In a recent episode of “The money movement“Along with Circle CEO Jeremy Allaire, Tommaso Mancini-Griffoli, deputy head of department at the Monetary & Capital Markets Division of the International Monetary Fund, the idea of a synthetic digital bank from the central bank came up. It is an idea that the IMF is kicking around for more than a year.
“A synthetic central bank digital currency is essentially a private-public partnership where the private sector issues an obligation that you and I use to buy assets for payments,” explains Mancini-Griffoli, “but that liability becomes fully supported by central bank reserves. “
For non-financial majors, a liability in this case would be just the token. Mancini-Griffoli’s proposal, which has not yet been endorsed by the IMF as a whole, contrasts with the traditional concept of a CBDC in which the central bank grants liability directly to the citizen.
That model is probably no longer tenable, says Mancini-Griffoli. “We have warmed to the idea of a public-private partnership. The question is how we can shape this collaboration.”
According to Mancini-Griffoli, central banks are concerned about the costs and risks of CBDCs, but also about deterring innovation by ending up in a space where global stablecoins and other digital assets are making headway.
The synthetic CBDC solves those concerns by allowing governments and companies to focus on what each of them does best. “This private-public partnership is designed to preserve the comparative advantages of the private sector in communicating and innovating with customers and preserving the comparative advantage of the central bank in regulating and maintaining confidence.”
Still, there are some who believe that CBDCs are unnecessary – and so are central bank regulations. The global stablecoin market is approaching $ 10 billion in market capitalization. In addition, consumers have many choices: Tether and recently launched exchange products such as USD Coin, Binance USD and Gemini dollar.
All the more in need of regulation, Mancini-Griffoli said. “It’s great that we have new innovations in payments, we have stablecoins supported with relatively safe assets, but there are a lot of different stablecoins available. It’s hard for consumers to know which ones are really fully supported , which really offer a claim on the underlying reserves and how liquid and safe those reserves are. “
So in the end, there is no plan hatched by the IMF to turn the fractional reserve banking system on its head or even to remove every intermediary. Mancini-Griffoli’s idea is more about enabling more efficient retail payments.
This, he noted, is also a practical way of banking the non-bankers and in fact bringing the power of finance to citizens around the world, an important part of the IMF’s mission. “In many countries where the penetration of the banking sector is low, we have seen massive use of new digital payment methods in many of our Member States,” said Mancini-Griffoli. “But in those cases, these new means of payment have enabled customers to get online, participate in payments, and then slowly migrate to banking services.”
So when it comes to public versus private, “it’s not either / or discussion.”