Demystifying Central Bank Digital Currencies: Insights from the IMF
Monday, March 06, 2023
The Global Central Banking Community is actively exploring the realm of Central Bank Digital Currencies (CBDCs), and the International Monetary Fund (IMF) has recently shared its insights on the necessary steps and options to move forward. In this blog post, we'll provide you with a succinct summary of what Compliance Officers should be aware of:
The IMF has released a Staff Report titled "IMF Approach to Central Banking Currency Capacity Development" on April 10, 2023, which was directly presented to the institution's Executive Board. Back in July 2021, the IMF Executive Board approved a digital currency strategy aimed at assisting and advising countries in this evolving landscape, allocating the necessary resources to achieve this objective.
Here are a few key takeaways regarding the macro-economic impact on financial stability, as well as considerations regarding cyber-resilience and governance of CBDCs:
1. Global Interest in CBDCs: More than 100 central banks around the world are actively engaged in CBDC projects, reflecting a growing interest in this innovative form of currency. A survey conducted by the Bank of International Settlements (BIS) in 2021 indicated that 76% of the world's population falls under jurisdictions exploring CBDCs.
2. Acceleration Amidst Crisis: The exploration and experimentation with CBDCs have gained momentum during the COVID-19 pandemic and as a response to the rise of crypto-assets. Advanced economies are championing CBDC efforts to fortify financial stability, while emerging economies are keen on enhancing financial inclusion and cross-border payment efficiency.
3. IMF's Collaborative Approach: The IMF is actively collaborating with other global institutions to support them in delivering Capacity Development (CD) initiatives. The BIS, with its 63 member countries, is fostering collaborative technological advancements related to CBDCs. The World Bank, through its global decision-making program (2021), is offering high-level expertise. Additionally, the IMF is working with standard-setting bodies to ensure that CBDC CD aligns with current international standards.
4. CBDC Handbook in the Works: The IMF is currently in the process of developing the CBDC Handbook, designed to assist participating countries in their CBDC Capacity Development efforts. The handbook's intended audience comprises medium and high-level policymakers in central banks, financial institutions, and related agencies. It will serve as a comprehensive resource, synthesizing knowledge from IMF White Papers, Notes, and other relevant publications. The handbook will be delivered in installments over the next four to five years, with four to five chapters released annually.
The world of Central Bank Digital Currencies is rapidly evolving, and the IMF is actively engaged in providing guidance and support to nations exploring this transformative landscape. Stay tuned for more updates and insights on this fascinating topic.
