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The IMF published a paper that introduces a conceptual macrofinancial framework to understand and track systemic risks stemming from crypto-assets. It proposes a country-level Crypto-Risk Assessment Matrix (C-RAM) to summarize the main vulnerabilities, useful indicators, potential triggers and potential policy responses related to the crypto sector. It also discusses how experts and officials can weave in specific vulnerabilities stemming from crypto-asset activity into their assessment of systemic risk, and how they can provide policy advice and take action to help contain systemic risks when needed.

The IMF published a paper on the macrofinancial implications of crypto-assets that they had delivered to the G20 in February. It concluded that "a widespread proliferation of crypto assets comes with substantial risks to the effectiveness of monetary policy, exchange rate management, and capital flow management measures, as well as to fiscal sustainability... Moreover, changes may be required to central bank reserve holdings, and the global financial safety net, yielding potential instability... Finally, banks may lose deposits and have to curtail lending."

The IMF reported that over 40 countries have approached with requests for CBDC capacity development assistance. Countries' questions range from objectives and design choices to pilots and analysis of macro-financial implications. In the past two years, the IMF has started to engage with almost 30 countries. The IMF will also publish a Handbook that will be the basis for CBDC capacity development and help countries make well-informed decisions when taking the major step to design and issue their own CBDC. The Handbook chapters will provide mostly a framework for structuring CBDC exploration and cover 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 initial wave of chapters, slated for publication around the 2023 Annual Meetings, will (1) provide a methodological framework for conducting CBDC exploration; (2) address the most common requests that IMF staff encounter in capacity development engagement; and (3) be based on relatively well-established knowledge and experiences. [

"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."

The Centre for Economic Policy Research (CEPR) and the European Central Bank (ECB) hosted a joint conference that brought together academics and policy makers to discuss theoretical and practical aspects of central bank digital currencies (CBDCs). Relying on a combination of research presentations, keynote speeches and panel discussions, it was aimed at advancing the understanding of the potential benefits and costs of CBDCs from a macroeconomic and policy perspective. Lots of interesting downloadable papers!

The Bank of Korea (BOK) published a paper on the macroeconomic impact of introducing retail central bank digital currency (CBDC). What sets this paper apart from the many other papers that focus on the same question is that it pays more attention to the precise bank-issued instruments that the CBDC competes with - non-interest-bearing demand deposits and interest-bearing savings and term deposits. CBDC directly competes with physical cash and debit, but only indirectly with demand deposits. According to the paper's theoretical model, CBDC introduction can lead to significant negative impact on demand deposit holdings, but this is accompanied by offsetting increases in holdings of interest-bearing deposits. This implies that the efficacy of CBDC on output and welfare, if any, is quantitatively only marginal, relative to the findings in the previous studies with only one type of deposit.