=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.
EXECUTIVE SUMMARY
1.The level of global interest in Central Bank Digital Currencies (CBDCs) is unprecedented.
Retail CBDC issuance is being explored in over 100 countries. Several central banks have already launched pilots or even issued a CBDC. At the same time, CBDC is a new and rapidly evolving topic with limited real-world experience. IMF member countries exploring CBDCs are looking for answers to questions and are eager to learn lessons from other members.
2.The IMF’s Digital Money Strategy, endorsed by its Executive Board in July 2021,
gives the institution a mandate to help ensure that digital money fosters domestic and international economic and financial stability. CBDC, in particular, will likely have important implications for monetary policy, financial stability, and the international monetary system (IMS). The IMF must monitor, and advise on, digital money developments for all members.
3.Given its mandate and global membership, the IMF is uniquely well-placed to offer advice to countries across different regions and income groups. Over 40 countries have approached the IMF to request assistance through CBDC capacity development (CD).
4.IMF CBDC CD efforts have focused on facilitating peer learning and developing analytical underpinnings for staff advice to member countries. In all CD efforts, IMF staff strive to be trusted advisors to country authorities. In these early days of CBDC exploration, CD missions have aimed at helping country authorities answer questions about how to think about CBDCs instead of whether they should pursue CBDCs under certain conditions. Looking forward, with more available country experiments and empirical evidence, IMF CD will evolve to provide increased value-added advice that is more tailored to country circumstances and is more solidly anchored in empirical and analytical work, and strengthen synergies with surveillance.
5.To document emerging lessons and results from analytical work in a fast-moving field,
IMF staff will launch a CBDC Handbook as the basis for CD engagement. The Handbook will be a reference for policymakers and central bank experts, particularly in emerging market and developing economies (EMDEs). It will be a major project—about March 29, 2023 IMF APPROACH TO CENTRAL BANK DIGITAL CURRENCY CAPACITY DEVELOPMENT 20 chapters envisaged over the next four to five years, with chapters produced or updated each year. The CBDC Handbook will also be a “living” document reflecting evolving experiences, findings, and policy views. The Handbook will help countries ascertain whether CBDC makes sense for them and make well-informed decisions.
6.The Handbook will identify the most frequently asked questions related to CBDC.
The questions are bundled into five priority areas: (1) policy objectives and operational framework of CBDC; (2) foundational requirements and readiness to issue CBDC, such as legal considerations, cyber resilience, central bank governance, and regulation and supervision; (3) CBDC design processes, considerations, and choices; (4) project approaches and technology; and (5) potential macrofinancial impacts of CBDC. The Handbook chapters will provide mostly a framework for structuring CBDC exploration, and recommendations will be drawn from international best practices and be conditional on country circumstances.
7.The Handbook chapters are being prepared sequentially;
an initial wave of chapters is slated for publication around the 2023 Annual Meetings.
These chapters are prioritized for three reasons:
(1) they provide a methodological framework for conducting CBDC exploration;
(2) they address the most common requests that IMF staff encounter in CD engagement; and
(3) they are based on relatively well-established knowledge and experiences.
8.The Handbook will be written following close collaboration with member countries and other international organizations. Staff will follow a three-step approach:
(1) develop Fintech Notes on CBDC topics to seek comments inside and outside the IMF;
(2) brief the IMF Executive Board on key policy messages extracted from the Fintech Notes; and
(3) publish subsequent waves of Handbook chapters around the time of Annual Meetings.
Consultation with member countries and other international organizations will help extract common practices.