- IMF Executive spoke to Shekhar Gupta and Sharad Raghavan at The Print’s ‘Off The Cuff’ show.
- He lectured on the necessity of distinguishing between cryptocurrencies and the CBDCs.
- The role of central banks and the fallacies about the functioning of the banks were also discussed in the talk.
Indian Economist, the Executive Director of the International Monetary Fund (IMF), and the former Chief Economic Advisor to the Government of India, K V Subramanian, talked about the necessity of distinguishing between Central Bank Digital Currency (CBDC) and cryptocurrency at the ‘Off The Cuff’ show.
On Tuesday, Subramanian had a talk with The Print Editor-in-Chief Shekhar Gupta and Deputy Editor TCA Sharad Raghavan at ‘Off The Cuff,’ the candid talk show launched by the online news channel, The Print.
Notably, he explained in detail the ways in which the CBDCs should be differentiated from the cryptocurrencies:
We need to distinguish between cryptocurrency and the CBDC. Unlike the physical currency that we carry in our pockets, when we need to give money to somebody, CBDC is basically a digital currency issued by the central bank. In some way, it will be a part of the currency in circulation, and that is just the central bank keeping pace with digitization.
Significantly, Subramanian said that the central banks lack well-established strategies to control inflation as well as a deeply-rooted management system for the supply of credits. Such concepts, he added, are only found in economic textbooks.
Interestingly, he talked about the conventional theory of financial intermediation, which takes banks as mediators, who take liquid deposits and distribute illiquid loans, which can be equated with the exchange of ‘parcels’
The fundamental flaw in this is that banks are actually money creators, they are not just passing the parcel.
Further, he elaborated more on the fallacies of the functions of banks that prevail currently. He said that it is thought that the banks can lend what they have. Contradicting the thought, Subramanian commented that “in real life, banks can lend much more than what they have.”
Concluding the session, Subramanian announced that “the printing of currency is based on the demand for currency.” He added that the CBDCs will also be issued according to the demand for them, like any other currency.