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Business and Economics > Banks and Banking

You are looking at 1 - 10 of 12 items for :

  • Type: Journal Issue x
  • Fintech Notes x
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Cover FinTech Notes
Private Law Aspects of Token-Based Central Bank Digital Currencies
Marianne Bechara
,
Wouter Bossu
,
Amira Rasekh
,
Chia Yi Tan
, and
Akihiro Yoshinaga
In designing central bank digital currencies (CBDCs), it is imperative that central banks carefully consider its legal foundations. As with any form of money, CBDCs require a solid basis under public and private law to provide it with the necessary legal certainty and political support that will underpin its wide circulation. This Fintech Note examines the private law aspects of token-based CBDC primarily intended for retail use. It follows a previous IMF working paper that examines the legal foundations of CBDC under central bank law and its treatment under monetary law—the main public law aspects of CBDC.
Keywords:
Token-Based CBDC; Private Law; Central Bank Digital Currencies; Legal Framework; Ownership Rights; Transfer Mechanisms; Financial Intermediaries
Cover FinTech Notes
Estimating the Impact of Digital Money on Cross-Border Flows: Scenario Analysis Covering the Intensive Margin
Eugenio M Cerutti
,
Melih Firat
, and
Hector Perez-Saiz
Digital money and digital payments innovations have the potential for improving cross-border payments by reducing costs, enhancing speed, and improving transparency. This note performs an empirical analysis of the potential impact of digital money on the volume and transaction costs of cross-border payments, with a focus on the short-term intensive margin. The market of cross-border payments is very large, with retail transactions having a low share of the total but the highest transaction costs, particularly for remittances. Our illustrative scenarios assume an estimated 60 percent reduction in transaction costs and short-term elasticities to changes in costs estimated from remittances data. The results show two outcomes. First, the cross-border volume increases could be sizable for countries that are large remittance recipients and face expensive transaction costs. Second, even with a large drop in transaction costs, the short-term rise in global cross-border transaction volumes could be limited as a result of the low transaction costs of the wholesale segment. Moving outside the short-term intensive margin, the impact could potentially be much larger as digital currencies and other digital payments innovations—together with tokenization of assets on programmable platforms—could move the financial system into a transformative new era by fostering financial development and promoting further inclusion across borders.
Keywords:
Digital money; cross-border payments; transaction costs; digital payments; payments innovation; cross-border payment; scenario analysis; IMF Fintech Brownbag Seminar; IMF seminar; Remittances; Central Bank digital currencies; Anti-money laundering and combating the financing of terrorism (AML/CFT); Correspondent banking; Global
Cover FinTech Notes
Implications of Central Bank Digital Currency for Monetary Operations
Tansaya Kunaratskul
,
Andre Reslow
, and
Manmohan Singh
This Fintech Note aims to analyze how the issuance of central bank digital currency (CBDC) could affect monetary operations, which include central banks managing the demand and supply of reserves to achieve a desired stance of monetary policy. The note outlines three scenarios: CBDCs substituting cash, commercial bank deposits, and reserves, with implications varying based on design features and market developments. It discusses how these scenarios influence balance sheets and reserves, potentially drawing short-term interest rates away from the policy target and complicating liquidity forecasting. Furthermore, the note shows how central banks could calibrate monetary operations such as engaging in a fine-tuning operation and provide additional reserves on demand to ensure that central banks can maintain their monetary policy stance. Finally, careful design of CBDCs, such as setting criteria for access, holding quantity, and remuneration, can mitigate adverse effects on monetary operations.
Keywords:
Central bank digital currency; CBDC; digital money; monetary operations; monetary policy; central bank digital currency design; IMF FINTECH note 2024/007; Bank of England omnibus account; design choice; CBDC demand; handbook chapter; Central Bank digital currencies; Short term interest rates; Commercial banks; Monetary base; Global
Cover FinTech Notes
Implications of Central Bank Digital Currencies for Monetary Policy Transmission
Ms. Mitali Das
,
Mr. Tommaso Mancini Griffoli
,
Fumitaka Nakamura
,
Ms. Julia Otten
,
Gabriel Soderberg
,
Mr. Juan Sole
, and
Brandon Tan
This fintech note presents an analysis of the implications of central bank digital currency (CBDC) for monetary policy. In our framework, the implications of CBDC issuance on monetary policy are intermediated by its impact on key parts of the macroeconomic environment. The note also makes a distinction between “level effects”—whereby the introduction of CBDCs could tighten or loosen financial conditions as a shock—and “transmission effects,” whereby CBDCs change the impact of a given monetary policy shock on output, employment, and inflation. In general, the effects of CBDCs on monetary policy transmission are expected to be relatively small in normal times; however, these effects can be more significant in an environment with low interest rates or financial market stress.
Keywords:
Central bank digital currencies; monetary policy; monetary policy transmission; monetary policy transition; IMF Fintech Note 2023/010; FINTECH note; CBDC issuance; Central bank policy rate; Financial inclusion; Bank deposits; Open market operations; Global
Cover FinTech Notes
How Should Central Banks Explore Central Bank Digital Currency?
Gabriel Soderberg
,
Mr. John Kiff
,
Hervé Tourpe
,
Ms. Marianne Bechara
,
Stephanie Forte
,
Kathleen Kao
,
Ashley Lannquist
,
Tao Sun
, and
Akihiro Yoshinaga
Digitalization of the economy provides both challenges and opportunities. Central banks should ensure that they have the capacity to continue to meet their policy objectives in the digital age. It is in this context that central bank digital currency (CBDC) should be evaluated. If designed appropriately, CBDCs could allow central banks to modernize payment systems and future-proof central bank money as the pace and shape of digitalization continues to evolve. However, the decision to proceed with CBDC exploration and an eventual launch would need to be jurisdiction specific, depending on the degree of digitalization of the economy, the legal and regulatory frameworks, and the central bank’s internal capacity. This paper proposes a dynamic decision-making framework under which the central bank can make decisions under uncertainty. A phased and iterative approach could allow central banks to adjust the pace, scale, and scope of their CBDC projects as the domestic and international environment changes.
Keywords:
Central bank digital currency; project management; digitalization; payments; IMF Fintech Note 2023/008; IMF Library; Fintech note; decision-making framework; publication order; CBDC project; Central Bank digital currencies; Payment systems; Commercial banks; Currencies; Sub-Saharan Africa; Global
Cover FinTech Notes
The Rise of Payment and Contracting Platforms
Mr. Tobias Adrian
and
Mr. Tommaso Mancini Griffoli
This Note explores the design and governance of platforms to enhance cross-border payments in line with public policy goals. While much innovation in recent years has more narrowly targeted end-user frictions, the vision in this paper is based on the mandate of the IMF, governed by the central banks and finance ministries of 190 member countries. Cross-border payments present the foundation for the global financial system, and its functioning is overseen by the IMF.
Keywords:
cross-border payments; platforms; central bank digital currencies; digital money; foreign exchange; settlement; programmability encryption; cross-border payment; note 2023/005; anatomy of payment; XC platform; platform operator; International reserves; Information and data management; Anti-money laundering and combating the financing of terrorism (AML/CFT); Global
Cover FinTech Notes
Trust Bridges and Money Flows: A Digital Marketplace to Improve Cross-Border Payments
Mr. Tobias Adrian
,
Mr. Rodney Garratt
, and
Mr. Dong He
Cross-border payments are expensive, slow, and opaque. These problems reflect multiple frictions, many of which boil down to limited trust among counterparties. Trust plays a central role in exchanging credit-based money. End users need to trust the issuers of money, and issuers must trust users to satisfy financial integrity requirements. Transactions are possible only where trust links exist. Interoperability between different forms of money can thus be conceptualized as the network of trusted links necessary for transactions. Traditionally, across borders, trust links involve exclusive bilateral credit relationships among correspondent banks. However, the fixed costs required to build these links foster an expensive and concentrated system. This paper interprets different payment arrangements in terms of the implied trust structures. It discusses how the tokenization of money alters trust links and allows for a potentially more efficient market structure to exchange money. The paper ends with a suggested global marketplace to trade tokenized money directly across borders.
Keywords:
cross-border payments; cross-border payment; tokenized money; liquidity swap lines; money flow; Tokenized money; issuers of money; marketplace model; trust relationship; Currencies; Digital currencies; Currency markets; Correspondent banking; Global
Cover FinTech Notes
Regulating the Crypto Ecosystem: The Case of Stablecoins and Arrangements
Stablecoins have experienced periods of rapid growth, accelerated links with traditional finance. Without proper regulation, contagion risks to wider financial sector will increase. Global regulation for stablecoins should be comprehensive, consistent, risk-based, flexible, and focus on their structural features and use. Requirements on stablecoins should cover the entire ecosystem and all its key functions, and there should be additional oversight for systemic stablecoin arrangements. In markets where risks are growing quickly, authorities should take immediate action by using all the tools at their disposal. This note provides key elements that should feature in any regulatory arrangement. For effective implementation, domestic and international collaboration are key.
Keywords:
stablecoin; DLT; crypto-asset; DeFi; Tether; TerraUSD; FSB; CPMI-IOSCO; IOSCO; regulation; Economic sectors; Emerging technologies; Financial crises; Financial sector policy and analysis; Financial sector stability; Financial services; Fintech; Systemic risk; Technology; IMF Fintech Note 2022/008; crypto Ecosystem; Stablecoin regulation; Infrasctructures to Stablecoin arrangement; e-money regulation; Virtual currencies; Blockchain and DLT; Reserve assets; Deposit insurance; Digital currencies; Global
Cover FinTech Notes
Behind the Scenes of Central Bank Digital Currency: Emerging Trends, Insights, and Policy Lessons
Gabriel Soderberg
,
Ms. Marianne Bechara
,
Wouter Bossu
,
Ms. Natasha X Che
,
Sonja Davidovic
,
Mr. John Kiff
,
Ms. Inutu Lukonga
,
Mr. Tommaso Mancini Griffoli
,
Tao Sun
, and
Akihiro Yoshinaga
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.
Keywords:
digital currency; central banks; fintech; CBDC; cross-border payments; distributed ledger technology; off-line capacity; anonymity; Sand Dollar; e-CNY; DCash; e-krona; e-peso; technology supplier; ensuring resilience; CBDC communication; technology choice; central bank representative; Central Bank digital currencies; Currencies; Blockchain and DLT; Caribbean
Cover FinTech Notes
The Impact of Fintech on Central Bank Governance: Key Legal Issues
Ms. Marianne Bechara
,
Wouter Bossu
,
Ms. Yan Liu
, and
Arthur Rossi
Fintech presents unique opportunities for central banks. The rapid changes in technology that are transforming the financial system will allow central banks to enhance the execution of various of their core functions, such as currency issuance and payment systems. But some aspects of fintech pose major challenges. Central banks have always been at the cutting edge of financial technology and innovation. In the past, the invention of the banknote, the processing of payments through debits and credits in book-entry accounts, and the successive transitions of interbank payment systems from the telegraph to internet protocols were all transformative innovations. Today, central banks are facing new and unprecedented challenges: distributed ledger technology, new data analytics (artificial intelligence [AI] and machine learning), and cloud computing, along with a wider spread of mobile access and increased internet speed and bandwidth. The purpose of this note is to discuss the authors’ preliminary views on how, from a legal perspective, central banks can best deal with the impact of fintech on their governance. These preliminary views are based on a review of central banks’ reaction thus far to the challenges posed by fintech to the legal foundations of their governance.
Keywords:
copyright page; publication order; central bank iLabs; collaboration arrangement; oversight responsibility; Fintech; Central bank legislation; Payment systems; Central bank governance; Central Bank digital currencies; Global