The International Monetary Fund ( IMF ) has announced it has been working on a platform for central bank digital currencies (CDBCs) to enable transactions between countries. As representatives see it, CBDCs should not be fragmented national propositions.

To have more efficient and fairer transactions there must be systems that connect countries, to provide interoperability. For this reason, the IMF is working on the concept of a global CBDC platform. The IMF wants central banks to agree on a common regulatory framework for digital currencies that will allow global interoperability.

Failure to agree on a common platform would create a vacuum that would likely be filled by cryptocurrencies. A CBDC is a digital currency controlled by the central bank, while cryptocurrencies are nearly always decentralised. Already 114 central banks are at some stage of CBDC exploration, with about 10 already crossing the finish line.

If countries develop CDBCs only for domestic deployment, they might be underutilising their capacity. CBDCs could also help promote financial inclusion and make remittances cheaper, IMF representatives observe, noting that the average cost of money transfers stands at 6.3% amounting to USD 44 billion annually. They also stressed that CBDCs should be backed by assets and added that cryptocurrencies are an investment opportunity when backed by assets, but when they are not they are a speculative investment.

One step closer In the attempt of unite the world of digital currency, the Digital Currency Monetary Authority (DCMA) has launched an international CDBC that complies with IMF-proposed crypto assets policy recommendations. The Universal Monetary Unit (UMU) is legally a money commodity that can transact in any legal tender settlement currency. It also functions like a CBDC when it comes to enforcing banking regulations and protecting the financial integrity of the international banking system according to prnewswire.com.

This international CBDC allows banks to attach SWIFT Codes and bank accounts to a UMU digital currency wallet with the purpose of conducting cross-border payments over digital currency rails that bypass the correspondent banking system. This method is available at wholesale FX rates and supports instant real-time settlements. Progress in Africa In November 2022 the IMF proposed an increase in regulation and better consumer protection in Africa’s cryptocurrency market.

The proposal came in the context of FTX’s downfall and the subsequent drop in the prices of Bitcoin, Ethereum, and other crypto assets. According to IMF citing a Chainalysis report, Africa’s crypto market is growing at a rapid pace, but it’s still one of the smallest in the world with crypto transactions peaking at USD 20 billion per month in mid-2021. One of the main concerns is that cryptocurrencies can be used to transfer funds illegally out of the region, while widespread crypto use could affect monetary policy effectiveness.

The IMF is particularly worried about countries where crypto is accepted as legal tender, a statement based on data from the October 2022 Regional Economic Outlook for sub-Saharan Africa report. .