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Law > Business and Financial

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Cover Policy Papers
Elements of Effective Policies for Crypto Assets
International Monetary Fund
This paper aims to address questions by Fund members on how to respond to the rise of crypto assets and the associated risks. To frame the discussion, the paper defines and classifies crypto assets based on their underlying features and describes their purported benefits and potential risks. The paper presents a policy framework for crypto assets that aims to achieve key policy objectives such as macroeconomic stability, financial stability, consumer protection, and market and financial integrity. The framework outlines key elements that are necessary to ensure that these objectives are met. However, such a framework will not fix any underlying crypto design flaws (for instance, the lack of a credible nominal anchor, payments finality, or scalability).
Keywords:
IMF's transparency policy; policy action; staff's policy dialogue; policy agenda; monetary unit; Virtual currencies; Currencies; Anti-money laundering and combating the financing of terrorism (AML/CFT); Blockchain and DLT; International monetary system; Global
Cover Policy Papers
State-Contingent Debt Instruments for Sovereigns
International Monetary Fund
Background. The case for sovereign state-contingent debt instruments (SCDIs) as a countercyclical and risk-sharing tool has been around for some time and remains appealing; but take-up has been limited. Earlier staff work had advocated the use of growth-indexed bonds in emerging markets and contingent financial instruments in low-income countries. In light of recent renewed interest among academics, policymakers, and market participants—staff has analyzed the conceptual and practical issues SCDIs raise with a view to accelerate the development of self-sustaining markets in these instruments. The analysis has benefited from broad consultations with both private market participants and policymakers. The economic case for SCDIs. By linking debt service to a measure of the sovereign’s capacity to pay, SCDIs can increase fiscal space, and thus allow greater policy flexibility in bad times. They can also broaden the sovereign’s investor base, open opportunities for risk diversification for investors, and enhance the resilience of the international financial system. Should SCDI issuance rise to account for a large share of public debt, it could also significantly reduce the incidence and cost of sovereign debt crises. Some potential complications require mitigation: a high novelty and liquidity premium demanded by investors in the early stage of market development; adverse selection and moral hazard risks; undesirable pricing effects on conventional debt; pro-cyclical investor demand; migration of excessive risk to the private sector; and adverse political economy incentives.
Keywords:
PP; State-Contingent Debt instrument; investor; issuer; benchmark design; market development; real GDP; foreign currency; interest rate; debt service; Bonds; Sovereign bonds; Securities; Currencies; Global
Cover IMF Working Papers
The International Monetary System: Where Are We and Where Do We Need to Go?
Rakesh Mohan
,
Michael Debabrata Patra
, and
Muneesh Kapur
The North Atlantic financial crisis of 2008-2009 has spurred renewed interest in reforming the international monetary system, which has been malfunctioning in many aspects. Large and volatile capital flows have promoted greater volatility in financial markets, leading to recurrent financial crises. The renewed focus on the broader role of the central banks, away from narrow price stability monetary policy frameworks, is necessary to ensure domestic macroeconomic and financial stability. Since international monetary cooperation might be difficult, though desirable, central banks in major advanced economies, going forward, need to internalize the implications of their monetary policies for the rest of the global economy to reduce the incidence of financial crises.
Keywords:
WP; capital flow; global economy; reserve currency; net capital; foreign exchange; Capital flows; central banks; currency internationalization; international monetary system; financial stability; pound sterling; IMS performance; post-Bretton Woods IMS; gold standard; financial asset; risk diversification; developing economy; IMS feed; short-term debt; multipolar IMS; Mexican peso; Currencies; Financial sector stability; Global; Asia and Pacific; East Asia; Middle East; North Africa
Cover IMF Working Papers
Out of the Box Thoughts about the International Financial Architecture
Mr. Barry J. Eichengreen
The Global Credit Crisis of 2008-09 has underscored the urgency of reforming the international financial architecture. While a number of short-term reforms are already in train, this paper contemplates more ambitious reforms of the international financial architecture that might be implemented over the next ten years. It proposes routinizing the expansion of IMF quotas and the conduct of exchange rate surveillance. It contemplates an expanded role for the SDR in international transactions, which would require someone-like the IMF-to act as market maker. It considers proposals for reimposing Glass-Steagall-like restrictions on commercial and investment banking, something that will have to be coordinated internationally to be feasible. Other proposals would require banks to purchase capital insurance; here the question is who would be on the other side of the market. Again there is likely to be a role for the IMF. Then there are arguments for a new agency or institution to deal with cross-border bank insolvencies. Any such entity will require staff support, which might plausibly come from the Fund. Finally, some insist that international colleges of regulators are not enough-that it is desirable to create a World Financial Organization (WFO) with the power to sanction members whose national regulatory policies are not up to international standards. A WFO will similarly need staff support, of which the IMF would be one possible source. All this of course presupposes meaningful IMF governance reform so that the institution has the legitimacy and efficiency to assume these additional responsibilities. The paper therefore concludes with some conventional and unconventional proposals for IMF governance reform.
Keywords:
WP; bank; central bank; financial market; IMF governance; credit crisis; IMF surveillance
Cover IMF Working Papers
Ponzi Schemes in the Caribbean
Ana Carvajal
,
Mr. Hunter K Monroe
,
Ms. Catherine A Pattillo
, and
Brian Wynter
In several Caribbean states, unregulated investment schemes grew quickly in recent years by claiming unusually high monthly returns and through a system of referrals by existing members. These are features shared with traditional Ponzi schemes and pyramid schemes. This paper describes the growth of such schemes, their subsequent collapse, and the policy response of regulators, and presents key policy lessons. The analysis and recommendations draw on country experiences in the Caribbean, and in such diverse countries as the United States, Colombia, Lesotho, and Albania.
Keywords:
WP; stay of execution; government authorities close; public offering; Antiguan government; business activity; Pyramid schemes; Ponzi schemes; Caribbean; Ponzi scheme; securities regulator; Currencies; Securities; Legal support in revenue administration