## The Money Dialogues

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**Canonical URL:** [The Money Dialogues](https://www.imf.org/-/media/files/publications/fandd/article/2025/09/mancini-griffoli.pdf)

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### Stablecoins and private payment innovation
- Stablecoins provide an instant, cheap, cross-border payment instrument, transferable from a phone by QR code or number.
- Stablecoins can be held as balances without a separate bank account; wallet providers and separate firms can handle onboarding, customer apps, and front-end services while stablecoin issuers focus on the payment instrument.
- Stablecoins are recorded and transferred on blockchains; banks and asset managers are exploring making deposits and other assets available on blockchains.
- Current primary uses include trading and buying crypto assets; potential uses include retail payments, e-commerce, cross-border transactions, and buying securities on blockchains.
- Money market funds and asset managers are starting to offer investment products, like exchange traded funds, on blockchains.

### Safety, regulation, and runs
- The value of a stablecoin fluctuates with the value of assets held by the issuer as reserves; this motivates laws and regulations to make stablecoins safer.
- Regulatory tools mentioned:
  - Know Your Customer (KYC) and anti–money laundering checks applicable to stablecoin providers depending on national law.
  - Requirements to vet issuers (e.g., excluding issuers offering anonymity).
- Risks:
  - Runs on private money are a perennial risk; stablecoins backed by safer reserve assets (for example, Treasury bills) are less risky but still exposed to price changes as interest rates move.
  - Some stablecoin issuers may attempt to attract bad actors; supervision, enforcement, and clear legal frameworks are necessary.
- Adjustments issuers might adopt: holding extra capital as a backup or holding safer, more liquid assets like central bank reserves.

### Central bank reserves, CBDC, and public-private boundaries
- Banks historically use central bank reserves as a common, safe asset to settle payments via central bank payment systems.
- Policy options discussed:
  - Allow stablecoin issuers access to central bank reserves within the day for payments to improve interoperability, possibly in exchange for additional oversight.
  - Fully backing stablecoins with reserves, which approaches exchanging stablecoins for central bank digital currency (CBDC).
  - Designing CBDC “built for integration and innovation”: central banks create the money while private firms innovate on distribution and services.
- Trade-offs:
  - Providing central bank reserves to private issuers may reduce private firm incentives or disrupt business models; conversely, central bank involvement can catalyze ecosystem compatibility and safety.

### Currency substitution and monetary policy risks
- Citizens in countries with high inflation, weak currencies, or poor payment systems may adopt stablecoins denominated in stronger currencies (for example, an “accessible dollar”).
- Collective effects of such adoption:
  - Potential drain of deposits from domestic banks.
  - Undermining the ability of central banks to conduct monetary policy and stabilize financial systems if the domestic currency is widely bypassed.
- Policy responses mentioned:
  - Requiring stablecoins to be held in domestically regulated wallets with limits on holdings.
  - Practical enforcement challenges in a borderless market (e.g., users hiding locations); technology could assist enforcement but requires issuer cooperation.

### Fragmentation, interoperability, and infrastructure
- Fragmentation risk: difficulty exchanging one stablecoin for another due to differing reserve pools, regulatory regimes, or incompatible blockchains.
- Interoperability challenges:
  - Stablecoins recorded on different blockchains may not be compatible; cross-chain solutions can be clunky and costly.
  - Jumping blockchains is expensive and risky; cyber risks increase with migrations.
- Potential solutions:
  - Use of central bank money on-chain to settle transactions, with central banks promoting compatibility and standards.
  - Open-source code and decentralized ownership to avoid single-entity control while enabling broad compatibility.
  - Ensuring code portability so smart contracts and identity/ownership checks can run across chains to alleviate concentration and fragmentation.

### Governance, privacy, and consumer protections
- Key governance issues:
  - Who governs decentralized communities and how responsibility is assigned (customer service, issuer accountability).
  - Hard-coded transaction rules embedded within assets for automatic enforcement.
- Consumer needs:
  - Preference for customer service points of contact (wallet, broker, or issuer) even in decentralized setups.
  - Privacy concerns versus regulatory requirements (KYC/AML).
- Cybersecurity and operational risks are implicit in chain concentration, chain migration, and centralized vs. decentralized models.

### Recommended direction and balance
- Maintain central banks’ role in money creation while enabling private-sector innovation in distribution, services, and product design.
- Prioritize:
  - Clear legal and regulatory foundations consistent across countries.
  - Central bank involvement to provide safe on-chain settlement options and to promote compatibility standards.
  - Private-sector freedom to innovate on front-end services, wallets, and applications, subject to prudential safeguards.
- Emphasize coordinated public-private approaches: walk “hand in hand” between innovation advocates and skeptics to find the right pace and course of change.

*Tommaso Mancini-Griffoli; F&D SEPTEMBER 2025.*

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_Source: https://www.imf.org/-/media/files/publications/fandd/article/2025/09/mancini-griffoli.pdf_