While there are still repeated calls for a digital dollar, the actual possibility seems to be a long way off. According to the International Monetary Fund’s (IMF) chief economist Gita Gopinath, digital currencies will not be doing anything for the U.S.’ position in the global market.
In an opinion piece for the Financial Times, Gopinath admits that digital currencies bring about interesting possibilities. Regardless, she doesn’t believe that they have the framework required to perform like the dollar. According to her:
“Advances in payment technologies do not address fundamental issues of what it takes to be a global reserve currency.”
She adds that the position the dollar occupies in the world’s markets is enhanced by U.S. efforts including its institutions as well as the rule of law. Gopinath believes that “simply raising the supply of an alternative currency will not be enough to surmount these considerations.”
Gopinath further adds that there is not a lot of evidence to support the fact that crypto has done enough to “reduce the expense of moving among currencies.”
IMF says that more than 60 percent of all foreign exchange reserves in last year’s third quarter was made up of the dollar. The chief economist’s comments suggest that digital currencies still have a long way to go to reach this feat.
An IMF survey conducted last year revealed that most central banks are planning to launch a central bank digital currency (CBDC).