Imf Approach To Central Bank Digital Currency Capacity Development

The global central banking community is actively exploring Central Bank Digital Currencies (CBDCs), which may have a fundamental impact on both domestic and international economic and financial stability. Over 40 countries have approached the IMF to request assistance through CBDC capacity development (CD). Current IMF CBDC CD efforts have focused on facilitating peer learning and developing analytical underpinnings for staff advice to member countries. CD missions have aimed at helping country authorities answer questions about how to think about CBDCs. With more available country experiments and empirical evidence, IMF CD will evolve to provide increased value-added advice more tailored to country circumstances and more solidly anchored in empirical and analytical work, and strengthen synergies with surveillance. This paper sketches a multi-year strategy to address frequently asked questions related to CBDC and outlines the process for developing a CBDC Handbook which will document emerging lessons, analytical findings, and policy views. The paper (1) explains the IMF’s approach to CBDC CD; (2) summarizes member countries’ emerging questions and challenges regarding CBDC; and (3) introduces the CBDC Handbook by motivating its scope and elucidating its governance structure.

As central bank digital currency (CBDC) projects progress around the world, there is increased need for a project management methodology that is appropriate for CBDC. This paper develops a CBDC-specific project management methodology that establishes a common terminology and offers guidance to development teams on best practices for addressing the complex requirements and risks associated with CBDC. It is centered on an original five-step approach called the “5P Methodology”: preparation, proof-of-concept, prototypes, pilots, and production. The methodology emphasizes a phased approach to CBDC research and development, with strong focus on research preparation, experimentation and testing, risk management, stakeholder engagement, and cyber resilience.

Digitalization is reshaping economic activity, shrinking the role of cash, and spurring new digital forms of money. Central banks have been pondering wheter and how to adapt. One possibility is central bank digital currency (CBDC)-- a widely accessible digital form of fiat money that could be legal tender. This discussion note proposes a conceptual framework to assess the case for CBDC adoption from the perspective of users and central banks. It discusses possible CBDC designs, and explores potential benefits and costs, with a focus on the impact on monetary policy, financial stability, and integrity. This note also surveys research and pilot studies on CBDC by central banks around the world.

Following the companion paper on the new policy challenges related to the adoption of digital forms of money, this paper presents an operational strategy for the IMF to continue delivering on its mandate of ensuring domestic and international financial and economic stability. The paper begins by summarizing the forces driving the adoption of digital forms of money, and the new policy questions that emerge. It then focusses on how the IMF’s core activities and output will need to evolve, including surveillance, capacity development, and analytical foundations. It ends by discusses how the IMF intends to partner with other organization, and to grow and structure internal resources to fulfill this vision.

Central banks are increasingly pondering whether to issue their own digital currencies to the general public, so-called retail central bank digital currency (CBDC). The majority of IMF member countries are actively evaluating CBDCs, with only a few having issued CBDCs or undertaken extensive pilots or tests. This paper shines the spotlight on the handful of countries at the frontier in the hope of identifying and sharing insights, lessons, and open questions for the benefit of the many countries following in their footsteps. Clearly, what can be gleaned from these experiences does not necessarily apply elsewhere. The sample of countries remains small and country circumstances differ widely. However, the insights in this paper may inspire further investigation and allow countries to gain time by building on the experience of others. Importantly, the purpose of this paper is not to evaluate the courses taken by different jurisdictions, but to study and discuss their key experiences and lessons. The paper studies six advanced CBDC projects, drawing on collaboration and exchanges with the respective central banks to get insights beyond what has previously been published. Unless a specific published source is cited, all information stems from interviews and workshops with members of CBDC project teams in each jurisdiction.

This paper examines key considerations around central bank digital currency (CBDC) for use by the general public, based on a comprehensive review of recent research, central bank experiments, and ongoing discussions among stakeholders. It looks at the reasons why central banks are exploring retail CBDC issuance, policy and design considerations; legal, governance and regulatory perspectives; plus cybersecurity and other risk considerations. This paper makes a contribution to the CBDC literature by suggesting a structured framework to organize discussions on whether or not to issue CBDC, with an operational focus and a project management perspective.

New technologies are driving transformational changes in the global financial system. Virtual currencies (VCs) and the underlying distributed ledger systems are among these. VCs offer many potential benefits, but also considerable risks. VCs could raise efficiency and in the long run strengthen financial inclusion. At the same time, VCs could be potential vehicles for money laundering, terrorist financing, tax evasion and fraud. While risks to the conduct of monetary policy seem less likely to arise at this stage given the very small scale of VCs, risks to financial stability may eventually emerge as the new technologies become more widely used. National authorities have begun to address these challenges and will need to calibrate regulation in a manner that appropriately addresses the risks without stifling innovation. As experience is gained, international standards and best practices could be considered to provide guidance on the most appropriate regulatory responses in different fields, thereby promoting harmonization and cooperation across jurisdictions.

This paper analyzes the legal foundations of central bank digital currency (CBDC) under central bank and monetary law. Absent strong legal foundations, the issuance of CBDC poses legal, financial and reputational risks for central banks. While the appropriate design of the legal framework will up to a degree depend on the design features of the CBDC, some general conclusions can be made. First, most central bank laws do not currently authorize the issuance of CBDC to the general public. Second, from a monetary law perspective, it is not evident that “currency” status can be attributed to CBDC. While the central bank law issue can be solved through rather straithforward law reform, the monetary law issue poses fundmental legal policy challenges.