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The IMF's @Kiffmeister charted a technology path for central bank digital currencies in a recent webinar hosted by The Block.

While scaling mobile cash transfers quickly to help alleviate the impact of the pandemic, governments should take a broad approach that goes beyond the technology and consider the whole ecosystem behind a robust and resilient mobile program. A holistic approach should be considered by policymakers and the industry to integrate all the "building blocks" of a sustainable mobile-money platform, including stakeholders and design and policy elements that help maximize benefits against risks.

Technology is changing the landscape of the financial sector, increasing access to financial services in profound ways. These changes have been in motion for several years, affecting nearly all countries in the world. During the COVID-19 pandemic, technology has created new opportunities for digital financial services to accelerate and enhance financial inclusion, amid social distancing and containment measures. At the same time, the risks emerging prior to COVID-19, as digital financial services developed, are becoming even more relevant.

COVID-19 and the Great Lockdown triggered a mass migration from analog to digital and highlighted that access to the Internet is crucial for socioeconomic inclusion. However, Internet usage remains a luxury: half of the world's population does not have access to the Internet, either through a mobile device or through fixed line broadband. The digital divide - the gap between those who have Internet access and those who don't - is more like a chasm, both within and between countries.

A chapter from the IMF's forthcoming Global Financial Stability Report concludes that tougher regulation is needed to prevent the rapid growth in crypto-assets leading to financial instability, defrauding of consumers and the funding of terrorism. The chapter drew particular attention to the widespread and rapid adoption of crypto-assets in emerging markets and developing economies (EMDEs), which could "pose significant challenges by reinforcing dollarization forces in the economy - or in this case cryptoization - where residents start using crypto-assets instead of the local currency, reducing the ability of central banks to effectively implement monetary policy... [In such cases] authorities should prioritize strengthening macroeconomic policies and consider the benefits of issuing central bank digital currency and improving payment systems. In some EMDEs, cryptoization can be driven by weak central bank credibility, vulnerable banking systems, inefficiencies in payment systems and limited access to financial services... [Also,] globally, policymakers should prioritize making cross-border payments faster, cheaper, more transparent and inclusive through the G20 Cross Border Payments Roadmap."

"Whether any of these ideas will go into full operation is an open question, but it does seem that in many regions offline access may be a make-or-break feature for central bank digital currencies."

"Most central banks in LAC are analyzing the potential introduction of CBDCs, with some island nations having already issued their own. According to our survey with government officials in the region, half of the respondents were considering both retail (i.e., designed for the general public) and wholesale (i.e., intended for use by financial institutions) CBDC options."

The Bank for International Settlements Innovation Hub, Committee on Payments and Market Infrastructures, International Monetary Fund and the World Bank assessed different options for cross-border access and interoperability of central bank digital currencies (CBDCs). They highlight that CBDCs currently have a key benefit in being able to consider cross-border functionality already during the initial development phase, but this "clean slate" advantage has an expiry date. International cooperation and coordination are needed in the early stages of CBDC design. In addition, any system must be built with the flexibility to adapt both to a changing world and the different CBDC designs likely to be chosen by central banks.

"DeFi still faces many challenges. However, it can also create an independent infrastructure, mitigate some risks of traditional finance, and provide an alternative to excessive centralization. The open-source nature of DeFi encourages innovation, and there are many talented people-academics and practitioners alike-working on these challenges. If they can find solutions without undermining the unique properties at the core of DeFi, it could become an important building block for the future of finance."

"An enhanced special drawing right (SDR), valued by a basket of goods, would provide the global currency and reserve asset the global economy craves. This paper proposes linking the value of the International Monetary Fund's SDR and national currencies that fix their exchange rates to the SDR to a representative basket of widely traded goods. The new "real SDR" would be issued and redeemed passively according to "Currency Board" rules in exchange for financial assets with the same market value as the basket. National currencies and/or an international reserve currency with the same value (i.e. fixed to a common unit of account) would lower the cost of trading by reducing transaction and information costs and exchange rate risk and would thus increase world trade and improve the efficiency of international resource allocation. A system anchored to a goods basket would not have the shortcomings that afflict the gold standard-gold's fluctuating relative value. The indirect redeemability rule, issuing and redeeming real SDRs for financial assets of equivalent value would avoid the shortcoming that makes multi-good commodity standards very costly-¬the need to maintain large reserves of all of the commodities in the basket. The innovative idea of indirect redeemability, discussed by Yeager, Greenfield, and others, keeps the quantity of SDRs equal to the amount demanded when its value is given by the valuation basket, without the need for the monetary authority to warehouse the goods in the basket."

"We develop a two-country New Keynesian model with endogenous currency substitution and financial frictions to examine the impact on a small developing economy of a stablecoin issued in a large foreign economy. The stablecoin provides households in the domestic economy with liquidity services and an additional hedge against domestic inflation. Its introduction amplifies currency substitution, reducing bank intermediation and weakening monetary policy transmission, worsening the impacts of recessionary shocks and increasing banking sector stress. Capital controls raise stablecoin adoption as a means of circumvention, increasing exposure to spillovers from foreign shocks. Unlike a domestic CBDC, a ban on stablecoin payments can alleviate these effects."

CBDCs can induce changes in the retail, wholesale and cross border payments that have negative spillover effects on monetary policy, through their effects on money velocity, bank deposit disintermediation, volatility of bank reserves, currency substitution, and capital flows. Countries most vulnerable are those with banking systems dominated by small retail deposits and demand deposits, low levels of digital payments and weak macro fundamentals. Proposed CBDC design features, such as caps on CBDC holdings and unremunerating the CBDC can moderate disintermediation risks, but they are not sufficient. Central banks will need to ensure that unintended macroeconomic risks are comprehensively identified and mitigated.

"The use of cash for payments is not well measured. We view the value of cash withdrawn from ATMs, or as a share of all payments, as a more accurate and timely measure of cash use compared to the standard measure of currency in circulation, or as a ratio to GDP. These two measures are compared for 14 advanced and emerging market economies. When aggregated, the trend in cash use for payments is currently falling for half the world's population. Such a measure can help inform policy decisions regarding CBDC and regulatory decisions concerning access to and use of cash."

The Digital Currency Monetary Authority (DCMA) has innovated a best-in-class design for CBDC leveraging a digital economic union. This paper outlines the blueprint for a best-in-class CBDC design and discusses how a digital economic union and an international CBDC could complement and strengthen the international monetary system. Several sovereign states have collaborated with the DCMA on a Model Law for an international CBDC, or money commodity, and have provided draft legislation for such outlined in Appendix 1.

"I study an entrepreneur's incentives to build a decentralized platform using a blockchain. The entrepreneur can either build the platform using a regular company and retain control of the platform, or build the platform using a blockchain and surrender control of the platform. In either case, the platform's users experience a locked-in effect. I show that a decentralized implementation of the platform is both (i) more profitable for the entrepreneur and (ii) a Pareto improvement, if and only if the size of the locked-in effect exceeds some threshold. Further, progressive decentralization through airdrops can be optimal."

The IMF's Dong He published an update on ongoing work being undertaken by the IMF's Monetary and Capital Markets Department on the implications of central bank digital currency (CBDC) for monetary policy. He argued that universally convertible and interoperable CBDC could bolster the role of central bank money as both the ultimate settlement asset and the unit of account, and preserve the central bank's capacity to implement monetary policy effectively in the digital age. An important challenge will be to figure out how the demand for reserves would be affected by the introduction of CBDC. The operational framework may need to be reconfigured to deal with increased volatility in the demand for reserves, and central bank capital buffers may also need to be revisited if balance sheet materially increases in size and in financial risks because of CBDC adoption. An interest-bearing CBDC could amplify the passthrough from policy interest rates to broader monetary conditions, albeit at the risk of disintermediating banks if the interest rate is set too high. But even a non-interest-bearing CBDC could enhance the channels of monetary policy transmission, although the magnitude of this effect is anticipated to be modest and heavily reliant on country characteristics, such as the capacity of CBDC to advance financial inclusion or diminish the appeal of currency substitution.