## ppea2021055

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---

### Executive summary — overview and strategic imperative
- Rapid technological innovation is ushering in a new era of public and private digital money: payments will become easier, faster, cheaper, and more accessible, and will cross borders swiftly.
- Potential benefits: foster efficiency and inclusion, with major benefits for all.
- Policy imperative: policymakers must step up to reap benefits and manage risks; the Fund must rapidly widen and deepen its work on digital money and ramp up resources devoted to these topics.
- Date on document: June 17, 2020.

### Core principles for safe and effective digital money
- Trustworthiness:
  - Protect consumers.
  - Be safe and anchored in sound legal frameworks.
  - Support financial integrity.
- Protect domestic economic and financial stability:
  - Carefully designed public-private partnerships.
  - A smooth transition of the role of banks.
  - Fair competition.
  - Design that supports climate sustainability and efficient fiscal policy.
- Preserve a stable and efficient IMS:
  - Countries must maintain control over monetary policy, financial conditions, capital account openness, and foreign exchange regimes.
  - Payment systems should integrate, not fragment; avoid a digital divide.
  - Reserve currency configurations and backstops must evolve smoothly.

### Fund mandate and comparative advantages
- Mandate: help ensure that widespread adoption of digital money fosters domestic economic and financial stability, and the stability of the IMS; monitor and advise members as adoption affects the Fund’s mandate.
- Four core competencies:
  - Near universal membership.
  - Focus on macrofinancial policies and spillovers.
  - Diversity of expertise.
  - Unique ties to member countries—central banks and ministries of finance—through surveillance and capacity development.

### Forces driving digital money adoption
- Enabling technologies: distributed ledger technology (DLT), encryption, analytics of “big” datasets, and artificial intelligence.
- Supply-side: entry of new firms—big techs and fintech startups; new platform business models; cross-selling and tailored products using user data.
- Demand-side: user needs, habits, and expectations evolved (in part due to the Covid crisis) to strongly favor digital forms of money.
- Policy example cited: European Commission’s “digital finance package,” September 2020.

### Forms and common features of digital money
- Forms:
  - Publicly issued money: central bank digital currency (CBDC).
  - Privately issued money: eMoney, mobile money, stablecoins, tokenized bank deposits, tokenized financial assets, and cryptoassets (noted as too volatile to be technically labelled as money, though accepted for payment).
  - Related innovations: iMoney; Distributed Finance (DeFi) and DLT-enabled financial services.
- Common features:
  - Cheap, instant, widely accessible payments.
  - Reward expertise in data analysis, programming, UI design, development speed.
  - Integration with services and distribution platforms; functionality evolves rapidly and transfers across devices and borders.
- Terminology: “digital money” used loosely to capture a wide and evolving set of potential forms.

### Policy relevance and scope of issues
- Implications intersect the IMF’s mandate across three areas: the IMS, broad domestic issues, and narrow domestic issues tied to digital form.
- Caveats:
  - The list of issues is a snapshot and likely to evolve rapidly.
  - Not all questions apply to all digital money forms or to all countries.

### Policy questions stemming from adoption (selected)
- International Monetary System (IMS) questions (selected):
  - How can digital forms of money foster greater integration and efficiency of international payments and avoid fragmentation?
  - How to avoid a global digital divide in payment system connectivity, correspondent banking, regulatory/legal upgrades, and payment safety?
  - How might digital money alter economic structure, business cycles, and exposure to currency substitutability?
  - How could digital money affect monetary, fiscal, and exchange rate instruments, frameworks, conduct, coordination, and policy space?
  - How should “bystander” countries adjust macro frameworks to protect against spillovers?
  - What impact on net and gross capital flows, market integration, cross-border shock transmission, balance of payments risk, cross-currency arbitrage, and choice of foreign exchange regime?
  - How might digital money alter effectiveness of capital account management measures (CFMs)?
  - How should CBDC or payment infrastructure be designed to minimize spillovers and help countries retain control?
  - How should privately-issued digital money be regulated?
  - How should Fund external sector assessments and spillover analysis account for digital money impacts?
  - How will public digital forms affect reserve currency configuration and how to smooth transitions?
  - How might the IMS look in 10 years and how can digital money be leveraged/regulated to reach that outcome?
  - How can the global financial safety net be redesigned to leverage digital money?

- Broad domestic effects (selected):
  - How will the role of banks evolve and implications for credit provision and financial stability?
  - How should regulation evolve to ensure a level playing field and stable transition?
  - Will DeFi impact market structure and functioning, and what role for digital money in capital market development?
  - How could CBDC design and private money regulation ensure financial stability and integrity?
  - Impact on growth, productivity, and balance of risks.
  - Public vs private sector roles to encourage competition and innovation.
  - How should regulation and design ensure competition and market contestability?
  - Economics of data and regulatory impact on market structure.
  - Improved efficiency, safety, targeting, and transparency of payments between authorities and private agents.
  - Opportunities to reach vulnerable households and reduce corruption.
  - Risks to tax evasion and opportunities to improve tax compliance; possible new tax policies (VAT, shareholder taxation, taxes on data value creation).
  - Tradeoffs between financial inclusion and data/privacy.
  - Need to evaluate environmental impacts (energy consumption of DLT can be extremely high).

- Narrow domestic effects (selected):
  - Design and regulation of privately-issued digital money to ensure consumer protection and effective safety nets.
  - Emerging global models and best practices.
  - Cross-border data integrity and privacy.
  - Evolution of central bank, monetary, private, and other laws to underpin innovation while ensuring stability and integrity.
  - Width of regulatory perimeter and evaluation of macro-criticality of rapidly evolving forms (e.g., cryptocurrencies).
  - Best practices for operational resilience, cyber-attack preparedness, and contagion mitigation.
  - Recommendations to ensure effective AML/CFT frameworks and safeguards against tax fraud.

### Policy challenges for authorities
- Authorities face pressure to act swiftly due to rapid innovation and market share gains by new private entrants.
- Strong network effects and high sunk costs create risks of ossification around suboptimal outcomes in stability, access, inclusion, efficiency, competition, self-determination, integrity, and integration.
- Constant monitoring and policy updating required.

### Operational strategy — three pillars
- Strategy components:
  - Adapting and extending key IMF functions (surveillance, capacity development, lending de-emphasized here).
  - Partnering with other stakeholders.
  - Building internal capacity.
- Emphasis on establishing clear analytical foundations: policy views and tools (models, methods, frameworks, data, indicators, standards) and support activities (training, guidance notes, document review, coordination, brainstorming).
- Policy tools initially developed generally then adapted to country specifics; continuous substantial updating required.

### Surveillance: scope, delivery, and steady-state expectations
- Surveillance must account for stability risks and opportunities from digital money.
- Current coverage: very limited; some Article IVs and a few FSAP pilots (Bahamas, Singapore, Switzerland).
- Reason for limited coverage: novelty and limited internal capacity.
- Article IV consultations:
  - All core Article IV areas potentially impacted: monetary, exchange rate, financial sector, fiscal, structural, and spillovers.
  - Coverage focused where implications are macro-critical; case-by-case decisions.
  - Example: Bahamas Article IV included a dedicated annex on the "Sand Dollar."
  - Steady state expected in about 3 years; still a period of rapid change.
  - Expect issues related to digital money to warrant some coverage in about a half to two thirds of Article IVs in 3 years and beyond.
    - Rationale: internal surveys; at end-2020, more than 80 percent of central banks were studying CBDCs.
  - Article IV coverage will vary from full-fledged analysis to narrow review; resource estimates assume relatively light coverage on average, about one third the involvement of a dedicated expert.

- FSAP:
  - Scope determined on risks in three pillars: risk analysis, oversight, and safety nets; flexible to adjust.
  - Digital money implications covered as they become systemically important—focus on narrow domestic effects.
  - Analysis incorporated in main FSAP report and technical notes.
  - Pilots will continue (examples: Korea, Singapore, Switzerland).
  - Assessment tools need upgrading to incorporate new risks and guidance from international standard-setting bodies.
  - Reference notes for FSAP mission chiefs to be prepared (some already with World Bank).
  - Data availability critical for in-depth risk analysis.

- Multilateral surveillance and flagships:
  - Multilateral products: WEO, GFSR, Fiscal Monitor, REOs, ESR, AREAER.
  - Bi-yearly flagships focus on broad domestic effects; occasional international implications.
  - GFSR: regular coverage of systemic risks from digital money adoption.
  - Yearly publications and a WEO chapter on spillovers to focus on international implications.
  - Ongoing development and maintenance of models, frameworks, indicators, and policy lines for multilateral surveillance.

### Capacity development: demand, delivery model, and steady-state
- Necessity: ramp up rapidly to avoid a digital divide and ensure solutions work for all countries.
- Demand-driven, guided by macro-criticality; aims include evaluating benefits/risks/tradeoffs; strengthening readiness and skills; evaluating/designing/monitoring new infrastructures (including interoperable CBDC); building/analyzing datasets.
- Fund role: advisory and capacity building; actual infrastructure development typically led by partners (World Bank, BIS Innovation Hub).
- Survey/strategy signals growth areas:
  - CBDC implications and design (survey: more than 100 countries actively exploring CBDC).
  - Regulation of private money schemes.
  - Payment strategies.
  - Digital risk management (including cyber security).
  - Legal and regulatory frameworks.
  - Data collection.
  - Tax and transfer policies and institutional implications.
- Current response: jump in technical assistance and regional workshops; resource constraints have required postponing/turning down requests.
- Prioritization: based on macro-criticality and expected traction and impact; focus on lower income and emerging market economies; bilateral and regional CD; multi-country cross-border payments work.
- Regional projects via RCDCs effective for basic upskilling prior to bilateral assistance.
- Fund as bridge among development community, central banks, ministries of finance to transfer lessons.

- Capacity delivery model and steady-state expectations:
  - Initially: CD projects mainly provided by IMF staff with short-term experts for hands-on transfer.
  - As experts and funding become available: shift toward greater participation by long-term experts in RCDCs, backstopped by IMF staff.
  - In steady state:
    - about half the projects led out of RCDCs,
    - a quarter by short-term experts,
    - a quarter by IMF staff.
  - Table 6 steady-state outputs (selected):
    - Bilateral CD engagements: Coverage: 50 projects per year.
    - Targeted evaluations of cyber-security, regulatory, and legal framework readiness: Coverage: 5 per year.
    - Regional workshops/training: Coverage: 1 in each geographical area per year.
    - Peer-to-peer regional and global networks: Coverage: 2 per year.
    - CD-specific tools and models: Coverage: 2 per year.
    - Joint studies with authorities: Coverage: 2-3 per year.
    - Regional coordination for cross-border payment solutions and fragile states: Coverage: 1 coordinator.

- Comparative context:
  - MCM delivers about 1000 projects per year, around 100 led by HQ staff.
  - Capacity development projects across the Fund near 5000 projects per year.

### Analytical foundations: purpose, deliverables, and support activities
- Purpose: underpin effective surveillance and capacity development via (1) policy views and tools and (2) support activities to mainstream skills, coordination, and information-sharing.
- Policy views and tools components:
  - Basic models, methods, and frameworks adaptable to country-specific needs.
  - Development of a data hub essential to policymaking (currently lacking).
  - Participation in international working groups (e.g., G20 Roadmap to Enhance Cross-border Payments).
  - Fund’s role: bring broad policy and macro-financial perspective and represent interests of all countries.
- Support activities:
  - Internal training (courses and workshops) to mainstream analysis of digital money.
  - Information sharing and coordination across workstreams and external partnerships.

- Deliverables and coverage (as summarized in Table 7):
  - Engage with the IMF Board: 1 engagement per year (+ informal seminars).
  - Publications/events: 4 publications and 1 major event per year.
  - Participate in international working groups: 5 per year.
  - Develop a publicly available data hub: Ongoing.
  - Consider "calls for proposals" (hackathons): 1 per year.
  - Internal training: 3-4 courses/workshops per year.
  - Resource/knowledge hub: Ongoing.
  - Brainstorming sessions across departments: At least 4 sessions per year.
  - Coordination across digital money projects with related workstreams and external stakeholders: Ongoing.

### Partnering: guidelines, core competencies, and complementarities
- Guidelines for engagement:
  - Remain within mandate, build on core competencies, minimize overlaps, seek standing arrangements, be transparent about workplans and priorities, recognize and disseminate other stakeholders’ work, engage in debate and feedback, develop independent policy views and take responsibility.
- Four Fund core competencies reiterated:
  - Near universal membership.
  - Core policy focus on macroeconomic and macrofinancial issues and spillovers.
  - Broad cross-disciplinary expertise.
  - Unique ties to members via surveillance and capacity development.
- Complementary stakeholder roles (selected):
  - World Bank: natural partner for joint FSAP, capacity development, focus on development, inclusion, govtech, remittances, procurement and infrastructure implementation.
  - BIS and BIS Innovation Hub: collaborate on innovative financial technology and concrete solutions; channel non-member needs to BISIH and disseminate findings.
  - G7/G20 and standard-setting bodies (FSB, CPMI, FATF): set immediate priority standards; Fund adds macro-financial expertise and wider country representation.
  - Country authorities: set Fund priorities and contribute experts; Fund facilitates peer learning and ensures independence.
  - Other stakeholders (private sector, academics, civil society): provide perspectives and help stay abreast of developments.
- Collaboration modalities: memoranda of understanding, joint projects, liaison officers, hosted representatives for knowledge sharing.

### Building internal capacity: skills, organization, and processes
- Four building blocks: skills mix; internal organization and processes; hiring guidelines; resource needs.
- Necessary skills (five sets):
  - Macro and fiscal economists.
  - Financial sector experts.
  - Technology and digital risk experts.
  - Lawyers.
  - Data specialists.
- Internal organization and processes:
  - Create an internal coordination group with 1-2 representatives from each functional and area department, with MCM as secretariat.
  - Create an internal technology learning environment coordinated with the World Bank.
  - Leverage the Fund’s new digital systems to channel and archive exchanges.
  - Maintain an active seminar series and develop internal training.
  - Re-start and re-position the fintech external advisory group (established in 2017) and integrate members in analytical support and capacity development.
  - Coordinate with Office of Innovation and Change (OIC), COM, KMU, and ITD on operationalization and knowledge hub development.

### Resource implications and staffing estimates
- Overall steady-state resource requirement:
  - A total of 55 FTE additional staff and experts needed to implement the Fund’s digital money strategy in steady state (assumed to be reached in about 3 years).
  - Adds to current resources of 15 FTEs.
  - IMF02 resources would be used to further expand capacity development opportunistically.
  - No distinction made between contractuals, short-term experts, and Fund staff in FTE estimates.

- Estimated resource split by core activity (Table 9):
  - Direct country work: 44 FTEs, 63 percent of total.
    - Bilateral surveillance: 23 FTEs, 33 percent of total.
      - AIV: 15 FTEs, 22 percent of total.
      - FSAP: 8 FTEs, 11 percent of total.
    - Capacity development: 21 FTEs, 30 percent of total.
  - Multilateral surveillance: 4 FTEs, 5 percent of total.
  - Policy and tools: 17 FTEs, 25 percent of total.
    - Adapt to surveillance/CD: 8 FTEs, 12 percent of total.
    - Develop: 9 FTEs, 13 percent of total.
  - Support activities: 5 FTEs, 7 percent of total.

- Activity-level assumptions and rationale:
  - Article IVs: planned ramp up to support participation in about a half to two-thirds of Article IVs every year, with lighter intensity (about 0.1 FTE per mission vs 0.3 FTE for other macro-financial issues).
  - FSAPs: targeted coverage of digital money in about 12 FSAPs annually (approximately 0.6 FTEs per FSAP considering coverage of each of the 3 pillars).
  - Capacity development: ramp up to support about 60 activities per year by IMF staff and short-term experts at about 0.3 FTEs per mission (assuming 2.5 people per project); steady state sees similar number led from RCDCs by long-term experts funded by IMF02.
  - International working groups: staffing about 7-8 groups per year (0.3 FTE each).
  - Policy work resourcing examples:
    - Cross-departmental policy papers: about 1.5 FTEs each.
    - Guidance notes/updating tools: 0.5 FTE each.
    - Publicly available data hub: about 3 FTEs.
    - Internal training, information sharing, coordination: about 1 FTE each.

### Mitigating factors, phasing, recruitment, and lessons
- Mitigating factors and synergies:
  - One-off investments excluded from estimates.
  - Avoid double counting of resources (e.g., models serving both AIV and FSAP).
  - Leverage existing macro-financial expertise and complementarities with fragile states and climate work (e.g., carbon footprint assessment).
- Phasing:
  - Phased ramp-up with initial investment in analytical foundations.
  - Surveillance and capacity development to begin immediately; rapid growth later to leverage analytical foundations and allow absorptive capacity.
  - Importance of early engagement to conserve policy degrees of freedom.
  - Delivery model: capacity development increasingly delivered by long-term experts in RCDCs funded by IMF02.
- Recruitment and absorption:
  - A recruitment and absorption strategy to be developed.
  - Main risk: finding, recruiting, attracting, and absorbing high-caliber diverse talent.
  - Growth over next three years with approximately linear hiring progression (likely more hiring in years two and three).
  - Seek rotations from other organizations and central banks; mix of contractual and staff appointments for flexibility.
- Lessons from comparable initiatives:
  - Need effective knowledge sharing and expertise buildup across departments.
  - Early hiring to close knowledge gaps.
  - Piloting in waves, selectivity, streamlined review, and brainstorming sessions effective.
  - External expertise (consultants) useful; pilots associated with higher quality systemic risk analysis but resource gaps persist especially for emerging market and developing economies.

### Conclusion and issues for discussion
- Key conclusions:
  - Digital money has profound, wide-ranging implications for domestic stability and the IMS.
  - The Fund must monitor, advise, and sometimes guide the transition; it is well positioned given core competencies but must rapidly increase resources and deepen skills.
  - Strengthening partnerships while minimizing overlaps is important.
- Questions posed to Directors:
  - Do Directors agree the Fund’s role needs to evolve given digitization?
  - Do Directors agree with the proposed operational strategy to enhance the Fund’s role on digital money issues?
  - Are there further areas to better serve the membership?
  - Do Directors agree with the request for additional resources necessary for effectiveness in this area?

*Source: EXECUTIVE SUMMARY and excerpts from "THE RISE OF DIGITAL MONEY: A STRATEGY TO CONTINUE DELIVERING ON THE IMF’S MANDATE" (ppea2021055).*

### EXECUTIVE SUMMARY

### EXECUTIVE SUMMARY

### Overview and strategic imperative
- Rapid technological innovation is ushering in a new era of public and private digital money: payments will become easier, faster, cheaper, and more accessible, and will cross borders swiftly.
- These improvements could foster efficiency and inclusion, with major benefits for all.
- To reap the full benefits and manage risks, policymakers around the world are looking to step up, given the wide-ranging and profound implications of digital money.
- The Fund must step up. To implement its mandate, keep pace with policy challenges, and ultimately serve its membership, the Fund must rapidly widen and deepen its work on digital money, while coordinating and collaborating closely with other institutions consistent with its mandate. The Fund must also rapidly ramp up its resources devoted to these topics.
- June 17, 2020

### Core principles for safe and effective digital money
- New forms of money must remain trustworthy:
  - Protect consumers.
  - Be safe and anchored in sound legal frameworks.
  - Support financial integrity.
- Domestic economic and financial stability must be protected by:
  - Carefully designed public-private partnerships.
  - A smooth transition of the role of banks.
  - Fair competition.
  - Design that supports climate sustainability and efficient fiscal policy.
- The international monetary system (IMS) should remain stable and efficient:
  - Digital money must be designed, regulated and provided so that countries maintain control over monetary policy, financial conditions, capital account openness, and foreign exchange regimes.
  - Payment systems must grow increasingly integrated, not fragmented, and must work for all countries to avoid a digital divide.
  - Reserve currency configurations and backstops must evolve smoothly.

### The Fund’s mandate and comparative advantages
- The Fund has a mandate to help ensure that widespread adoption of digital money fosters domestic economic and financial stability, and the stability of the IMS.
- The Fund must monitor, and advise on, this rapid and complex transition for all members as it affects its mandate.
- Four core competencies the Fund offers:
  - Near universal membership.
  - Focus on macrofinancial policies and spillovers.
  - Diversity of expertise.
  - Unique ties to member countries—central banks and ministries of finance—through surveillance and capacity development.

### Operational strategy in brief
- The paper lays out an operational strategy: summarize forces driving adoption, outline how the Fund’s core activities and outputs will need to evolve, and discuss partnering and internal resource growth and structuring.
- The April 2, 2021 informal Board paper presented the case for the Fund to expand involvement in digital money; this paper provides more detail on operationalizing that strategy.

### Forces of change driving digital money adoption
- Enabling technologies: distributed ledger technology (DLT), encryption, analytics of “big” datasets, and artificial intelligence.
- Supply-side transformations: entry of new firms—big techs and fintech startups—in finance; new business models leveraging platforms and large established networks for distribution; cross-selling and tailoring of products based on users’ data.
- Demand-side transformation: user needs, habits, and expectations evolved (in part due to the Covid crisis) to strongly favor digital forms of money.
- Policy response example cited: the European Commission’s “digital finance package,” issued in September 2020.

### Forms and common features of digital money
- Forms include:
  - Publicly issued money: central bank digital currency (CBDC).
  - Privately issued money: eMoney, mobile money, stablecoins, tokenized bank deposits, tokenized financial assets, and cryptoassets (noted as too volatile to be technically labelled as money, though accepted for payment).
  - Related innovations: concept of iMoney (Adrian and Mancini-Griffoli (2019)); Distributed Finance (DeFi) and financial services emerging from DLT (IMF (2021a)).
- Common features across forms:
  - Offer cheap, instant, and widely accessible payments.
  - Reward expertise in data analysis, programming, user-interface design, and development speed—opening the door to new issuers.
  - Allow integration of money with new services and distribution platforms, some leveraging large installed bases.
  - Functionality evolves rapidly and can be transferred widely, including across devices and borders.
- The term "digital money" is intentionally loose to capture a wide and evolving set of potential forms.

### Policy relevance and scope of issues
- Public and private digital money have widespread implications intersecting the IMF’s mandate (domestic and international economic and financial stability).
- Issues arise across three areas: the IMS, broad domestic issues, and narrow domestic issues directly related to the digital form of money.
- Three caveats:
  - The list of issues is a snapshot and is likely to evolve rapidly.
  - Not all questions apply to all forms of digital money.
  - Not all questions apply equally to all countries; adoption and spillover impacts will vary.

### Policy questions stemming from adoption (Box 1 summary)

- Policy questions related to the IMS include:
  - How can public and private digital forms of money be leveraged to foster greater integration and efficiency of international payments, and avoid fragmentation?
  - How can we avoid a global digital divide whereby some countries struggle to keep up with technological transformations, link their payment systems to those of other countries, maintain correspondent banking relations, upgrade their regulatory and legal frameworks, and keep their payment systems safe?
  - How might digital money alter an economy’s structure, business cycle, and exposure to currency substitutability?
  - How could digital money affect the instruments, frameworks, conduct, and coordination of monetary, fiscal and exchange rate policies and the availability of policy space?
  - How should “bystander” countries adjust their macro policy frameworks to protect against spillovers from digital money adoption elsewhere?
  - What impact might digital money have on net and gross capital flows, market integration, the cross-border transmission of shocks, the risk of balance of payment problems, cross-currency arbitrage, and countries’ choice of foreign exchange regime?
  - How might digital money alter the effectiveness of capital account management measures (CFMs)?
  - How could CBDC or other payment infrastructure be designed to minimize spillovers, and help countries retain control over domestic policies?
  - How should privately-issued forms of digital money be regulated to do so?
  - How should the Fund’s external sector assessments and spillover analysis account for the impact of digital money on external positions?
  - How will public digital forms of money affect the configuration of reserve currencies, and how can the potential transition towards new configurations be smoothed out?
  - How might the IMS look like in 10 years, and how can digital money be leveraged or regulated to get there?
  - How can the global financial safety net, including backstops, regional arrangements, and Fund operations be redesigned to leverage digital money?

- Policy questions related to broad domestic effects include:
  - How will the role of banks evolve, and what impact might this have for the provision of credit and for financial stability?
  - How should regulation evolve to ensure a level playing field and stable transition?
  - Will DeFi impact market structure and functioning, and what role could digital money play in capital market development, functioning, structure, and efficiency?
  - How could CBDC be designed, and privately issued money be regulated to ensure financial stability and integrity?
  - What will be the impact on growth and productivity, as well as the balance of risks?
  - What role should the public and private sectors have in the development and provision of different forms of digital money to encourage competition and innovation?
  - How should regulation and design of different forms of digital money evolve to ensure competition and market contestability?
  - What are the economics of data and to what extent can regulation of data impact market structure?
  - How can digital money make payments between authorities and private agents more efficient, safer, and more targeted and transparent?
  - What opportunities arise to reach the most vulnerable households, as well as reduce corruption?
  - What are the risks to tax evasion and the opportunities to improve tax compliance?
  - What new tax policies can be envisaged including VAT, shareholder taxation, and taxes on the value creation of data?
  - How can digital money contribute to financial inclusion, and what tradeoffs might exist with access to data and privacy?
  - How should the environmental impact (energy consumption of DLT can be extremely high) of different forms of digital money be consistently, credibly, and publicly evaluated?

- Policy questions related to narrow domestic effects include:
  - How should privately-issued digital forms of money be designed and regulated to ensure consumer protection, and effective safety nets?
  - What models are arising globally and which constitute best practices?
  - How can data integrity and privacy be respected across borders?
  - How should central bank, monetary, private and other laws evolve to provide clear legal underpinning to support innovation while ensuring financial stability and integrity?
  - How wide should the regulatory perimeter be, and how can the macro-criticality of new and rapidly evolving forms of digital money (such as cryptocurrencies) be evaluated?
  - What best practices should be implemented to ensure operational resilience of different forms of digital money, including to cyber-attacks and contagion?
  - What new recommendations should be adopted, and how can different forms of digital money be leveraged to ensure the effective implementation of a robust anti-money laundering and combating the financing of terrorism (AML/CFT) framework, and appropriate safeguards against tax fraud?

### Policy challenges for authorities
- Many country authorities feel the need to act swiftly to tackle rapidly evolving policy challenges and opportunities.
- Additional pressure comes from new private sector entrants rapidly gaining market share.
- The pace of innovation and changes in business models require constant monitoring and updating of policies.
- Strong network effects in payments, and high sunk costs associated with technology and coordination, require swift action as first entrants impose standards while backtracking is costly and slow.
- Regulation, market structure, product features, and the role of the public sector can quickly ossify around suboptimal outcomes regarding stability, equal access, inclusion, efficiency, competition, self-determination, integrity, and integration.

### Organizational and operational content outline (paper structure)
- The paper summarizes forces of change and policy questions (stylized in Figure 1), offers a vision for how the Fund’s core activities and output will need to evolve, and discusses partnering and internal resource growth and structuring.
- Sections include: Adapting and Extending Functions (Surveillance, Capacity Development, Analytical Foundations), Partnering (Guidelines for Engagement and Core Competencies; Complementarities with Other Stakeholders), Building Internal Capacity (Necessary Skills; Internal Organization and Process; Resource Implications), Conclusion, and Issues for Discussion.
- The April 2021 informal Board paper and this operational paper are complementary and should be read together.

*Source: EXECUTIVE SUMMARY (ppea2021055).*

### 10.      To advise countries and help avoid these coordination failures, the IMF must quickly

### 10.      To advise countries and help avoid these coordination failures, the IMF must quickly develop views on, and experience in, the policy issues related to digital money.

### Adapting and Extending Functions
- Strategy comprises three parts: adapting and extending key functions, partnering with other stakeholders, and building internal capacity.
- Core IMF functions to operationalize the digital money strategy: surveillance, capacity development, and lending (lending de-emphasized in this paper).
- Emphasis on establishing a clear analytical foundation for country work, comprising:
  - development of policy views and tools: models, methods, frameworks, data, indicators, and standards;
  - support activities: internal training, guidance notes, review of country documents, internal coordination, information sharing, debates and brainstorming.
- Policy views and tools may be generally developed initially but must be adapted to specific countries, projects, and technologies; continuous and substantial updating will be necessary.

### A. Surveillance
- Surveillance must adapt to account for economic and financial stability risks and opportunities from digital money.
- Relevant reviews and calls for action cited: IEO (2019), CSR (2021a), Executive Board, 2021 FSAP Review (IMF 2021b).
- Surveillance should explore potential benefits, risks, and spillovers from digital money.
- Current coverage of digital money issues in surveillance is very limited; some Article IVs and a few FSAP pilots (Bahamas, Singapore, Switzerland) have addressed aspects.
- Limited coverage stems from novelty of issues and lack of internal capacity.
- Figure 2 used as framework distinguishing functions carried out mostly by area and relevant functional departments: FAD, ITD, ICD, LEG, MCM, RES, SPR, and STA.

Article IV Consultations
- All core areas of Article IV consultations are potentially impacted by digital money adoption: monetary, exchange rate, financial sector, fiscal, structural, and spillovers where relevant.
- Coverage will focus on countries/areas where implications are macro-critical (or becoming macro-critical); decided case by case.
- Example: initial coverage of CBDC in the Bahamas Article IV, with a dedicated annex on the "Sand Dollar."
- Steady state expected to be reached in about 3 years; steady state will continue to be a period of rapid change.
- Expect issues related to digital money to warrant some coverage in about a half to two thirds of Article IVs in 3 years and beyond.
  - Rationale: internal surveys; at end-2020, more than 80 percent of central banks were studying CBDCs.
- Article IV coverage will vary from full-fledged analysis to narrow review; resource estimates assume relatively light coverage on average, amounting to about one third the involvement of a dedicated expert.

Table 3 — Products and Tools for Article IV Consultations and Expected Output (selected)
- Direct engagement deliverable: Article IV coverage of macro-critical digital money implications, with initial focus on jurisdictions with systemically important financial sectors, high, early, or rapid digital money adoption, or spillovers.
  - Coverage: 1/2 to 2/3 of countries per year (light coverage on average).
- Surveillance-specific policy and tools deliverables:
  - Upgrade and maintain the Vulnerability Exercise (VE), the Systemic Risk Tracker (SRT), and over time potentially integrate with the financial programming framework; ensure digital money aspects are reflected in the Consistent Policy Assessment (CPA) tool. (Ongoing)
  - Develop and maintain country-specific tools. (Ongoing)

FSAP
- FSAP scope determined on basis of risks in three pillars: risk analysis, oversight, and safety nets; flexible to adjust to evolving landscape.
- Implications of digital money adoption covered as they become of systemic importance—focus on narrow domestic effects.
- Analysis of risks incorporated in main FSAP report and technical notes.
- Plans to continue digital money-related pilots as in recent FSAPs for Korea, Singapore, and Switzerland.
- Assessment tools need upgrading to incorporate new sources of risks and guidance from international standard-setting bodies.
- Reference notes for FSAP mission chiefs on targeted topics will be prepared (some already with World Bank).
- New standards and codes will evolve from standard setters; interim policy views will follow Board-agreed guidance until then.
- Data availability is critical for feasibility and quality of in-depth risk analysis.

Table 4 — Products and Tools for FSAP Missions and Expected Output (selected)
- Direct engagement deliverable: Expand and deepen the analysis of risks related to digital money (as agreed with country authorities and depending on the systemic importance of digital money in the jurisdiction, as well as available guidance and standards).
  - Coverage: Most FSAP missions, where relevant.
- Surveillance-specific policy and tools deliverables:
  - Reference notes for FSAP mission chiefs, drawing on guidance and standards and codes set by international standard-setting bodies.
    - Coverage: 2-3 per year.
  - Participate in international working groups to update and develop standards relevant for the FSAP.
    - Coverage: 2-3 groups.
  - Develop, update, and maintain approaches and models to assess resilience to continuously evolving risks from digital money for banks, financial market infrastructures, and payment systems (including "bespoke tools" developed during missions). (Ongoing)
  - Develop, update, and maintain tools to evaluate materiality of risks related to digital money, to inform FSAP coverage. (Occasional)

Multilateral Surveillance and Flagships
- Multilateral surveillance products include WEO, GFSR, Fiscal Monitor, REOs, ESR, and AREAER.
- Bi-yearly flagships focus on broad domestic effects of digital money adoption and occasionally international implications.
- GFSR to offer regular coverage of systemic risks from digital money adoption.
- Yearly publications and WEO chapter on spillovers to focus on international implications.
- Related deliverables include regular coverage across products with periodic dedicated chapters and developing/maintaining models, frameworks, indicators, and policy lines relevant to multilateral surveillance products (Ongoing).

### B. Capacity Development
- Capacity development must ramp up rapidly to avoid a digital divide and ensure new solutions work for all countries.
- Projects demand-driven, guided by macro-criticality; aim to help countries evaluate benefits, risks, tradeoffs, strengthen readiness and skills, evaluate/design/monitor new infrastructures (including interoperable CBDC), and build/analyze datasets.
- Actual development of infrastructure not a central Fund focus; partners (World Bank, BIS Innovation Hub) may lead infrastructure development.
- Demand rapidly increasing and expected to remain sustained; internal survey and area department strategies indicate growth areas:
  - CBDC implications and design (survey: more than 100 countries actively exploring CBDC),
  - regulation of private money schemes,
  - payment strategies,
  - digital risk management (including cyber security),
  - legal and regulatory frameworks,
  - data collection,
  - tax and transfer policies and institutional implications.
- Fund has seen a jump in requests for technical assistance and regional workshops; resource constraints have led to postponing or turning down some requests.
- Priority remains based on macro-criticality and expected traction and impact.
- Focus on lower income and emerging market economies; bilateral and regional CD, potential multi-country cross-border payments work.
- Regional projects via RCDCs effective for basic upskilling before targeted bilateral assistance.
- Fund can act as bridge among development community, central banks, ministries of finance to transfer lessons.

Capacity delivery model and steady-state expectations
- Initially CD projects mainly provided by IMF staff with short-term experts for hands-on technical transfer.
- As experts and funding become available, shift toward greater participation by long-term experts in RCDCs, backstopped by IMF staff.
- In steady state:
  - about half the projects led out of RCDCs,
  - a quarter by short-term experts,
  - a quarter by IMF staff.
- Table 6 identifies about 50 bilateral projects per year in steady state led by IMF staff or short-term experts as part of the IMF01 budget.
- Departments principally involved: FAD, ITD, LEG, MCM, STA, and COM on occasion.

Table 6 — Products and Tools for Capacity Development and Expected Output (selected)
- Direct engagement deliverables:
  - Bilateral CD engagements.
    - Coverage: 50 projects per year.
  - Targeted evaluations of cyber-security, regulatory, and legal framework readiness (for infrastructure/schemes not yet systemic, or for countries not receiving FSAPs).
    - Coverage: 5 per year.
  - Regional workshops/training to get countries up to speed on evolving policy opportunities and challenges.
    - Coverage: 1 in each geographical area per year.
  - Peer to peer regional and global networks to systematically share lessons/knowledge.
    - Coverage: 2 per year.
- CD-specific policy and tools deliverables:
  - Update and maintain new models and methodologies to tailor CD (such as to estimate banking sector disintermediation from CBDC adoption, or to assess a country’s readiness to adopt digital money solutions for government-to-person transfer payments); provide frameworks to guide CD on new and continuously evolving topics.
    - Coverage: 2 per year.
  - Joint studies with country authorities to establish policy-relevant hypotheses, extract lessons, run pilots and surveys.
    - Coverage: 2-3 per year.
  - Regional coordination for countries seeking cross-border payment solutions and for specialized solutions for fragile states (potential collaboration with RCDCs, World Bank, BIS Innovation Hub).
    - Coverage: 1 coordinator.

- Comparative capacity context:
  - MCM delivers about 1000 projects per year, around 100 led by HQ staff; capacity development projects across the Fund are about 5 times greater, nearing 5000 projects per year.

### C. Analytical Foundations
- Analytical foundation emphasized as a core function: development of policy views and tools, and support activities (internal training, guidance notes, document review, coordination).
- Continuous updating and tailoring of models, methods, frameworks, data, indicators, and standards required given rapid evolution of digital money landscape.

*Source: Authors’ illustration and text.*

### 24.      General analytical foundations are essential to underpin effective surveillance and

### ppea2021055 - 24.      General analytical foundations are essential to underpin effective surveillance and

### Analytical foundations: purpose and elements
- Two elements comprise the general analytical foundations: (1) development of policy views and tools to provide independent, effective, innovative, and constructive advice; and (2) support activities to mainstream skills, coordination, and information-sharing.
- Policy views and tools:
  - Provide the basis to influence policy debates affecting the IMS and to proactively suggest a broad vision and measures to ensure IMS stability and efficiency.
  - Include basic models, methods, and frameworks to be adapted for country-specific surveillance and capacity development.
  - Include development of a data hub essential to policymaking but currently lacking for public and internal use.
  - Include participation in international working groups (for example, those implementing the G20 Roadmap to Enhance Cross-border Payments) to develop policy principles and standards for digital money.
  - Emphasized the Fund’s role to bring a broad policy and macro-financial perspective (e.g., cross-border interoperability principles must take into account spillovers and CFMs) and to represent the interests and needs of all countries.
- Support activities:
  - Internal training via courses and workshops to bring economists up to speed on policies and tools relevant to country groupings and to mainstream analysis of digital money, grounded in understanding of technologies’ strengths and limits.
  - Information sharing and coordination across digital money workstreams and partnerships with other stakeholders.

### Deliverables and coverage (as summarized in Table 7)
- Development of policy and tools:
  - Engage with the IMF Board (meetings and informal seminars): 1 engagement per year (+ informal seminars as requested).
  - Contribute to international policy debates through Staff Discussion Notes (SDNs), Fintech Notes, and How-To Notes; management engagements; and annual/spring meetings: 4 publications and 1 major event per year.
  - Actively participate in international working groups tasked with setting standards, regulatory guidance, and/or facilitating policy coordination: 5 per year.
  - Develop a publicly available data hub with datasets relevant to digital money adoption and related policy implications: Ongoing.
  - Consider issuing "calls for proposals" (hackathons): 1 per year.
- Support activities:
  - Internal training: Create, maintain, and provide courses and workshops: 3-4 per year.
  - Information sharing: Create and maintain resource/knowledge hub unifying all relevant IMF output: Ongoing.
  - Engage in brainstorming across departments and functions to ensure continuous learning and sharing: At least 4 sessions per year.
  - Coordination across digital money projects with other related workstreams (e.g., climate, inclusion, fragile states), and external stakeholders: Ongoing.

### Partnering: guidelines and core competencies
- Guidelines for engagement (the Fund will):
  - Remain within its mandate.
  - Build on core competencies.
  - Minimize overlaps.
  - Seek to collaborate through standing arrangements, if not on a project-by-project basis.
  - Be transparent about workplans and priorities.
  - Recognize, cross-reference, and disseminate the work of other stakeholders.
  - Engage in debates with, and seek feedback from, other stakeholders.
  - Nevertheless, develop independent policy views and take responsibility for its policy advice.
- Four core competencies of the Fund:
  - Near universal membership across countries and institutions, offering an ideal platform to bring together ministries of finance and central banks, propose policy solutions targeted to the needs and capacity of all countries, and foster a common understanding of design principles for digital money.
  - Core policy focus on macroeconomic, macrofinancial, exchange rate, fiscal, and spillover issues and their interconnections at the center of the IMS.
  - Broad expertise combining economists, financial sector experts, technical and technology experts, and lawyers on common projects.
  - Unique ties to member countries through surveillance and capacity development, enabling bilateral, regional, and global discussions, independent analysis, and peer-to-peer learning.

### Complementarities with other stakeholders
- Five stakeholder groups and complementary roles:
  - World Bank:
    - Natural partner for surveillance (joint FSAP), capacity development (cross-staffing and cross-referencing of TA and training missions), and analytical foundations (joint tools and papers).
    - Complements Fund with focus on development, financial inclusion, govtech, remittances, data collection, evaluation of technologies, and procurement to implement infrastructure.
  - BIS and BIS Innovation Hub (BISIH):
    - BIS: small active research team.
    - BISIH: fosters collaboration on innovative financial technology and explores concrete solutions involving different forms of digital money.
    - Fund can channel needs of non-member central banks/ministries to BISIH and disseminate BIS/BISIH findings to non-members.
    - Potential to suggest projects to the BISIH (e.g., leveraging digital money to improve CFMs).
  - G7, G20, and standard-setting bodies (FSB, CPMI, FATF):
    - Effective at creating consensus on immediate priority standards.
    - Fund complements by bringing macro-financial expertise to working groups (e.g., G20 Roadmap to enhance cross-border payments) and representing countries outside selective groups.
    - Fund can disseminate standards via outreach events and surveillance and engage in assessments through capacity development.
  - Country authorities (central banks, ministries of finance, regulatory/supervisory/anti-trust agencies):
    - Set Fund priorities as main shareholders.
    - Can contribute experts to capacity development and share experiences and best practices.
    - Fund can facilitate peer learning across its global membership while ensuring uniformity of treatment and independence of its views.
  - Other stakeholders (private sector entrepreneurs, academics, privacy advocacy groups, civil society, think tanks):
    - Important to stay abreast of developments and societal impacts and to provide objective, far-sighted perspectives despite some having narrow agendas.
- Collaboration modalities:
  - Aim to establish memoranda of understanding, engage in joint projects, enlist liaison officers to coordinate projects, and host representatives from other organizations for limited periods to encourage knowledge sharing and strengthen ties.

### Building internal capacity: structure and skills
- Four building blocks: skills mix; internal organization and processes; hiring guidelines; resource needs.
- Necessary skills (five sets):
  - Macro and fiscal economists.
  - Financial sector experts.
  - Technology and digital risk experts.
  - Lawyers.
  - Data specialists.
- Internal organization and processes:
  - Create an internal coordination group with 1-2 representatives of each functional and area department, with MCM as secretariat; tasked with sharing departmental work plans, facilitating prioritization and collaboration, identifying desirable work areas, and reporting to management and the Board.
  - Create an internal technology learning environment, in coordination with the World Bank, to maintain staff awareness on technologies powering digital moneys, their risks, trends, and limitations.
  - Leverage the Fund’s new digital systems to channel and archive exchanges (news, ideas, publications, meetings, divisional workplans).
  - Maintain an active seminar series for external speakers and for staff feedback on projects; develop internal training.
  - Re-start, re-structure, and re-position the fintech external advisory group (established in 2017) and integrate members more closely in analytical support and some capacity development.
  - Coordinate with Office of Innovation and Change (OIC), COM, KMU, and ITD on operationalization, awareness, knowledge hub development, and training/workshops.

### Resource implications and estimated staffing
- Overall steady-state resource requirement:
  - A total of 55 FTE additional staff and experts are needed to implement the Fund’s digital money strategy in steady state (assumed to be reached in about 3 years).
  - This adds to current resources of 15 FTEs.
  - IMF02 resources would be used to further expand capacity development opportunistically.
  - No distinction made between contractuals, short-term experts, and Fund staff in estimating FTE requirements for this exercise.
- Estimated resource split by core activity (Table 9):
  - Direct country work: 44 FTEs, 63 percent of total.
    - Bilateral surveillance: 23 FTEs, 33 percent of total.
      - AIV: 15 FTEs, 22 percent of total.
      - FSAP: 8 FTEs, 11 percent of total.
    - Capacity development: 21 FTEs, 30 percent of total.
  - Multilateral surveillance: 4 FTEs, 5 percent of total.
  - Policy and tools: 17 FTEs, 25 percent of total.
    - Adapt to surveillance/CD: 8 FTEs, 12 percent of total.
    - Develop: 9 FTEs, 13 percent of total.
  - Support activities: 5 FTEs, 7 percent of total.
- Rationale and activity-level assumptions:
  - Country work:
    - Past involvement in Article IV surveillance responded to ad-hoc requests (e.g., Sweden and the Bahamas 2021 AIV), limited to 2-3 per year; FSAP fintech-related risk assessments limited to 2-3 per year.
    - Planned ramp up would support participation in, and review of, about a half to two-thirds of Article IVs every year, with less intensity on average than other macro-financial issues (about 0.1 FTE per mission as opposed to 0.3 FTE).
    - Targeted coverage of digital money in about 12 FSAPs annually (approximately 0.6 FTEs per FSAP considering coverage of each of the 3 pillars).
    - Capacity development to date is at early stages (about 10 missions per year); ramp up would support about 60 activities per year by IMF staff and short-term experts out of FAD, ITD, LEG, MCM, STA, and COM on occasion, at about 0.3 FTEs per mission (assuming 2.5 people per project).
    - In steady state about the same number of projects would be led out of RCDCs by long-term experts (or short-term experts backstopped by long-term experts) covered by the IMF02 budget.
  - Multilateral surveillance, policy and tools, and support activities:
    - Fund has staffed about 5 international working groups per year to contribute to G7/G20 efforts (e.g., stablecoin regulation, enhancing cross-border payments); further resourcing would allow staffing about 7-8 international working groups per year (0.3 FTE each).
    - Policy work has produced impactful papers (about 1-2 per year) but risks becoming reactive; additional resources would support sustained leadership through:
      - Full-blown cross-departmental policy papers requiring about 1.5 FTEs each.
      - Guidance notes and more regular updating of tools requiring 0.5 FTE each.
      - A publicly available data hub (about 3 FTEs).
      - Internal training, information sharing, and internal and external coordination (about 1 FTE each).

*Source: Authors.*

### 43.      These estimates take into account mitigating factors. One-off investments to reach steady

### THE RISE OF DIGITAL MONEY: A STRATEGY TO CONTINUE DELIVERING ON THE IMF’S MANDATE

### Mitigating factors, synergies, and scope of estimates
- One-off investments to reach steady state were excluded from the estimates.
- Special care was taken not to double count (for instance, models developed for AIV surveillance but also relevant for FSAP missions).
- Synergies sought with existing macro-financial expertise, including:
  - Designing models for bank stress-testing in response to disintermediation risks.
  - Leveraging expertise in conventional financial market infrastructure to evaluate the stability and efficiency of payment systems.
- Synergies and complementarities with other new workstreams were taken into account:
  - Foundational work in fragile states to build institutions is needed before advice on digital money can be provided.
  - Capacity among the climate team will help assess the carbon footprint of digital money initiatives and propose policies to contain these.

### Phasing of work and resource ramp-up
- The work on digital money and efforts to enhance capacity would be phased.
- A steady ramp-up in overall resources will be phased differently for the various components of the work.
- Initial investment focus:
  - Building the analytical foundations to engage with countries on digital money (policy lines and tools, training and review capacity).
- Timing of activities:
  - Surveillance and capacity development will begin immediately.
  - Rapid growth will occur somewhat later to:
    - Leverage stronger analytical foundations.
    - Allow countries to build absorptive capacity.
- Engagement principle:
  - Important to engage with countries before issues become macro-critical and policy challenges fully materialize to conserve degrees of freedom to affect the digital money landscape.
- Delivery model:
  - Capacity development increasingly delivered by long-term experts (hosted in RCDCs, funded by IMF02).
- Visual aids referenced:
  - A stylized sketch of the phasing patterns (not levels) of the strategy’s main building blocks is presented in Figure 4.
  - Figure 3. Illustration of the Phasing Patterns Across Major Functions — Source: Authors’ illustration.

### Recruitment and absorption strategy
- A recruitment and absorption strategy would be developed.
- Main risk: capacity to find, recruit, attract, and absorb new high-caliber and diverse talent into the organization.
- Growth plan:
  - Growth would occur over the next three years, with an approximately linear progression in hiring (although structural lags in identifying talent and moving people to headquarters would likely lead to more hiring the second and third years relative to the first).
- Talent pool expansion:
  - Opportunities such as rotations of staff coming from other organizations or central banks would be sought.
- Staffing mix:
  - A mix of contractual and staff appointments to provide flexibility as technology and policy challenges evolve.

### Lessons from ramping up comparable initiatives (Box 2)
- Overall lessons applicable to digital money rollout:
  - Need for effective knowledge sharing mechanisms and buildup of expertise across all departments and functions.
  - Need to acquire talent through hiring to accelerate the buildup of expertise and to adequately attend rapidly evolving needs.
  - Speed at which the knowledge frontier can evolve and need to invest early to close the knowledge gap.
  - Self-reinforcing cycle in learning from targeted country engagements and wider development of analytical foundations.
  - Importance of continuous learning, including unstructured brainstorming across departments and involving participants in all functions.

- Macroprudential policy lessons:
  - IMF developed frameworks, surveillance guidance, and datasets but CSR suggested that "lack of expertise" and "competing priorities" constrained deeper integration into Article IV consultations.
  - CSR calls for "deeper knowledge on the effects of macroprudential policy and its interaction with other policies" through learning from country experiences and additional analytical work.

- Macrofinancial surveillance lessons:
  - Piloting approach effective: started with 24 pilot countries in 2015, expanded to 67 countries in 2016 and 128 in 2017, and the full membership in 2018.
  - 2018 Interim Surveillance Review takeaways:
    - Learning is effective when pilots are rolled out in waves.
    - Selectivity and streamlined review can support more in-depth analysis and tailored policy advice.
    - Brainstorming sessions enhanced dialogue outside the formal review process.
    - Learning took place across initiatives; leveraging outside expertise including externally financed consultants was helpful.
  - 2021 CSR follow-up found participation in pilots associated with higher quality of systemic risk analysis and macroprudential policy advice, but gaps persisted, especially for emerging market and developing economies, attributed to insufficient resources and limitations in macrofinancial expertise.

### Conclusion and operational questions
- Key conclusions:
  - The rise of digital money has profound, wide-ranging, and interconnected implications for domestic economic and financial stability and the stability of the IMS.
  - The Fund has a mandate to monitor, advise on, and in some cases guide this transition.
  - The Fund is well positioned given its core competencies and established activities (surveillance, capacity development, lending), but needs to rapidly increase resources and deepen skills.
  - Strengthening partnerships with complementary organizations is important while minimizing overlaps.

- Issues for discussion posed to Directors:
  - Do Directors agree that the Fund’s role would need to evolve given the fast-changing developments with digitization?
  - Do Directors agree with the proposed operational strategy to enhance the Fund’s role on issues relating to digital money?
  - Do Directors see any further areas that could be considered to better serve the membership?
  - Do Directors agree with the request for additional resources that would be necessary to ensure Fund’s effectiveness in this area?

*Source: Excerpts from "THE RISE OF DIGITAL MONEY: A STRATEGY TO CONTINUE DELIVERING ON THE IMF’S MANDATE."*

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_Source: https://www.imf.org/-/media/files/publications/pp/2021/english/ppea2021055.pdf_