William Webster

written by

William Webster

Researcher, Avoncourt Partners GmbH

Culture Blog - Nov 15, 2017

IMF’s SDR System Placed on the Blockchain

During the 2008-2009 financial crisis, the IMF effectively showed itself a major player in the just distribution of wealth around the globe. The 2009 SDR allocations, totaling SDR 182.6 billion, played a critical role in providing liquidity to the global economic system and supplementing member countries’ official reserves amid the global financial crisis.

The SDR is neither a currency, nor a claim on the IMF. It is a potential claim on the freely usable currencies of IMF members. Holders of SDRs can obtain these currencies in exchange for their SDRs in two ways: first, through the arrangement of voluntary exchanges between members; and second, by the IMF designating members with strong external positions to purchase SDRs from members with weak external positions. Many nations did this in 2009 to help bail other nations from utter economic disaster. Since October 1, 2016, the SDR basket consists of the US dollar, the euro, the Chinese renminbi, the Japanese yen, and the British pound.

In November 2015, a Chinese central bank researcher hinted that the International Monetary Fund would create a digital version of its global reserve currency (SDR) that could be more widely used across the world’s financial markets and payment systems. This in fact happened.

At the beginning of 2017, the IMF teamed up with blockchain researchers and investors to launch a digital SDR called the ACC (Asset Collection Coin), or simply eSDR, which is based on the ACChain blockchain. It allows for more rapid exchange and a more secure and stable global market. This eSDR would help address flaws in the current global monetary system. BTC and ETH are the objects of the ACC, both of which are relatively stable cryptocurrencies. 

Since IMF members often need to buy SDRs to discharge obligations to the IMF, or to sell SDRs in order to adjust the composition of their reserves, buying these digital eSDRs will help balance the wealth distribution in the world. As prescribed, the IMF may act as an intermediary between members and prescribed holders to ensure that SDRs can be exchanged for freely usable currencies, including now bitcoin and ethereum in the eSDR. 

Members with sufficiently strong external positions are designated by the IMF to buy SDRs with freely usable currencies up to certain amounts from members with weak external positions. This arrangement serves as a backstop to guarantee the liquidity and the reserve asset character of the SDR. This may become the rule regarding eSDRs as well. It is certainly a laudable shift of attitude and perception to dignify the grassroots efforts of blockchain researchers to increase transparency and justice in the equal distribution of wealth around the globe.