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"An enhanced special drawing right (SDR), valued by a basket of goods, would provide the global currency and reserve asset the global economy craves. This paper proposes linking the value of the International Monetary Fund's SDR and national currencies that fix their exchange rates to the SDR to a representative basket of widely traded goods. The new "real SDR" would be issued and redeemed passively according to "Currency Board" rules in exchange for financial assets with the same market value as the basket. National currencies and/or an international reserve currency with the same value (i.e. fixed to a common unit of account) would lower the cost of trading by reducing transaction and information costs and exchange rate risk and would thus increase world trade and improve the efficiency of international resource allocation. A system anchored to a goods basket would not have the shortcomings that afflict the gold standard-gold's fluctuating relative value. The indirect redeemability rule, issuing and redeeming real SDRs for financial assets of equivalent value would avoid the shortcoming that makes multi-good commodity standards very costly-¬the need to maintain large reserves of all of the commodities in the basket. The innovative idea of indirect redeemability, discussed by Yeager, Greenfield, and others, keeps the quantity of SDRs equal to the amount demanded when its value is given by the valuation basket, without the need for the monetary authority to warehouse the goods in the basket."

This blog by ex-IMFer (1976-2003) Warren Coats suggests that the IMF get to work developing a digital SDR, to build the foundation on which the SDR can become a more important international reserve asset.

The creation of a vibrant market in SDR linked to commodity prices could create a powerful new monetary anchor, argues former IMF SDR chief Warren Coats.

Here is a quick survey of the SDR and the many appearances it makes in modern life. The SDR is a fairly minor currency, but it is surprising to see some of the economic nooks and crannies where it is being used.

"USD650bn of the International Monetary Fund's synthetic currency, the Special Drawing Rights (SDRs), today hits the balance sheets of IMF members as a response to the pandemic. The scramble to leverage this allocation for development and climate change underlines how far from the SDR's original purpose-as the elastic provision of global liquidity-we have traveled. Yet the emergence of cryptocurrency technology suggests ways the SDR could be revamped for the global challenges ahead. With imagination and ambition, such a revamp would allow developing economy savings to be channeled into productive investments rather than financing the US current account. This would be a genuine watershed in the fight against climate change."

In our first piece of the Crypto Drawing Rights series we explained what the SDR is, what role it plays and how its value is derived. In this piece, we want to focus on how SDRs are created and used in IMF financial operations.

Previous posts discussed what the IMF's Special Drawing Rights (SDRs) are and how they are used. This post discusses what a hypothetical crypto-SDR, or Crypto Drawing Rights (CDR), would look like and how it could benefit the IMF and its member organizations.

The Wall Street Journal posted an article entitled "Forget Bitcoin. Have You Heard of IMFcoin?" While the piece makes for an interesting read, it is misguided in its belief that the International Monetary Fund (IMF) wants to create an alternative to Bitcoin or other decentralized cryptocurrencies. We'd like to set the record straight on what the SDR is and does and offer our vision for a digital SDR in a series of posts.

The primary function of Abaku Capital is the maintenance and promotion of a family of tokens aimed at facilitating commerce. The flagship token is designed for monetary stability, and as a hedge against foreign-exchange risk, whereas the rest of the family comprises tethers to various currencies of interest. This token is, in essence, a cryptonisation of the International Monetary Fund's proprietary currency, the SDR (special drawing rights). The SDR, and therefore its Abaku counterpart, is an asset-backed currency based on a basket of national currencies managed by the IMF.

Some are comparing Facebook's Libra Reserve scheme to the IMF's Special Drawing Right (SDR) system. This makes sense. It's based on a basket of currencies just like Libra intends to be when it is launched next year. But the truth is Libra is anything but an SDR system.

The SDR-a blueprint for libra? The SDR's history and limited success show how difficult it is to design an international currency. Libra will likely face very similar challenges.

Abaku SDR is 100% backed by the currencies underlying the IMF's currency. Deposits are held by a major international bank with monthly audits conducted by a certified accounting firm to validate the presence of collateral

"If Libra has its heart set on choosing an artificial currency unit as the basis for its global currency, it should have probably just go with the IMF's SDR basket rather than brewing its own strange currency concoction."

This could logically mean a new enhanced role for the BIS, which coincidentally relies on a primitive kind of "stablecoin": the BIS's vast reserves, accounting for close to 7 per cent of the world's total currency, are held via a BIS unit of account denominated in IMF special drawing rights, which in turn are pegged to a basket of convertible currencies. It would be a small step to ensure there is life after Libra, albeit with central banks in charge.