IMF boss: central bank digital money is better than bitcoin

According to IMF director Kristalina Georgieva, a central bank digital currency has the potential to be much better than bitcoin. It would be more unruly, cheaper, more available and safer. The comparison is only partially valid: both are digital currencies, but they are also opposites of each other.

Georgieva made the statements during a speech at a meeting of the American think tank Atlantic Council on central bank digital money, also known as Central Bank Digital Currencies (CBDC).

?ǣIf carefully designed, CBDCs have the potential to offer more resiliency, more security, more availability and lower costs than private forms of digital money ,?ǥ she said. Private money is money that has not been issued by a government.

?ǣThat is clearly the case when compared to unsecured crypto assets which are inherently volatile,?ǥ she added. ?ǣAnd even the better managed and regulated stablecoins are not going to be able to match a well-designed CBDC.?ǥ


Some 100 countries are now said to be experimenting with digital central bank money. Mostly this concerns research, but in some countries people are already a little further: in the Bahamas the ‘Sand Dollar’ is circulating among about 20,000 people and in China more than 100 million people are said to be using the digital renminbi e-CNY.

Practice shows, according to Georgieva, that there is no ‘best’ way to introduce digital central bank money, because every economy is different. Some economies would benefit more from financial inclusion, while for other economies central bank digital money is mainly useful as a backup money system.

Remarkable are her considerations with regard to financial stability. Georgieva says it is important that financial intermediaries are not sidelined. To prevent too much money from flowing into central bank digital money, the attractiveness could be reduced by setting limits, or via a lower (or no) interest rate. In an earlier report on digital central bank money, DNB also pointed to similar risks.

The right balance should also be found with regard to privacy. Up to a certain amount, one would have some privacy, but above that additional identification requirements would apply to counter illegal activity.


Bitcoin and central bank digital money are sometimes compared because they are both digital currencies, but they are actually opposites. That is mainly in the design.

Central bank digital money is usually highly centralized. The central bank manages the system completely and trust in the central bank is essential. The central bank must be trusted, among other things, to protect the funds and personal data against hackers, to allow transactions and to conduct a sound monetary policy.

The innovation of Bitcoin is that similar trust in intermediaries is not necessary, because it is decentralized. Bitcoin’s operation and monetary policy are immutably enshrined in the code that each participant runs individually. As a result, no party has control and no personal data is stored anywhere – they are not needed on the Bitcoin network.

With (digital) central bank money, the central bank influences the money supply in order to achieve a stable exchange rate for the currency. Stability means 2% inflation per year in central banks, but sometimes it is more and in some countries it is a lot more.

Bitcoin works the other way around. The money supply is fixed, resulting in a fluctuating exchange rate. This is determined through free market forces by supply and demand – the number of users. Inflation is also fixed: it drops by about half every four years, until it finally reaches zero.

Central bank digital money is likely to have identification requirements, built-in limits and restrictions or possibly even negative interest rates. Bitcoin doesn’t have that: it’s free and open, limitless and limitless.


Claims about being faster and cheaper – especially with the Lightning Network – are debatable to say the least. The decentralized Bitcoin network is also known as the safest network in the world. It is not obvious why digital central bank money would be better, or why citizens in the West would prefer it to traditional digital bank money.

The innovations of digital central bank money seem mainly to benefit governments: more surveillance and control. Perhaps it is therefore not surprising that China is at the forefront of the development of central bank digital money. It will have to be seen whether governments in the west take the same direction, but fortunately there is always a free, open and unrestricted alternative available.

s: IMF, license CC BY-NC-ND 2.0

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