IMF official: Multiple reserve currencies help achieve global stability, cryptocurrencies are too young to become global reserve currencies

At the Consensus 2021 summit hosted by CoinDesk, CoinDesk Managing Director Emily Parker posed the question: Should the United States be concerned that China’s central bank digital currency (CBDC) could threaten the dollar’s ​​dominance as the global reserve currency?

“I’m not saying that’s the case with the dollar. It’s just a theoretical argument that supports the idea that having multiple reserve currencies allows for greater global stability. So from an international perspective, I think multiple reserve currencies is a welcome proposition,” explained Mancini-Griffoli, who is head of the IMF’s Monetary and Capital Markets Payments and Infrastructure Department. The world already has multiple reserve currencies, including the dollar, euro and yen, Mancini-Griffoli added.

China has begun testing the digital yuan. Bitpush previously reported that in March, Agustín Carsten, general manager of the Bank for International Settlements (BIS), said that China could win the United States' "first-mover advantage" by issuing CBDC. However, Federal Reserve Chairman Jerome Powell believes that the priority promotion of the digital yuan will not stimulate the United States to enter the digital currency competition.

Mancini-Griffoli also said that crypto assets are still too small to be a significant source of financial stability risk.

“For crypto assets to pose a significant risk to central banks, they would need to have substantial currency substitution. In this case, countries would have to (in theory) use a more stable cryptocurrency instead of or in addition to their national currency.”

Mancini-Griffoli added that alternative currencies are a big problem internationally, with countries with weak institutions, high inflation and volatile exchange rates having an increasing degree of currency substitution, thus including not only crypto assets but also stablecoins and CBDCs: “These are exactly the types of problems that require international cooperation to solve.”

The IMF official also believes that while cryptocurrencies can often be created in a very short period of time, they are not necessarily ideal candidates for global reserve currencies.

“I just want to take this opportunity to clarify that while Bitcoin, Dogecoin, and other similar tokens may have been created in the ‘flick of a finger’ and relatively quickly, and may have been widely adopted relatively quickly and achieved significant market capitalization, in doing so they neither serve the purpose of, nor can they be considered, an international reserve currency,” he said.

Mancini added that a global reserve currency must be able to store value stably. Digital assets are too volatile, and cryptocurrencies are closer to investment assets than currencies.