A digital bank can offer a Central Bank Digital Currency

IMF to issue CBDC handbook as several countries reach out for guidance

The International Monetary Fund (IMF) has announced that it will release a handbook that will serve as a quick guide for countries exploring a central bank digital currency (CBDC).

Deputy Managing Director of the IMF Bo Li made the disclosure in his opening remarks at a discussion panel on CBDCs. Li remarked that the surging interest in CBDCs has made it imperative for the IMF to play a leading role in assisting interested central banks.

Over 40 countries have reached out to the IMF for technical assistance concerning the design and objectives of their CBDCs. To deal with the rising appetite, the IMF noted that it would publish a CBDC handbook that will be a treasure trove of knowledge for central banks and stakeholders interested in exploring digital currencies.

“The Handbook will be a compendium of knowledge and experience on CBDC,” said Li. “It will be the basis for capacity development and hopefully help countries make as well-informed decisions as possible when taking the major step to design and issue their own CBDC.”

The monetary agency has covered every blade of grass since 2020 and recently published a policy paper outlining a multi-year strategy for central banks. Widely touted as the precursor to the handbook, the IMF advocates that central banks should place a premium on CBDC pilots and adopt a slow-and-steady approach.

In its Digital Money Strategy released in 2021, the IMF saddled itself with the mandate to “monitor” and “advise” member countries on the macro relevance of CBDCs and other fintech innovations.

A recent Bank for International Settlements (BIS) study notes that of the 81 central banks polled in 2021, which represent 94% of the world’s economy, nine out of 10 are delving into CBDCs. The study further revealed that over two-thirds of interested central banks had announced plans to launch retail CBDCs within a six-year period.

Given the meteoric growth of CBDCs, the G7 countries are scrambling to issue CBDC guidelines for developing countries before the end of the year.

Profound implications for the financial system

Li noted in his speech that CBDCs threaten monetary policy and financial stability if poorly designed. He pointed out that privacy violations are only the tip of the iceberg that could spiral into legal and operational challenges.

On the flip side, Li notes that a well-designed CBDC is integral for a resilient and efficient payment system. He added that CBDCs have the ability to improve cross-border payments by eliminating intermediaries and fostering healthy competition.

To learn more about central bank digital currencies and some of the design decisions that need to be considered when creating and launching it, read nChain’s CBDC playbook.

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