The SDR (Special Drawing Rights) is an international reserve asset created by the IMF as a supplementary international reserve asset in 1969. The SDR serves as the unit of account of the IMF and other international organizations.
The SDR is not a currency, but its value is based on a basket of five currencies—the US dollar, the euro, the Chinese renminbi, the Japanese yen, and the British pound sterling. The SDR asset holders can exchange for currency when needed.
The IMF originally defined the SDR as equivalent to a fractional amount of gold equivalent to one US dollar. This arrangement was when fixed exchange rates of currencies tied to the price of gold and the US dollar were the leading international reserve asset.
IMF redefined the SDR in 1973, when fixed exchange rates ended, as equivalent to the value of a basket of world currencies the US dollar, the euro, the Chinese renminbi, the Japanese yen, and the British pound sterling.
Individuals and private entities cannot hold SDRs. IMF members – and the IMF itself – hold SDRs and the IMF has the authority to approve other holders, such as central banks and multilateral development banks. However, individuals and private entities cannot hold SDRs.
As of February 2023, there were 20 organizations approved as prescribed holders. Participating members and prescribed holders can buy and sell SDRs. However, prescribed holders do not receive allocations of SDRs, and they may not request an exchange of SDRs in transactions with designation as members do.
