Digital currencies: questions and answers

The IMF can help in three ways: by informing the policy debate, by convening relevant parties to discuss policy options, and by helping countries develop policies.

Central Bank Digital Currencies (CBDC) is a complex and multidisciplinary topic requiring active analysis and debate. It raises questions related to monetary policy, central banking operations, and payment systems — as well as financial stability and legal foundations and regulation.

Below are some of the most pressing questions and answers on the topic.

What is the International Monetary Fund’s (IMF) role around CBDCs now and in the future?

The IMF can help in three ways: by informing the policy debate, by convening relevant parties to discuss policy options, and by helping countries develop policies. Because CBDC is a novel topic, the IMF has mostly been active in the first two areas, but it is gradually moving into the third area as member countries consider CBDC options and seek advice.

First, the IMF can help inform the policy debate. The IMF is currently investigating implications of CBDC available across borders. Other institutions, such as the Bank for International Settlements and the Committee on Payments and Market Infrastructure, among others, have also contributed to the topic. The IMF is well-placed to study CBDC, because it can draw on its in-house experts. Moreover, a potential world with multiple CBDCs could raise important questions about cross-border payments and the international monetary system, which are at the core of the IMF’s mandate.

Second, the IMF is well-positioned to help foster cooperation across countries and relevant parties. The IMF can draw on its universal membership to share information about rapidly evolving developments across advanced and emerging market economies. Moreover, because the IMF is a public international institution, it can bring together central bankers and regulators, as well as investors, entrepreneurs, and academics from around the world for an open dialogue. It has done so repeatedly at its bi-yearly meetings, in its yearly “fintech roundtable,” and in its ad-hoc research events.

Third, the IMF can help countries evaluate policies regarding CBDC as well as investigate alternative means to improve payment systems. The IMF can do so through its surveillance work, its Financial Sector Assessment Programs, and its technical assistance, which it has a long tradition of providing. IMF teams have already worked with countries to modernize payment systems, advise on legislation related to digital payments, and review plans to issue CBDC. The IMF can help countries think through the implications of CBDC and its attendant potential benefits and risks, including through regional workshops leveraging knowledge in central banks at the frontier of CBDC development, and bilateral technical assistance missions.

How does the IMF view global development and implementation of CBDC?

Countries differ substantially in the extent to which they are actively exploring digital currencies and in their proximity to issuing such currencies.

Some other countries have also scaled up resources dedicated to CBDC and payment systems, although they mostly focus on undertaking analysis and more limited hands-on testing of technology. Although CBDC remains an option for these countries, they are also actively exploring alternative solutions.

A third set of countries do not see an immediate need to issue CBDC, and focus instead on improving existing payment arrangements and strengthening regulation.