## Introduction

## Source details

**Canonical URL:** [Introduction](https://www.imf.org/-/media/files/publications/ftn063/2025/english/ftnea2025009a.pdf)

## Other formats

- [Markdown version](/-/media/files/publications/ftn063/2025/english/ftnea2025009a.pdf.md)
- [Structured JSON version](/-/media/files/publications/ftn063/2025/english/ftnea2025009a.pdf.json)

---

### Overview and purpose
- Payment ecosystem resilience: the capacity to maintain payment operations during periods of stress or restore them quickly after disruption.
- Context: Fragile and Conflict-Affected States (FCS) face especially complex risks (physical damage, inaccessibility, weakened institutions, low public trust) that can both cause and be worsened by payment disruptions.
- Objective: Provide an ecosystem-wide overview of policies and concrete strategies that have helped jurisdictions ensure payment system resilience in the face of fragilities and conflict. The Note:
  - Examines interconnected layers of the ecosystem rather than single technologies.
  - Draws lessons from country case studies.
  - Considers implications for CBDC design without endorsing or rejecting CBDC; focuses narrowly on payment resilience as one dimension of CBDC implications.
- Scope: Technical analysis focused on tools and real-world experiences to help policymakers evaluate payment resilience trade-offs.

### Key contextual findings
- "Well-functioning payment systems underpin economic activity, facilitate aid delivery, and contribute to broader social and financial stability."
- "Over 1 billion people live in FCS."
- By 2030, "two-thirds of the world’s extreme poor individuals will live in areas affected by fragility and conflict (World Bank Group 2020)."
- Digitalization both offers promise and adds complexity: cash remains a crucial fallback but is logistically difficult and unsafe; digital payments depend on electricity, connectivity, and user trust.
- Cybersecurity trend: IMF estimates the financial impact from cyber incidents "has more than quadrupled since 2017, reaching $2.5 billion as of the end of 2023 (Natalucci, Qureshi, and Suntheim 2024)."

### Payment ecosystem — systemic framing
- Emphasis: minimum viable functionality across interconnected layers.
- Layer definitions:
  - User layer: individuals, businesses, governments, humanitarian agencies.
  - Payment solutions layer: instruments and interfaces (cash; traditional digital: payment cards, digital wallets, QR, POS; checks; potential new digital payment solutions: stablecoins, crypto assets, CBDCs).
    - Note: "CBDCs are issued by central banks or monetary authorities for use as digital money."
  - Payment intermediaries layer: PSPs (banks, fintechs, mobile money operators, nonbank entities).
  - Payment infrastructure layer: Large-Value Systems (RTGS), Retail Payment Platforms (ACH, card networks, national switch, fast payment systems), alternative infrastructure (e-money, mobile money).
  - Connectivity infrastructure layer: internet, mobile networks, power supply, enabling technologies.
- Interdependence: failure in one layer can cascade to others; holistic assessment is essential.

### Acute challenges for payment resilience in FCS
- Cyber threats and digital vulnerabilities:
  - Diverse attack vectors (malware, phishing, DDoS, ransomware) increase attack surface.
  - Payment infrastructure complexity and inconsistent security standards in FCS exacerbate risk.
- Absence or disruption of fundamental payment infrastructure:
  - RTGS, clearing and switching platforms, retail systems may be absent or physically destroyed.
- Access restrictions through intermediary and solution-layer disruptions:
  - PSPs may lack commercial incentive or logistical feasibility to operate in insecure areas → fragmented coverage, reliance on informal/high-risk alternatives.
  - Physical damage to PSP facilities, agent networks, ATM infrastructure disrupts cash and digital access.
- Cash hoarding and supply issues:
  - Conflict triggers surges in cash withdrawals that overwhelm institutions.
  - Denominations can become unfit in inflationary environments.
- Connectivity layer disruptions:
  - Electricity and telecoms are highly vulnerable; outages can interrupt both digital payments and cash withdrawal operations.
- Institutional and regulatory strain:
  - Supervisory and regulatory capacity is constrained by displacement, insecurity, or political fragmentation; dual or rival authorities can fracture oversight.
- Risks to central bank reserves:
  - Internal misuse via unauthorized digital transfers or physical cash extraction.
  - External freezes and sanctions can paralyze central bank operations and cross-border payments.

### Resilience practices (overview)
- Primary resilience practice categories:
  - Redundancy and Scalability: backup options and capacity to absorb demand surges (multisite equipment, multiple payment solutions available to users).
  - Distributed Infrastructure and Decentralization: geographic dispersion and decentralized control to avoid single points of failure.
  - User-Centric Accessibility and Awareness: multiple access points, inclusive UIs, communications and digital literacy.
  - Operational and Cybersecurity: adherence to international standards (CPMI/IOSCO PFMI, Guidance on Cyber Resilience), business continuity frameworks (Targeted Plan for Service Continuity).
  - Regulatory and Legal Practice: legal readiness and regulatory agility to adapt during crises.

### Case-study grounded strategies and lessons (selected highlights)
- Case studies: Ukraine, West Bank and Gaza, Sudan, Yemen, Haiti, Tuvalu, CEMAC (regional monetary union).
- Comparative indicators (from Table snapshot):
  - CEMAC: Digitalization "38.9" ; Financial Inclusion "40.6"
  - Haiti: Digitalization "39.3" ; Financial Inclusion "33.0"
  - Tuvalu: Digitalization "74.0" ; Financial Inclusion "n.a."
  - Sudan: Digitalization "26.4" ; Financial Inclusion "n.a."
  - Ukraine: Digitalization "91.8" ; Financial Inclusion "84.0"
  - West Bank and Gaza: Digitalization "89.0" ; Financial Inclusion "50.1"
  - Yemen: Digitalization "13.8" ; Financial Inclusion "12.0"

- Redundancy and Scalability strategies:
  - Multisite operational architecture:
    - CPSS-IOSCO PFMI: systemic infrastructures should have at least "two sites with different risk profiles"; extreme circumstances may require more.
    - Ukraine expanded RTGS from "three-site to a five-site parallel architecture"; NBU conducts regular training and simulations.
    - As of 2025, "55 percent of bank facilities are part" of Ukraine’s Power Banking network linking over "2,400 bank branches to a resilient network spanning 60 banks out of 80."
  - Managing connectivity single points of failure:
    - NBU mandated banks and nonbank PSPs to maintain access to "at least two independent internet providers, using physically distinct routes."
    - Merchant-level backups: combining cable internet with mobile networks; merchant power generators to accept cashless payments.
    - Gaza and Haiti examples show centralized dependency vulnerabilities (imports of fuel/electricity; single telecom provider; attacks on telecom towers).

- Distributed infrastructure and decentralization:
  - Satellite networks:
    - Starlink and SNT used as alternative communication (Sudan, Tuvalu, Ukraine).
    - Limitations and risks: signal spoofing/jamming, vendor concentration, cost—Starlink service fee example "approximately $2.50 per hour (Reuters 2024)."
    - Operational constraints: line-of-sight issues in dense urban areas; seizure or destruction of kits reported.
  - Decentralized power:
    - Solar panels on POS, charging stations, and landline POS modifications (Gaza).
    - Power Banking in Ukraine: diesel generators and autonomous connectivity at shared branch locations.
  - Cloud services:
    - Cloud provides geographic distribution, elastic scalability, failover, and advanced security features; Ukraine moved critical services to cloud after expedited regulatory decisions allowing data storage in "trusted jurisdictions such as the EU, Great Britain, United States, and Canada."
    - Risks: vendor lock-in, data sovereignty, contractual negotiation challenges in FCS.
  - Foreign infrastructure for redundancy:
    - Offshore-hosted e-voucher platforms in Sudan (RedRose, AIDONIC, Last Mile Technology) enable aid delivery and settlement through bank accounts held abroad when domestic systems are degraded.
    - Trade-offs: limited merchant choice, regulatory concerns about offshore settlements outside national oversight.

- User-centric accessibility and awareness strategies:
  - Payment solution design for continuity:
    - Fee waivers and temporary interchange reductions: Visa and Mastercard reduced interbank commission to "0 percent" for domestic transactions in Ukraine from March 4, 2022.
    - Wartime-specific digital products (donation solutions in Ukraine); app adoption surges (Bankak in Sudan).
    - Identity verification challenges can force suspension of onboarding (Gaza fast payment platform).
  - Digital identification:
    - NBU BankID and "Diia" app in Ukraine enabled remote onboarding and access to services; critical during displacement.
    - CEMAC: Cameroon launched biometric national ID in February 2025 capable of issuing cards within "48 hours."
    - Gaza and other outages show onboarding limitations when infrastructure is disrupted.
  - Digital literacy and trust-building:
    - Literacy reduces vulnerability to scams and supports flexible channel switching in crises.
    - Sudan: Bankak saw an "85 percent increase of users, reaching approximately 7 million" (The New Humanitarian 2024)—uptake driven by necessity rather than literacy barriers.
    - Yemen: distrust in formal financial sector linked to fragmentation across regions; digital literacy must be paired with trust-building.
    - BRH in Haiti has informational videos/publications aligned with National Financial Education Plan (PNEF 2020).

- Cash operations and balance with digital modalities:
  - Cash remains critical as fallback but is vulnerable (distribution, ATM operation, denomination suitability).
  - Ukraine: NBU outreach advised holding only "a week’s worth of cash" and coordinated measures to stabilize cash/digital mix.
  - Gaza: PMA plans to transition to fully cashless system, but unreliable electricity and internet constrain feasibility.
  - Humanitarian actors combine formal banking, money transfer operators, and direct cash distributions (Yemen; UNICEF coordination).

- Digital money and crypto considerations:
  - Stablecoins:
    - Potential advantages: cross-border, near-instant settlement, utility with limited infrastructure—used in humanitarian contexts (Sudan, UNHCR/Stellar USDC pilot).
    - Risks: limited merchant acceptance, regulatory gaps, AML/CFT concerns, potential dollarization and erosion of monetary sovereignty.
    - Sudan: stablecoin-based humanitarian distributions use crypto wallets and networks of local agents; lack of domestic regulation raises monitoring concerns.
    - Ukraine pilot: USDC on Stellar enabled cashout through "over 4,500 MoneyGram locations" for refugees (Circle Internet Financial 2024).
  - Unbacked crypto assets (Bitcoin, Ethereum) generally unsuitable for everyday payments due to volatility, cost, and speed; used mainly for fundraising in crisis.

### Implementation trade-offs and cross-cutting observations
- No one-size-fits-all: strategies must be tailored to domestic circumstances, institutional capacity, and the nature of fragility.
- Trade-offs to manage:
  - Redundancy vs. cost (multisite, decentralized power).
  - Foreign-hosted redundancy vs. sovereign oversight and regulatory reach.
  - Cloud and global provider benefits vs. data sovereignty, contractual complexity, and vendor concentration.
  - Rapid innovation and onboarding vs. identity verification and fraud risks.
- Importance of preparation: prior investment in digital platforms, contingency planning, and institutional maturity materially improve resilience (Ukraine example).

### Operational, regulatory, and CBDC-specific lessons (from Boxes)
- Operational and cybersecurity lessons:
  - Contingency planning, coordinated incident response, and sector-wide information sharing are critical (Ukraine CSIRT-NBU, Malware Information Sharing Platform).
  - Licensing and oversight responses during crises can include temporary bans and mandatory redundancy requirements (Ukraine temporary ban on e-money issuance; requirement for at least two independent communication channels).
- Regulatory and legal resilience:
  - Pre-crisis financial stability matters; countries entering crises with stronger regulatory frameworks fare better (Ukraine; West Bank and Gaza).
  - Agile regulatory tools and informal coordination (martial law, weekly coordination calls) can support rapid operational adjustments.
- CBDC design and resilience implications:
  - CBDC potential roles: redundancy layer; infrastructure where none exists; direct public access channel (last-resort); programmable disbursements; offline capabilities; support for low-connectivity (USSD).
  - Cloud and DLT can enable geographic redundancy, data replication, and fault tolerance, but benefits are design-dependent and subject to human capital, vendor, data-sovereignty, and governance constraints.
  - Key design principles: defense-in-depth, compartmentalization, frequent reconciliation for offline operation, flexible front-end options, regulatory agility, and careful management of cross-border and foreign-CBDC spillovers.
  - Preconditions for CBDC success: substantial planning, specialized technical expertise, national and international collaboration, and reforms to address corruption and strengthen judicial and regulatory independence where needed.

*Source: ftnea2025009a - Introduction.*

### Introduction _____________________________________________________________________________________ 7

### Introduction

### Table of contents and structure
- Introduction _____________________________________________________________________________________ 7
- Payment Ecosystem Resilience __________________________________________________________________ 9
- Payment Ecosystem Layers _______________________________________________________________________ 9
- Challenges for Payment Resilience _______________________________________________________________ 11
- Practices to Maintain Resilience for the Payment Ecosystem _____________________________________ 14
- Strategies and Lessons for Strengthening Payment Resilience ______________________________ 18
- Redundancy and Scalability ______________________________________________________________________ 20
- Distributed Infrastructure and Decentralization __________________________________________________ 22
- User-Centric Accessibility and Awareness ________________________________________________________ 27
- Operational and Cybersecurity ___________________________________________________________________ 33
- Regulatory and Legal Resilience _________________________________________________________________ 35
- Applying Resilience Lessons to Central Bank Digital Currency: Opportunities and Design Considerations _________________________________________________________________________________ 40
- Conclusion _____________________________________________________________________________________ 45
- References _____________________________________________________________________________________ 50

### Boxes
- 1. Use of Crypto Assets in Wartime Ukraine ____________________________________________________________ 33
- 2. Central Bank Digital Currency Resilience Through Enabling Technologies—Cloud and DLT ________ 44

### Figures
- 1. Interconnected Layers of the Payment Ecosystem ___________________________________________________ 10
- 2. Payment Ecosystem Resilience Practices _____________________________________________________________ 14

### Tables
- 1. FCS Jurisdictions Included in the Study _______________________________________________________________ 20
- 2. Matrix of Payments Ecosystem Resilience Strategies _________________________________________________ 46
- 3. Overview of Resilience Lessons to CBDC _____________________________________________________________ 47

### Annex
- Central Bank Digital Currency Status in Fragile and Conflict-Affected States __________________________ 49

### Acronyms (as listed)
- ATM  Automated teller machine
- BRH  Banque de la République d’Haïti
- CBDC  Central Bank Digital Currency
- CEMAC Central African Economic and Monetary Community
- CSIRT-NBU Computer Security Incident Response Team of the National Bank of Ukraine
- DLT  Distributed Ledger Technology
- FCS  Fragile and Conflict-Affected States
- NBU  National Bank of Ukraine
- PMA  Palestinian Monetary Authority
- POS  Point-of-Sale
- PSP  Payment Service Provider
- QR  Quick response
- RTGS  Real-Time Gross Settlement Systems
- SNT  Satellite Networks Technology

*https://www.imf.org/-/media/files/publications/ftn063/2025/english/ftnea2025009a.pdf*

### Introduction

### ftnea2025009a - Introduction

### Overview and purpose
- Payment ecosystem resilience: the capacity to maintain payment operations during periods of stress or restore them quickly after disruption.
- Context: Fragile and Conflict-Affected States (FCS) face especially complex risks (physical damage, inaccessibility, weakened institutions, low public trust) that can both cause and be worsened by payment disruptions.
- Objective: Provide an ecosystem-wide overview of policies and concrete strategies that have helped jurisdictions ensure payment system resilience in the face of fragilities and conflict. The Note:
  - Examines interconnected layers of the ecosystem rather than single technologies.
  - Draws lessons from country case studies.
  - Considers implications for CBDC design without endorsing or rejecting CBDC; focuses narrowly on payment resilience as one dimension of CBDC implications.
- Scope: Technical analysis focused on tools and real-world experiences to help policymakers evaluate payment resilience trade-offs.

*Source: ftnea2025009a - Introduction.*

### Key contextual findings
- "Well-functioning payment systems underpin economic activity, facilitate aid delivery, and contribute to broader social and financial stability."
- Over "1 billion people live in FCS."
- By 2030, "two-thirds of the world’s extreme poor individuals will live in areas affected by fragility and conflict (World Bank Group 2020)."
- Digitalization both offers promise and adds complexity: cash remains a crucial fallback but is logistically difficult and unsafe; digital payments depend on electricity, connectivity, and user trust.
- Cybersecurity trend: IMF estimates the financial impact from cyber incidents "has more than quadrupled since 2017, reaching $2.5 billion as of the end of 2023 (Natalucci, Qureshi, and Suntheim 2024)."

### Payment ecosystem — systemic framing
- Payment ecosystem resilience emphasizes minimum viable functionality across interconnected layers:
  - User layer: individuals, businesses, governments, humanitarian agencies.
  - Payment solutions layer: instruments and interfaces (cash; traditional digital: payment cards, digital wallets, QR, POS; checks; potential new digital payment solutions: stablecoins, crypto assets, CBDCs).
    - Note: "CBDCs are issued by central banks or monetary authorities for use as digital money."
  - Payment intermediaries layer: PSPs (banks, fintechs, mobile money operators, nonbank entities).
  - Payment infrastructure layer: Large-Value Systems (RTGS), Retail Payment Platforms (ACH, card networks, national switch, fast payment systems), alternative infrastructure (e-money, mobile money).
  - Connectivity infrastructure layer: internet, mobile networks, power supply, enabling technologies.
- Interdependence: failure in one layer can cascade to others; holistic assessment is essential.

### Acute challenges for payment resilience in FCS
- Cyber threats and digital vulnerabilities:
  - Diverse attack vectors (malware, phishing, DDoS, ransomware) increase attack surface.
  - Payment infrastructure complexity and inconsistent security standards in FCS exacerbate risk.
- Absence or disruption of fundamental payment infrastructure:
  - RTGS, clearing and switching platforms, retail systems may be absent or physically destroyed.
- Access restrictions through intermediary and solution-layer disruptions:
  - PSPs may lack commercial incentive or logistical feasibility to operate in insecure areas → fragmented coverage, reliance on informal/high-risk alternatives.
  - Physical damage to PSP facilities, agent networks, ATM infrastructure disrupts cash and digital access.
- Cash hoarding and supply issues:
  - Conflict triggers surges in cash withdrawals that overwhelm institutions.
  - Denominations can become unfit in inflationary environments.
- Connectivity layer disruptions:
  - Electricity and telecoms are highly vulnerable; outages can interrupt both digital payments and cash withdrawal operations.
- Institutional and regulatory strain:
  - Supervisory and regulatory capacity is constrained by displacement, insecurity, or political fragmentation; dual or rival authorities can fracture oversight.
- Risks to central bank reserves:
  - Internal misuse via unauthorized digital transfers or physical cash extraction.
  - External freezes and sanctions can paralyze central bank operations and cross-border payments.

### Resilience practices (overview)
- Redundancy and Scalability: backup options and capacity to absorb demand surges (multisite equipment, multiple payment solutions available to users).
- Distributed Infrastructure and Decentralization: geographic dispersion and decentralized control to avoid single points of failure.
- User-Centric Accessibility and Awareness: multiple access points, inclusive UIs, communications and digital literacy.
- Operational and Cybersecurity: adherence to international standards (CPMI/IOSCO PFMI, Guidance on Cyber Resilience), business continuity frameworks (Targeted Plan for Service Continuity).
- Regulatory and Legal Practice: legal readiness and regulatory agility to adapt during crises.

### Case-study grounded strategies and lessons (selected highlights)
- Case studies: Ukraine, West Bank and Gaza, Sudan, Yemen, Haiti, Tuvalu, CEMAC (regional monetary union).
- Comparative indicators (Table snapshot):
  - CEMAC: Digitalization "38.9" ; Financial Inclusion "40.6"
  - Haiti: Digitalization "39.3" ; Financial Inclusion "33.0"
  - Tuvalu: Digitalization "74.0" ; Financial Inclusion "n.a."
  - Sudan: Digitalization "26.4" ; Financial Inclusion "n.a."
  - Ukraine: Digitalization "91.8" ; Financial Inclusion "84.0"
  - West Bank and Gaza: Digitalization "89.0" ; Financial Inclusion "50.1"
  - Yemen: Digitalization "13.8" ; Financial Inclusion "12.0"

- Redundancy and Scalability strategies:
  - Multisite operational architecture:
    - CPSS-IOSCO PFMI: systemic infrastructures should have at least "two sites with different risk profiles"; extreme circumstances may require more.
    - Ukraine expanded RTGS from "three-site to a five-site parallel architecture"; NBU conducts regular training and simulations.
    - As of 2025, "55 percent of bank facilities are part" of Ukraine’s Power Banking network linking over "2,400 bank branches to a resilient network spanning 60 banks out of 80."
  - Managing connectivity single points of failure:
    - NBU mandated banks and nonbank PSPs to maintain access to "at least two independent internet providers, using physically distinct routes."
    - Merchant-level backups: combining cable internet with mobile networks; merchant power generators to accept cashless payments.
    - Gaza and Haiti examples show centralized dependency vulnerabilities (imports of fuel/electricity; single telecom provider; attacks on telecom towers).
- Distributed infrastructure and decentralization:
  - Satellite networks:
    - Starlink and SNT used as alternative communication (Sudan, Tuvalu, Ukraine).
    - Limitations and risks: signal spoofing/jamming, vendor concentration, cost—Starlink service fee example "approximately $2.50 per hour (Reuters 2024)."
    - Operational constraints: line-of-sight issues in dense urban areas; seizure or destruction of kits reported.
  - Decentralized power:
    - Solar panels on POS, charging stations, and landline POS modifications (Gaza).
    - Power Banking in Ukraine: diesel generators and autonomous connectivity at shared branch locations.
  - Cloud services:
    - Cloud provides geographic distribution, elastic scalability, failover, and advanced security features; Ukraine moved critical services to cloud after expedited regulatory decisions allowing data storage in "trusted jurisdictions such as the EU, Great Britain, United States, and Canada."
    - Risks: vendor lock-in, data sovereignty, contractual negotiation challenges in FCS.
  - Foreign infrastructure for redundancy:
    - Offshore-hosted e-voucher platforms in Sudan (RedRose, AIDONIC, Last Mile Technology) enable aid delivery and settlement through bank accounts held abroad when domestic systems are degraded.
    - Trade-offs: limited merchant choice, regulatory concerns about offshore settlements outside national oversight.

- User-centric accessibility and awareness strategies:
  - Payment solution design for continuity:
    - Fee waivers and temporary interchange reductions: Visa and Mastercard reduced interbank commission to "0 percent" for domestic transactions in Ukraine from March 4, 2022.
    - Wartime-specific digital products (donation solutions in Ukraine); app adoption surges (Bankak in Sudan).
    - Identity verification challenges can force suspension of onboarding (Gaza fast payment platform).
  - Digital identification:
    - NBU BankID and "Diia" app in Ukraine enabled remote onboarding and access to services; critical during displacement.
    - CEMAC: Cameroon launched biometric national ID in February 2025 capable of issuing cards within "48 hours."
    - Gaza and other outages show onboarding limitations when infrastructure is disrupted.
  - Digital literacy and trust-building:
    - Literacy reduces vulnerability to scams and supports flexible channel switching in crises.
    - Sudan: Bankak saw an "85 percent increase of users, reaching approximately 7 million" (The New Humanitarian 2024)—uptake driven by necessity rather than literacy barriers.
    - Yemen: distrust in formal financial sector linked to fragmentation across regions; digital literacy must be paired with trust-building.
    - BRH in Haiti has informational videos/publications aligned with National Financial Education Plan (PNEF 2020).

- Cash operations and balance with digital modalities:
  - Cash remains critical as fallback but is vulnerable (distribution, ATM operation, denomination suitability).
  - Ukraine: NBU outreach advised holding only "a week’s worth of cash" and coordinated measures to stabilize cash/digital mix.
  - Gaza: PMA plans to transition to fully cashless system, but unreliable electricity and internet constrain feasibility.
  - Humanitarian actors combine formal banking, money transfer operators, and direct cash distributions (Yemen; UNICEF coordination).

- Digital money and crypto considerations:
  - Stablecoins:
    - Potential advantages: cross-border, near-instant settlement, utility with limited infrastructure—used in humanitarian contexts (Sudan, UNHCR/Stellar USDC pilot).
    - Risks: limited merchant acceptance, regulatory gaps, AML/CFT concerns, potential dollarization and erosion of monetary sovereignty.
    - Sudan: stablecoin-based humanitarian distributions use crypto wallets and networks of local agents; lack of domestic regulation raises monitoring concerns.
    - Ukraine pilot: USDC on Stellar enabled cashout through "over 4,500 MoneyGram locations" for refugees (Circle Internet Financial 2024).
  - Unbacked crypto assets (Bitcoin, Ethereum) generally unsuitable for everyday payments due to volatility, cost, and speed; used mainly for fundraising in crisis.

### Implementation trade-offs and cross-cutting observations
- No one-size-fits-all: strategies must be tailored to domestic circumstances, institutional capacity, and the nature of fragility.
- Trade-offs to manage:
  - Redundancy vs. cost (multisite, decentralized power).
  - Foreign-hosted redundancy vs. sovereign oversight and regulatory reach.
  - Cloud and global provider benefits vs. data sovereignty, contractual complexity, and vendor concentration.
  - Rapid innovation and onboarding vs. identity verification and fraud risks.
- Importance of preparation: prior investment in digital platforms, contingency planning, and institutional maturity materially improve resilience (Ukraine example).

*Source: ftnea2025009a - Introduction.*

### Box 1. Use of Crypto Assets in Wartime Ukraine

### Box 1. Use of Crypto Assets in Wartime Ukraine

### Use of crypto assets during the full-scale war
- At the beginning of the full-scale war, crypto assets were widely used in Ukraine as a tool for collecting donations.
- The Ministry of Digital Transformation quickly launched official wallets to receive donations in Bitcoin and Ethereum because opening traditional bank accounts for public authorities to collect donations in foreign currency took some time.
- These wallets provided an alternative way to support Ukraine’s military and humanitarian needs through cross-border transactions.
- Since the beginning of the full-scale war, the use of crypto assets to circumvent capital controls has expanded.
- In the absence of an adequate regulatory framework and unclear mandates and responsibilities among the authorities tasked with regulation and supervision, it became difficult to monitor such activity.
- The National Bank of Ukraine introduced restrictions on the purchase of crypto assets using traditional digital payment methods through Ukrainian banks.
- Some users continued to buy crypto using cards issued by crypto-friendly foreign banks, often with relaxed KYC requirements, or through cash-based transactions at crypto kiosks.
- This experience highlights both the practical role that crypto assets can play in crisis settings and problems that may arise in the absence of legal and regulatory frameworks and clear supervisory action.

### Operational and cybersecurity lessons
- Contingency planning
  - Countries must develop comprehensive contingency plans accounting for various risks, including pre-established crisis protocols, regulatory adaptations, alternative operational arrangements, and comprehensive staff training across the payment ecosystem.
  - Ukraine’s contingency planning was first developed after the beginning of the war in 2014 and later activated in 2022 when the full-scale war began (European Payments Council 2023). Plans included relocating key financial institutions, safeguarding payment infrastructure, and ensuring liquidity measures.
  - Haiti: BRH had contingency plans prior to the resurgence of violence, established a backup facility (servers, services, data center), and relocated staff, servers, and infrastructure outside Port-au-Prince; delays in moving infrastructure due to staff security concerns contributed to a 2023 cybersecurity incident that disrupted BRH operations.
- Coordinated incident response
  - Cyberattacks target financial systems to disrupt stability and erode trust; an effective response requires timely, coordinated, sector-wide action between regulatory/supervisory bodies, national cybersecurity agencies, payment intermediaries, and operators.
  - Scams (phishing, impersonation, social engineering) are systemic risks requiring structured incident response, potentially via a dedicated public-private body to enable scam intelligence-sharing platforms, blacklists, user alerts, and coordinated takedown mechanisms.
  - CEMAC: Central Bank of Central African States identified cybersecurity, frauds, and scams as the most significant threats to payment resilience and reputation; it requires PSPs to establish robust IT security measures and comply with AML/CFT regulations.
  - Gaza: PMA implemented network compartmentalization through firewalls and network segregation to contain breaches and enable focused incident response.
  - Ukraine: powerful distributed denial-of-service attacks targeted major banks ahead of the full-scale war in early 2022; the two largest banks repelled the attacks without disruption, smaller institutions faced temporary outages but core services were restored within 24 hours.
    - CSIRT-NBU (Computer Security Incident Response Team of the National Bank of Ukraine) was established after earlier cyber incidents to protect internal systems, analyze cyber incidents, coordinate with cybersecurity entities, and support PSPs.
    - CSIRT-NBU participated in developing a countrywide threat-monitoring system that blocks malicious websites and alerts users at the browser level.
    - The NBU launched the Malware Information Sharing Platform to facilitate real-time threat intelligence exchange and deployed a threat-monitoring system in cooperation with payment intermediaries and industry associations to block scam infrastructure and alert users with pop-up warnings when accessing known malicious websites.

### Regulatory and legal resilience
- Pre-crisis financial stability matters
  - A well-regulated banking system, sound monetary policy, and established payment market infrastructure influence a country’s ability to maintain payment functionality during crises.
  - Countries with prolonged fragility, institutional weakness, or economic instability are especially vulnerable because they lack structural capacity to respond quickly or maintain public trust.
- Country cases
  - Yemen: years of political and institutional division produced profound lack of trust in the banking system, widespread preference for cash and informal payment systems (Hawala), limited bank-based digital payment usage, routine full-balance withdrawals, liquidity shortages preventing settlement of donor-funded disbursements, arbitrary restrictions by de facto authorities, region-specific sanctions and limited interoperability (Sana’a Center for Strategic Studies n.d.).
  - Ukraine: entered the 2022 full-scale war with a stronger financial foundation after 2014 reforms (adopting international supervision and financial monitoring standards, resolving nonperforming loans, closing insolvent banks, nationalizing systemically important ones); improved trust helped contain panic and prevent cash hoarding and bank runs.
  - West Bank and Gaza: entered the current conflict with a sound banking sector characterized by significant capital and liquidity buffers; since 2008, the PMA strengthened supervisory and regulation framework, macroprudential tools, crisis management arrangements, and payment infrastructure; PMA adherence contributed to depositor base stability.
  - Tuvalu: does not have a central bank; two domestic banks operate without effective prudential regulation and oversight; Tuvalu is a member of the Asia/Pacific Group on Money Laundering.
- Adaptability of regulatory and institutional responses
  - Agile regulatory responses and informal coordination mechanisms can be critical when formal processes are strained.
  - Ukraine: martial law enabled the NBU to swiftly implement and revise emergency regulations (fixing the exchange rate, adjusting capital controls, limiting cash withdrawals), ease reporting burdens on banks, introduce new transaction data requirements for card networks, and allow cloud-based data storage outside the country.
  - The NBU launched weekly coordination calls with bank chief operating officers for real-time problem solving and operational alignment; meetings covered logistical details such as using armored cash delivery routes to transport meals and selecting diesel over gasoline generators.
- Licensing and oversight response
  - Wartime contexts may require temporary bans or exceptional restrictions for elevated-risk market participants when standard oversight is insufficient.
  - Ukraine introduced a temporary ban on e-money issuance due to concerns about potential misuse for terrorist financing.
  - The regulatory framework was revised to require important payment infrastructures to maintain at least two independent communication channels with geographically distinct routes.
- Foreign currencies for short-term support
  - Foreign currencies can offer temporary relief as a store of value and medium of exchange but carry trade-offs: diminished monetary sovereignty, limited policy space, increased external dependency.
  - West Bank and Gaza: dollarized economy with no domestic currency. The Israeli shekel is the main currency for most transactions; retail payments are mostly cash and checks; recurring challenges include cash shortages (small-denomination notes in Gaza) and buildups of New Israeli Shekel excess cash holdings in Palestinian Banks that are difficult to repatriate (Coulibaly 2022, pp. 2–10).
  - Yemen: monetary fragmentation and dual currency regimes; widespread use of Jordanian dinar, Saudi riyal, and US dollar for savings and larger transactions.
  - Sudan: high degree of de facto dollarization; foreign currencies, especially the US dollar, are widely used amid hyperinflation and erosion of trust in the Sudanese pound.
  - Tuvalu: absence of a national currency and central bank; uses the Australian dollar as its official currency.

### Applying resilience lessons to CBDC: opportunities and design considerations
- General opportunities and caveats
  - Several central banks explore CBDCs to enhance payment system resilience, particularly in environments exposed to conflict, economic instability, or operational disruption; most initiatives remain at the pilot or exploratory stage.
  - Nigeria’s e-Naira experience shows opportunity and complexity: launched to promote inclusion and support unbanked populations, adoption has been slow (Cornell SC Johnson College of Business 2023), and pilot phases targeting conflict-affected areas were deferred and are currently on hold.
  - CBDC could provide a redundant digital payment infrastructure, robust offline functionality, and programmable disbursements during emergencies, but design must weigh decentralization vs. operational efficiency, cybersecurity, operational risks, and illicit finance risks (Soderberg and others 2023; Tourpe, Lannquist, and Soderberg 2023; Bharath, Paduraru, and Gaidosch 2024).
  - Building a safe and secure CBDC requires substantial planning, robust design, national and international collaboration, and specialized technical expertise.
- CBDC as a tool for resilience
  - CBDC as a tool for building trust: as a direct liability of the central bank, CBDC can strengthen resilience where confidence in the monetary authority remains intact; where institutional legitimacy is weak, complementary communication efforts and strategic partnerships may be necessary.
  - CBDC as a complementary form of money: introducing retail CBDC as a third form of money—alongside cash and private digital money—can diversify means of payment and provide fallback options during crises, provided CBDC does not displace cash or undermine trust in existing systems.
  - CBDC as a redundancy layer: CBDC can introduce a new digital rail with distinct operational/technical features to add redundancy in fragile settings with limited traditional digital services.
  - CBDC as infrastructure where none exists: retail CBDC could provide basic payment functionality to end users; wholesale CBDC could support re-establishing interbank settlement systems where private-sector infrastructure has collapsed or failed to develop.
  - CBDC as a direct public access channel: a direct CBDC model (central bank provides wallets/accounts directly to end users) can preserve basic monetary functions when PSPs are scarce, but places significant operational and technical demands on the central bank and should be a last-resort contingency.
- Secure CBDC design and national incident response
  - CBDC design should incorporate defense-in-depth and compartmentalization, segmentation of system components, isolation of sensitive information, need-to-know and least privilege principles, and integration with the national coordinated incident response network.
- Incentivizing resilience by bolstering competition
  - CBDC offered as a platform for interoperability could lower barriers to entry for PSPs, encouraging competition, increasing redundancy, and improving service quality.
- Designing for connectivity and power constraints
  - CBDC systems should function under low-connectivity conditions, including support for USSD-based payments on basic mobile networks without internet access (Tourpe and others 2025), and be compatible with battery-powered or solar-charged devices.
- CBDC with offline capabilities
  - Offline-enabled CBDC (preloaded hardware tokens, smart cards, or software wallets that synchronize later) can provide reliable fallbacks and support inclusiveness where electricity or internet access may be unavailable for prolonged periods.
  - Offline functionality expands financial and security risks, especially with longer offline durations or consecutive offline transactions (International Monetary Fund 2025). Design should enforce low numbers of consecutive offline transactions with frequent reconciliations during normal periods and allow temporary relaxations in disaster periods.
- Flexible front-end solutions
  - Support a range of front-end interfaces (physical tokens, QR-code systems, digital wallets) to accommodate diverse user needs and ensure redundancy in crisis settings.
- Programmability for crisis response
  - Programmable CBDC features (smart contracts) can enable targeted emergency disbursements with predefined conditions, enhance transparency and speed of relief, support remote identity verification, and limit fraud where physical documentation is unavailable.
- Regulatory agility to support CBDC operations
  - CBDC implementation in fragile settings requires legal frameworks that are robust and adaptable, with predefined flexibility (sandboxes, emergency protocols, real-time monitoring) to adjust CBDC operations rapidly while maintaining stability and compliance.
- Cross-border functionality and migration support
  - CBDCs with cross-border functionality could support migrants and refugees, enabling secure, low-cost transfers; collaboration and interoperability between central banks across migration corridors are necessary while preventing regulatory arbitrage.
- Role of foreign CBDC adoption
  - In FCS where public trust in foreign currencies may exceed domestic currency, foreign CBDCs could offer temporary stability but risk weakening monetary sovereignty and local institutions; central banks should monitor foreign CBDC developments and most currently aim to limit CBDC circulation beyond national jurisdictions.

*Source: ftnea2025009a - Box 1. Use of Crypto Assets in Wartime Ukraine.*

### Box 2. CBDC Resilience through Enabling Technologies—Cloud and

### Box 2. CBDC Resilience through Enabling Technologies—Cloud and Distributed Ledger Technology

### Cloud Infrastructure for Resilience
- Cloud computing can offer key operational benefits for central bank digital currency (CBDC) systems, particularly in FCS.
- Multiregion or multizone deployment enables geographic redundancy and high availability, helping CBDC infrastructure remain functional during localized disruptions such as cyberattacks, power outages, or physical infrastructure damage.
- Human capital gap considerations:
  - As with broader payment infrastructures, cloud adoption for CBDC must also address the human capital gap.
  - Managing cloud-based CBDC platforms requires specialized technical skills as misconfigurations and insufficient security awareness could introduce legal and jurisdiction issues for sensitive data.
  - Investment in cloud-specific training—tailored to central bank needs—is essential to mitigate these risks.
  - Flexibility of supervisors to relax cloud usage-related restrictions should it become necessary in times of conflict or natural disasters.

### Distributed Ledger Technology as a Resilience-Enabling Architecture
- If CBDC systems are designed using distributed ledger technology (DLT), certain resilience features may be built-in:
  - Eliminating single points of failure.
  - Enabling data replication across nodes.
- Potential resilience advantages:
  - Depending on the governance and implementation model, DLT could support greater redundancy and fault tolerance, allowing the system to continue operating even when some nodes are offline.
- Design-dependence and caveats:
  - The resilience benefits of DLT are highly dependent on design.
  - Network centralization, consensus mechanisms, and infrastructure hosting arrangements can all affect how well the system performs under stress.
  - DLT may complement—but not replace—other resilience measures and should be evaluated in relation to broader operational and institutional factors.

### Relation to CBDC Resilience Lessons and Wider Payment-Resilience Agenda
- CBDCs touch every layer of the payment ecosystem: payment infrastructure, intermediaries, payment solutions, users, and connectivity infrastructure (as mapped in Table 3).
- Key resilience roles for CBDCs (as summarized in Table 3):
  - Redundancy and scalability: Complementary form of money; Redundant layer in digital payments.
  - Distributed infrastructure and decentralization: Resilience through enabling technologies—cloud and DLT; Infrastructure where none exists.
  - User-centric accessibility and awareness: Incentivizing resilience by bolstering Competition; Designing for connectivity and power constraints; Offline capabilities; Flexible front-end solutions; Programmability for crisis response.
  - Operational and cybersecurity: Secure design with compartmentalization strategies; Critical infrastructure consideration with national coordinated incident response.
  - Regulatory and legal resilience: Tool for building trust; Regulatory agility to support CBDC operations; Role of foreign CBDC adoption; Cross-border functionality and migration support.
- Comparative observations:
  - CBDCs offer considerable potential to enhance redundancy and scalability by serving as a complementary form of money and introducing an additional layer of digital payments infrastructure.
  - CBDCs can support decentralization through enabling technologies such as cloud computing or DLT, particularly in contexts where conventional infrastructure is weak or absent.
  - The most significant resilience potential lies in user-centric design features, including offline functionality, flexible front-end solutions, and programmability for crisis response.
  - The role of CBDCs in enhancing operational and cybersecurity resilience is less evident and is similar to other payment infrastructures.
  - Careful legal and institutional design is needed to ensure CBDCs enhance resilience rather than introduce new risks.

### Implementation Considerations and Preconditions
- Success factors and requirements:
  - Thoughtful design grounded in identified resilience practices.
  - Investment in specialized resources, infrastructure, and sustained national and international collaboration.
  - Capacity development to operationalize resilience strategies in ways that reflect each country’s unique context and constraints.
- Risks and constraints:
  - Costs and risks of implementing CBDCs must be considered.
  - In environments of pervasive corruption and weak rule of law, CBDCs face considerable hurdles to become a trusted means of payment.
  - Mitigating these challenges requires reforms to address corruption and strengthen judicial and regulatory independence and capacity.
  - Where such reforms are unlikely, CBDC adoption should be approached with careful consideration.

*Source: Box 2, "CBDC Resilience through Enabling Technologies—Cloud and Distributed Ledger Technology", from Payment Resilience in Fragile and Conflict-Affected States: Lessons for Central Bank Digital Currency (CBDC), NOTE/2025/009.*

---


_Source: https://www.imf.org/-/media/files/publications/ftn063/2025/english/ftnea2025009a.pdf_