Yesterday, Bo Li, the Deputy Managing Director of the International Monetary Fund (IMF), described the level of interest in central bank digital currency (CBDC) as ‘unprecedented’. Forty countries have approached the IMF for assistance and it has engaged with almost 30.
The IMF sees one of its roles as CBDC capacity development. It released a paper around what it’s learned so far and plans to develop a CBDC Handbook to support its efforts. The 20 chapter handbook is funded by Japan, and it will release four or five chapters per year.
One of the key takeaways is the various motivations for CBDC interest, with countering the interest in crypto-assets coming top of the list. For advanced economies, the drivers include maintaining central bank involvement in digital payment systems, enhancing payment competition, and supporting tokenization. In contrast, emerging and developing economies see financial inclusion as a major factor.
Demand for help from the IMF is sufficiently great that it has to prioritize what it works on. It will target systemically important countries and those fast-tracking CBDC work but with risks such as capacity constraints or weak regulations.
The IMF wants to continue its work with other international bodies. While the BIS is considered a major global player when it comes to CBDC, the IMF noted that the BIS does ‘not directly serve the majority of EMDEs (developing economies)’. Our takeaway is that compared to the BIS, the IMF will have a different emphasis, with a greater focus on financial inclusion. It is also more wary of the risks of foreign CBDCs and digital currencies regarding dollarization and the inability of some countries to control funds moving out of the country. That could directly impact the repayment of IMF loans.
