. Digital currencies will bring a massive disruption, you need to get involved with the new technology before it is too late.
The financial counselor and director of the monetary and capital markets department of the International Monetary Fund, Tobias Adrian said in an interview:
“In the U.S. and other countries around the world, it is just a matter of time before we see massive disruption. There is at least the potential that new technology might lead to a new global payment system fairly rapidly.”
Several central banks are considering whether they should issue digital currencies. The FED is studying new ways to improve its payment system to make payments almost instantly.
The first thing is online payments, where money needs to travel through banks and credit card companies where costs and delays rise and hurt the pockets of low-income people.
Aaron Klein, a fellow in Economic Studies at the Brookings Institution who is a sceptic to the FED promise, to launch its own instant payments system said:
“The American payment system is a giant reverse Robinhood, sucking billions of dollars out of people who live paycheck to paycheck and depositing money in the form of credit card rewards to the already rich,’’
The second thing which is a real threat to the existence of the central banks is a Facebook coin that would facilitate online payment on their social media platform. This coin could be more stable than cryptocurrencies because would be tied to real assets as a stable coin. And Facebook already has a name for this coin which is Libra.
Even JPMorgan is experimenting with its JPM Coin which should speed its corporate transactions.
A financial system that is poised to change rapidly from a central bank centric to payment based platforms, poses an important question.
Will be central banks themselves with their FIAT money to facilitate this new trend or will come someone else with their own money to fulfill this need.