## Central Bank Digital Currency Development Entering the New Phase

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**Canonical URL:** [Central Bank Digital Currency Development Entering the New Phase](https://www.imf.org/-/media/files/oap/oap-home/2024/presentation-on-cbdc-tokyo-2024-final-tommaso.pdf)

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### Global CBDC Exploration: Diverse International Landscape
- Interest remains strong in both retail and wholesale CBDC.
- Three jurisdictions have officially launched retail CBDC: The Bahamas, Jamaica and Nigeria.
- Several pilots are ongoing world-wide.
- Some jurisdictions are devoting large resources: Brazil, China, Euro Area, India, and the United Kingdom.
- Interest in wholesale CBDC increased for cross-border payments and settlement of tokenized assets.
- International organizations are also taking part.
- The IMF’s analytical work reflects evolving experiences, findings, and policy views on CBDC exploration.

### IMF CBDC Virtual Handbook: Completed Chapters and Waves
- Handbook chapters cover Objectives, Readiness, Design, Process, Macro-financial topics.
- Chapter topics include:
  - Digital money: positioning CBDC
  - Identifying pain points and objectives
  - Elements of thinking through CBDC
  - Legal considerations
  - Operational and cyber resilience
  - Required capacity within central banks
  - Regulation and supervision
  - Design choices
  - Business models and adoption
  - Financial integrity considerations
  - Data use and privacy protection
  - Capital flow management measures
  - Product development (5 Ps)
  - Technology landscape and innovation
  - Promoting financial inclusion
  - Impact on monetary policy transmission
  - Impact on monetary operations
  - Impact on financial stability
  - Cross-border payments
  - Financial-sector market structure and contestability
- Note: Those in green are the first wave chapters published in 2023. Those in red are the second wave chapters to be published in November 2024.

### Positioning CBDC in the Payments Landscape
- How do retail CBDC, Fast Payment Systems and e-money compare, and which to prioritize?
- All three systems can deliver efficiency gains and support financial inclusion.
- Approaches can be complementary.
- CBDC is issued by the central bank, and can offer:
  - Trust and interoperability
  - Market discipline and uniformity of money
  - Infrastructure can be shared
- eMoney can resemble CBDC.
- The future is likely to see co-existing systems:
  - Depending on pain points and constraints in capacity, resource, and governance
  - No “one-size-fits-all” strategy.

### Cyber Resilience of the CBDC Ecosystem
- Trust is pivotal for money. Trust also builds on cyber security.
- Cyber resilience requires a multi-pronged approach across:
  - Security Controls (access controls, cryptography, vulnerability management, secure coding, lifecycle management)
  - Governance (technology, process, people, standards, regulations, cooperation and governance)
  - Resiliency Measures (redundancy, offline functionality, crisis management)
- CBDC is a complex and vast ecosystem, an attractive target for cyber attackers, with financial stability implications.

### CBDC Adoption and Strategies
- Challenges with CBDC adoption:
  - Lack of public awareness and trust
  - Novelty/nature of CBDC
  - Chicken-and-egg problem
  - Lack of incentives for intermediaries
  - Potential threat to business models
- The REDI Framework to manage adoption.

### CBDC Data Use and Privacy Protection
- CBDC creates a “digital trail” – data to be collected and stored.
- An appropriate balance between CBDC data use and privacy will depend on norms and cultural preferences.
- Some will opt for a high degree of privacy in the design of CBDC.
- Others will leverage data for policy, such as financial inclusion and policymaking.
- CBDC offers an opportunity to improve the trade-off between data use and privacy protection using institutional arrangements, CBDC design, and technological solutions.

### Monetary Operations
- CBDC may affect how central banks conduct monetary policy operations by:
  - substituting for other forms of money and changing reserve balances in the banking system, which in turn may influence short-term interest rates
  - affecting central banks’ ability to forecast liquidity, drawing market rates away from the policy target, and complicating banks’ liquidity management
- Effects can be attenuated by adapting monetary operations or CBDC design:
  - improving liquidity forecast model, engaging in fine-tuning operations, and providing additional liquidity to the market
  - adjusting CBDC design, such as remuneration, access, or quantity limits

### Cross-Border Payments with Retail CBDC
- Retail CBDC can facilitate faster and cheaper cross-border payments.
- Design should be factored in from the start regarding five interrelated elements: access, communication, currency conversion, compliance, and settlement.
- International collaboration and information sharing are critical to maximize benefits.

### Conclusions and Policy Guidance
- If appropriately designed, CBDC has the potential to improve payment systems and support a role for central bank money even as other solutions proliferate.
- The appropriateness of CBDC will vary with country circumstances. If poorly designed, CBDC could pose risks.
- Given the complexities and the novelty involved, policymakers should explore CBDC carefully and systematically.
- The virtual CBDC Handbook offers initial guidance to policymakers on how to explore CBDC and investigate its macro-financial implications.
- Analytical and practical progress on different aspects of CBDC is being made and captured in the Handbook.
- Requests for CD going forward are expected to be more specific in nature as jurisdictions seek to build capacity in specific areas they deem important.
- The IMF will continue analytical work to offer jurisdictions knowledge, lessons, experience, and findings.

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_Source: https://www.imf.org/-/media/files/oap/oap-home/2024/presentation-on-cbdc-tokyo-2024-final-tommaso.pdf_