## CENTRAL BANK DIGITAL CURRENCY: FURTHER NAVIGATING CHALLENGES AND OPPORTUNITIES

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### Handbook purpose and scope
- The Handbook is a technical resource primarily for emerging market and developing economies (EMDEs) to reflect countries’ experiences, lessons, and research and to offer frameworks to help think through potential implications and tradeoffs of CBDC.
- Each chapter tackles a specific question and is not intended to evaluate CBDC’s overall appropriateness; that judgment is left to policymakers given domestic circumstances.
- Financial support for the Handbook is provided by the Government of Japan.
- The third wave of chapters, summarized here and scheduled for publication in November 2025, examines:
  - implications of CBDC for financial stability and retail payments competition;
  - legal and financial integrity issues;
  - payment ecosystem resilience in fragile and conflict-affected states (FCS);
  - tokenized reserves.

### Current CBDC and payments landscape (key facts)
- BIS survey: "91 percent of 93 surveyed central banks are exploring rCBDCs, wCBDCs, or both—with work on wCBDC progressing to more advanced stages than rCBDC (BIS, 2025)."
- IMF survey in Sub-Saharan Africa: "75 percent of countries surveyed are currently engaged or planning to be engaged in CBDC, with roughly two-thirds in the research phase and more than a quarter actively preparing for a rCBDC launch by 2028 (IMF, 2024)."
- Since launch in November 2023, the Handbook’s webpage has attracted "over 62,090 unique visitors" and the chapters have collectively garnered "49,287 downloads."
- Notable country timelines and pilots described:
  - Kazakhstan: full launch by "the end of 2025."
  - Russia: plans to enable Digital Ruble transactions from "September 2026."
  - Brazil: plans to launch Drex CBDC in "2026, in two phases."
- rCBDC adoption examples:
  - Nigeria: "less than 2 percent of population using rCBDC."
  - Jamaica and The Bahamas: "less than 1 percent" usage.
- Project collaborations and pilots: Project Acacia (RBA), Project Agora (seven central banks and >40 private firms), Project Helvetia (SNB), Project mBridge (MVP stage), Project Sunbird, Project Nexus (aims to go live by "2026").

### Implications of rCBDC for financial stability
- Findings:
  - rCBDC could affect domestic financial stability negatively or positively via multiple channels, including changes to bank funding and lending, fee income loss, run risks, information flow, and payment system resilience.
  - The strength of these effects depends on adoption levels and country characteristics, but it remains empirically uncertain.
  - rCBDC could impact financial stability through six interrelated channels:
    1. liability channel (changes in composition of liabilities and increase in cost of funding);
    2. asset channel (reduction in size/composition of assets and increase in cost of lending);
    3. fee income channel (reduction in collected fees);
    4. run-risk channel (increased risks and intensity of runs in stress times);
    5. information channel (changes in flow of borrower and user information);
    6. payment system resilience channel (competition and operational resilience effects).
  - Quantitative studies to date find limited financial stability risks under scenarios of mild adoption, though banking system profitability may decrease and results are country-specific.
- Policy approaches and tools:
  - Start impact assessments with bank balance sheet analyses and evolve with macro-financial modeling and ongoing data collection.
  - Mitigation options and design features include:
    - quantity limits on rCBDC holdings,
    - fees applied to holdings above a certain limit.
  - Complementary safeguards: macroprudential and crisis management policies.
  - Note: restricting rCBDC adoption can undermine objectives or be counter-productive if downside risks are small or the financial system can adapt.

### How rCBDC would affect retail payments competition
- Findings:
  - Design features—fee structures, interoperability, intermediary rules, and legal tender status—influence competitive dynamics.
  - rCBDC can improve competition where private platforms dominate, reduce fees, boost access, and enhance service standards; effects are more moderate in regulated markets with fee caps.
  - rCBDC is most transformative in private platform-dominated markets, complementary where public FPS are strong, and can encourage digital payments in cash‑reliant markets.
- Market structure framework (three typical structures):
  1. private platform-dominated markets;
  2. markets with established public FPS (examples: Brazil’s Pix and India’s UPI);
  3. cash-reliant markets with limited digital infrastructure (example: Pacific Island countries).
- Risks and design mitigations:
  - Risks: crowding out private providers, reduced market resilience, increased operational costs for central banks.
  - Design mitigations: tiered access models, intermediary-based distribution, flexible fee structures, interoperability.
- Evaluation indicators to track:
  - price-based outcomes (e.g., merchant discount rates, interchange fees),
  - market concentration measures (e.g., Herfindahl-Hirschman Index, provider market shares),
  - contestability indicators (e.g., new market entry, user switching, multihoming),
  - financial inclusion metrics (e.g., increased digital payment use among underserved populations).

### Legal considerations for rCBDC and wCBDC
- rCBDC legal questions:
  - Legal nature of rCBDC as currency; statutory basis for issuance and platform operation; regulatory authority over service providers.
  - Need to assess whether existing laws provide adequate basis; may require amendments to central bank and monetary laws to grant currency status and exclusive issuance authority.
  - rCBDC typically envisaged as a liability of the central bank, supporting convertibility and singleness of money.
  - Legal frameworks should cover issuance, ownership, platform operation, outsourcing arrangements, governance, conflicts of interest, and clear delineation of responsibilities among central bank, intermediaries, and users.
  - Functional aspects (limits, transaction amounts, fees, programmability, offline use) should be anchored in law.
- wCBDC legal challenges (tokenization-focused):
  - Legal nature of tokenized instruments; central bank mandate to issue wCBDC and operate or outsource its platform.
  - Need legal clarity on settlement finality, treatment in cases of loss or unauthorized transfer, and synchronization between token records and central bank ledger balances to prevent double spending.

### Financial integrity (AML/CFT) and rCBDC
- Findings:
  - Financial integrity implications depend on rCBDC design; token-based, decentralized, or direct models may pose higher or novel ML/TF risks and could require central banks to assume AML/CFT responsibilities traditionally held by intermediaries.
  - rCBDCs carry more complex financial integrity implications than wCBDCs.
  - There is little precedent on applying FATF Standards to rCBDCs; AML/CFT assessor bodies have not assessed rCBDC AML/CFT regimes to date.
- Recommendations and implementation guidance:
  - Assess ML/TF risks at the design stage and throughout pilots and launch phases.
  - Develop a phased plan to enable data collection and analysis to advance risk understanding as rollout proceeds.
  - Actors meeting FATF definitions of financial institutions, DNFBPs, or VASPs must be subject to AML/CFT obligations and supervision.
  - Consider the regulatory implications of model choice (direct/unintermediated vs. indirect/intermediated) for allocation of AML/CFT obligations and oversight, taking account of central bank independence.
  - Address customer due diligence challenges associated with "cash‑like" features and anonymous or low‑identification wallets on a case‑by‑case basis informed by demonstrated ML/TF risk.

### Payment ecosystem resilience in Fragile and Conflict-Affected States (FCS)
- Resilience framework:
  - Strengthen five layers: users; payment solutions; intermediaries; infrastructure for clearing and settlement; power and communications.
  - Core structural practices:
    - redundancy and scalability;
    - distributed infrastructure and decentralization;
    - user‑centric accessibility and awareness;
    - operational and cybersecurity aligned with global standards;
    - regulatory and legal frameworks combining foundation with agility.
- Key resilience measures observed in FCS:
  - multisite operational architecture; reduce dependency on single-connectivity providers;
  - satellite networks, decentralized connectivity, cloud-based systems, foreign infrastructure backups;
  - continuity-focused payment design, secure digital ID, digital literacy, continued role of cash;
  - contingency planning, coordinated incident response frameworks, pre-established crisis protocols;
  - pre-crisis financial stability, regulatory flexibility, strengthened oversight, use of foreign currencies for short-term continuity.
- rCBDC potential role:
  - Could provide backup digital infrastructure, secure digital rails, and programmable emergency disbursements.
  - Should complement, not displace, cash and private digital money.
  - Direct, unintermediated rCBDC should be a last resort for basic monetary functions when conventional infrastructure collapses.
  - Design features for FCS: offline functionality, low‑tech options like USSD, programmability for targeted aid, DLT and cloud solutions for redundancy and fault tolerance.
- Context and constraints:
  - Benefits depend on local conditions: institutional trust, cybersecurity capacity, and inclusive access considerations.

### Tokenized reserves: definition, use cases, and tradeoffs
- Definition and motivation:
  - Tokenized reserves refer specifically to central bank reserves issued on distributed ledger technology (DLT).
  - They would be direct liabilities of the issuing central bank and accessible to predefined institutions on a DLT-based infrastructure.
- Use cases and potential benefits:
  - Enhance wholesale payment systems, support atomic settlement of tokenized assets, enable payment-versus-payment (PvP), delivery-versus-payment (DvP), and DvPvP, and automate conditional payments via smart contracts.
  - Programmability could automate open market operations, standing facilities, and support 24/7 liquidity management.
- Implementation models and tradeoffs:
  - Two main ledger models:
    1. single ledger: money and assets on same ledger—advanced programmability and atomic settlement but higher contagion and financial stability risks;
    2. compatible ledger: separate ledgers interoperable with one another—different tradeoffs.
  - Central bank roles: operate the ledger or share responsibility; risks include cybersecurity, smart contract errors, operational challenges, and liquidity fragmentation.
- Alternatives to tokenized reserves:
  - RTGS links or “trigger solutions” to coordinate tokenized asset delivery with RTGS payments;
  - Intermediaries with omnibus accounts providing settlement services backed by central bank reserves;
  - Privately‑issued tokenized money (higher credit risk).
- Policy guidance:
  - Central banks should assess tokenized reserves against alternatives, balance benefits and risks, and tailor strategic approaches to jurisdictional priorities, resources, legal frameworks, and policy goals.

### Conclusion and next steps
- Purpose recap:
  - This paper informs the Executive Board about emerging issues related to CBDC and summarizes six Handbook chapter topics: financial stability, payments competition, legal considerations, financial integrity, payment resilience in FCS, and tokenized central bank reserves.
- Planned future publications:
  - A fourth wave of Handbook chapters will be published in 2026.
  - Forthcoming topics are expected to focus on "tokenized reserves and financial assets, the interaction with privately-issued money, and cross-border payments."
- Key next steps:
  - Continue publication of Handbook chapters (fourth wave in 2026).
  - Prioritize analysis on: "tokenized reserves and financial assets"; "the interaction with privately-issued money"; "cross-border payments."
  - Maintain engagement with IMF member central banks to refine topics based on country needs.

*Executive Summary of ppea2025041 — CENTRAL BANK DIGITAL CURRENCY: FURTHER NAVIGATING CHALLENGES AND OPPORTUNITIES (November 10, 2025).*

### EXECUTIVE SUMMARY

### EXECUTIVE SUMMARY

### Handbook purpose and scope
- The Handbook is a technical resource primarily for emerging market and developing economies (EMDEs) to reflect countries’ experiences, lessons, and research and to offer frameworks to help think through potential implications and tradeoffs of CBDC.
- Each chapter tackles a specific question and is not intended to evaluate CBDC’s overall appropriateness; that judgment is left to policymakers given domestic circumstances.
- Financial support for the Handbook is provided by the Government of Japan.
- The third wave of chapters, summarized here and scheduled for publication in November 2025, examines:
  - implications of CBDC for financial stability and retail payments competition;
  - legal and financial integrity issues;
  - payment ecosystem resilience in fragile and conflict-affected states (FCS);
  - tokenized reserves.

### Current CBDC and payments landscape (key facts)
- BIS survey: "91 percent of 93 surveyed central banks are exploring rCBDCs, wCBDCs, or both—with work on wCBDC progressing to more advanced stages than rCBDC (BIS, 2025)."
- IMF survey in Sub-Saharan Africa: "75 percent of countries surveyed are currently engaged or planning to be engaged in CBDC, with roughly two-thirds in the research phase and more than a quarter actively preparing for a rCBDC launch by 2028 (IMF, 2024)."
- Since launch in November 2023, the Handbook’s webpage has attracted "over 62,090 unique visitors" and the chapters have collectively garnered "49,287 downloads."
- Notable country timelines and pilots described:
  - Kazakhstan: rolling out Digital Tenge for full launch by "the end of 2025."
  - Russia: plans to enable Digital Ruble transactions from "September 2026."
  - Brazil: plans to launch Drex CBDC in "2026, in two phases."
- rCBDC adoption examples:
  - Nigeria: "less than 2 percent of population using rCBDC."
  - Jamaica and The Bahamas: "less than 1 percent" usage.
- Project collaborations and pilots:
  - Project Acacia (RBA), Project Agora (seven central banks and >40 private firms), Project Helvetia (SNB), Project mBridge (MVP stage), Project Sunbird, Project Nexus (aims to go live by "2026").

### What are the implications of rCBDC for financial stability?
- Findings:
  - rCBDC could affect domestic financial stability negatively or positively via multiple channels, including changes to bank funding and lending, fee income loss, run risks, information flow, and payment system resilience.
  - The strength of these effects depends on adoption levels and country characteristics, but it remains empirically uncertain.
- Policy approaches:
  - Countries can mitigate financial stability risks through careful rCBDC design and existing policy tools.
  - Impact assessments should begin with bank balance sheet analyses and evolve with macro-financial modeling and ongoing data collection.

### How would rCBDC affect retail payments competition?
- Findings:
  - Design features—fee structures, interoperability, intermediary rules, and legal tender status—influence whether rCBDC will strengthen or dampen competitive dynamics.
  - A well-calibrated design is essential to balance benefits like inclusion and pricing discipline with risks such as crowding out private providers.
  - rCBDC has the potential to improve competition, especially in markets dominated by private platforms with high fees and limited access.
  - rCBDC may have a more moderate impact in regulated markets with fee caps or other controls.
- Complementary policies:
  - Other policy measures exist to underpin competition in payment systems beyond rCBDC issuance.

### Key legal considerations for rCBDC and wCBDC
- rCBDC legal questions:
  - Legal nature of rCBDC as currency; statutory basis for issuance and platform operation; regulatory authority over service providers.
  - Legal assessment of relationships within a rCBDC ecosystem and of features such as limits, fees, interest, programmability, and offline use.
- wCBDC legal challenges (tokenization-focused):
  - Legal nature of tokenized instruments; central bank mandate to issue wCBDC and to operate or outsource its platform.
  - Legal relationship between central bank and users; legal certainty for settlement finality of wCBDC transactions.

### How might rCBDC affect financial integrity (AML/CFT)?
- Findings:
  - Financial integrity implications depend on rCBDC design. Token-based, decentralized, or direct models may pose higher or novel ML/TF risks, potentially requiring central banks to assume AML/CFT responsibilities traditionally held by intermediaries.
  - rCBDCs carry more complex financial integrity implications than wCBDCs.
  - There is little precedent on applying FATF Standards to rCBDCs, creating interpretive and practical challenges.
- Recommendations:
  - Assess ML/TF risks of a rCBDC system at the design stage and throughout successive phases of pilots or launch.
  - Some AML/CFT implementation aspects can mirror traditional approaches; others may require new systems or further guidance.

### Lessons for strengthening payment ecosystems in fragile and conflict-affected states (FCS)
- Resilience framework:
  - Reinforce five layers—users, solutions, intermediaries, infrastructure, and connectivity—through strategies such as redundancy and scalability, distributed infrastructure and decentralization, operational and cybersecurity, user accessibility and awareness, and regulatory and legal frameworks.
- rCBDC potential benefits in FCS:
  - Can offer backup infrastructure, secure digital rails, and programmable emergency disbursements.
  - Benefits must be tailored to local contexts, e.g., offline capabilities, low-tech access, and institutional trust.

### What are tokenized reserves, and how might central banks explore them?
- Definition and potential:
  - Tokenized reserves refer specifically to central bank reserves issued on distributed ledger technology (DLT).
  - Central banks, as issuers of the most liquid and safe assets—central bank reserves—may consider issuing tokenized reserves on DLT-based infrastructure to preserve the role of central bank money in anchoring trust and stability.
  - Tokenized reserves could enhance efficiency and support use cases like atomic settlement of tokenized assets or cross-currency transactions.
- Alternatives and strategic choices:
  - Central banks might assess alternatives such as RTGS links, omnibus accounts, and privately-issued tokenized money.
  - Strategic decisions and policy options will vary across jurisdictions, reflecting differences in resources, legal systems, and policy priorities.

### Conclusion and next steps (as summarized)
- The new Handbook chapters provide frameworks to help policymakers scrutinize CBDC issues, especially for EMDEs, and contribute to capacity development and peer learning.
- Findings are preliminary and may be updated as new knowledge and experiences emerge.

*Executive Summary of ppea2025041 — CENTRAL BANK DIGITAL CURRENCY: FURTHER NAVIGATING CHALLENGES AND OPPORTUNITIES (November 10, 2025).*

### 13.      Recent development and regulatory shifts in crypto assets and stablecoins could have

### 13.      Recent development and regulatory shifts in crypto assets and stablecoins could have

### Recent regulatory shifts and implications
- The enacted GENIUS Act and Clarity Act bill (still pending passage by the Senate) in the U.S. aim to establish a regulatory framework for payment stablecoins and to clarify the regulatory jurisdiction of federal agencies overseeing other digital assets, respectively, encouraging broader adoption by reducing legal and regulatory uncertainty.
- The EU’s Markets in Crypto-Assets Regulation (MiCA) establishes harmonized rules for crypto asset and stablecoin issuance and services.
- These frameworks seek to foster innovation and bring greater legal and regulatory clarity.
- Some EMDE authorities are concerned that foreign stablecoins could amplify capital outflow risks and undermine local financial systems.
- Some jurisdictions expect that both stablecoins and CBDC could be used for payments. They could:
  - compete against each other if they are seen as close substitutes, or
  - coexist if they focus on different use cases, dictated by their different economic, legal, and technological characteristics (IMF, 2025).
- It will be critical to monitor their effects on payment system development.

### IMF capacity development (CD) and cross-border work
- The IMF’s CD work has encouraged jurisdictions to take a careful and systematic approach to evaluate CBDC rather than rushing to deployment.
- CD work is becoming more data driven, drawing on information provided by country authorities and tailoring analysis to their specific macroeconomic and financial conditions.
- Recent CD has expanded into adjacent areas, including cross-border payments.
- The IMF and World Bank provide joint technical assistance on cross-border payments to help countries improve payment systems, reduce costs, and meet G20 Roadmap targets for faster, safer, and more inclusive payments.
- These CD efforts have been integrated with the IMF’s analytical and surveillance work to help member countries navigate an increasingly complex digital payment landscape.
- Project Nexus is a collaboration between Bank Indonesia, Bank Negara Malaysia, Bangko Sentral ng Pilipinas, the Monetary Authority of Singapore, and the Bank of Thailand.

### Macro-Financial Implications of rCBDC — overview
- Central banks are mandated to ensure price stability and trust in money, which requires close supervision of payment systems; they must carefully assess how rCBDCs might affect the financial system, monetary stability, and competitive dynamics within payments.
- Financial stability concerns are a primary question when evaluating rCBDC.
- The chapter contributes by:
  - providing a framework of the transmission channels in a domestic context across different types of economies, and
  - offering practical guidance on tools and models to evaluate financial stability risks and discussing options to mitigate them.

### Financial stability: transmission channels and findings
- rCBDC as a new liquid, safe, and widely accessible payment instrument and store of value substitutes for existing forms of money; agents may decrease holdings of bank deposits and other safe, money-like assets in favor of rCBDC.
- rCBDC could impact financial stability negatively or positively through six interrelated channels:
  1. changes in the composition of financial institutions’ liabilities and, relatedly, an increase in the cost of funding (liability channel);
  2. a reduction in the size of financial institutions’ assets, changes in their composition, and relatedly an increase in the cost of lending (asset channel);
  3. a reduction in banks’ income from collected fees (fee income channel);
  4. an increase in the risks and intensity of runs on banks and issuers of safe and money-like assets in stress times (run-risk channel);
  5. changes in the flow of information on borrowers and CBDC users (information channel);
  6. an increase in competition in retail payment markets and operational resilience (payment system resilience channel).
- The relative strength and economic significance of these channels are uncertain and depend on rCBDC adoption, country characteristics, and design features.
- Quantitative studies to date find that rCBDC would not pose significant financial stability risks under scenarios of mild adoption, though this depends on country-specific factors. Findings indicate:
  - banking system profitability may decrease,
  - the impact on financial stability is likely to be limited overall in countries with low competition, low reliance on deposit funding, sufficient alternative funding sources, and continuous innovations enabling banks to respond to CBDC competition.
- A key factor is banks’ response: banks that offer new products or services competing with rCBDC will likely see a lower impact on financial stability.
- Complexity and need for nuanced modeling underscore uncertainty about real-world effects.

### Tools, models, and mitigation options
- Countries can evaluate rCBDC impacts using tools and models:
  - Start by exploring balance sheet responses of financial institutions, the central bank, government, and private sector.
  - Models capturing richer financial sector dynamics and consumer/borrower and government behavior require more modeling capacity and tend to treat banks more simply.
  - Analysis should be rooted in data: balance sheet composition of banks and the central bank, profitability, metrics of banking system competition, and other financial indicators.
- Mitigation options and design features to curtail or slow substitution of bank deposits with rCBDC include:
  - quantity limits on rCBDC holdings,
  - fees applied to holdings above a certain limit.
- Restricting rCBDC adoption can undermine rCBDC objectives or be counter-productive if downside stability risks are small or the financial system can adapt.
- Appropriate rCBDC designs should be complemented by traditional safeguards: macroprudential and crisis management policies.

### Impact of rCBDC on competition in retail payments
- Central banks seek guidance on assessing competitive effects of rCBDC in domestic retail payments markets.
- The chapter draws on payments literature and provides practical guidance on design choices affecting competition: fee structures, interoperability, intermediary participation, and holding limits.
- Payment markets are shaped by network effects and platform dynamics that can lead to concentration; a few card networks, BigTechs, and mobile wallets often dominate.
- The framework identifies three typical market structures:
  1. private platform-dominated markets (may operate with or without regulation; examples include systems based on credit and debit card networks, e-money platforms, or private FPS);
  2. markets with established and widely adopted public FPS (such as Brazil’s Pix and India’s UPI);
  3. cash-reliant markets with limited digital payment infrastructure (such as the Pacific Island countries).
- rCBDC’s impact depends on market structure:
  - most transformative in markets dominated by unregulated private platforms—can reduce fees, boost access, and enhance service standards;
  - in regulated markets with fee caps, rCBDCs have more moderate effects—reinforce existing controls and address inclusion or transparency gaps;
  - where public FPS are strong, rCBDCs play a complementary role, supporting wider access for underserved groups;
  - in cash-heavy markets, rCBDCs can encourage digital payments, financial inclusion, and curb potential future market concentration.
- Risks to balance against benefits include crowding out private providers, reducing market resilience, or increasing operational costs for central banks.
- Design mitigations include tiered access models, intermediary-based distribution, flexible fee structures, and interoperability with existing systems.
- Evaluating rCBDC’s impact on competition requires tracking indicators across categories:
  - price-based outcomes (e.g., changes in merchant discount rates or interchange fees),
  - market concentration measures (e.g., Herfindahl-Hirschman Index, provider market shares),
  - contestability indicators (e.g., new market entry, user switching, multihoming),
  - financial inclusion metrics (e.g., increased digital payment use among underserved populations).

### Legal and financial integrity aspects — overview
- CBDC initiatives must be built on robust legal and regulatory frameworks, support financial integrity objectives, and uphold public trust in the monetary and financial systems.
- Proactively addressing legal and financial integrity considerations will mitigate associated risks and enhance the credibility, safety, and legitimacy of CBDCs.
- The chapter addresses rCBDC primarily, with one dedicated section on wCBDC.

### Selected legal considerations for rCBDC
- Jurisdictions must assess whether existing laws and regulations provide an adequate basis for secure and effective CBDC deployment; lacking such a foundation creates legal, financial, operational, and reputational risks that could undermine public confidence and adoption.
- The chapter guides policymakers to assess legal frameworks for issuance and management of CBDC, covering:
  - mechanisms to sanction rCBDC as currency,
  - the legal basis for issuance and deployment of rCBDC payment platforms,
  - the central bank’s regulatory authority over rCBDC service providers.
- A robust legal foundation is essential if rCBDC is to be granted currency status; this may necessitate amendments to central bank and monetary laws.
- Typically, rCBDC would be designed to constitute a liability of the central bank, entailing exclusive issuance authority and legal tender status—supporting convertibility with other central and commercial bank money, reinforcing monetary sovereignty, and preserving the singleness of money.
- Legal frameworks for issuance and ownership and operation of rCBDC payment platforms require explicit legislative authorization and a clear central bank mandate; where platforms attain systemic importance, adherence to the Principles for Financial Market Infrastructures (PFMI) is essential.
- Outsourcing arrangements for platform operation must be governed by legally binding agreements ensuring effective central bank control and accountability.
- Jurisdictions may:
  - authorize central banks to offer front-end rCBDC services (digital wallets, hardware devices),
  - mandate designated intermediaries’ participation in the public interest,
  - enable wallet portability under defined conditions with appropriate safeguards.
- Governance frameworks must address conflicts of interest from the central bank’s dual role as operator and regulator.
- Multiple legal relationships in an rCBDC ecosystem require clear delineation of responsibilities among central bank, intermediaries, and users; existing payment regimes may need amendments to rein in intermediaries offering rCBDC services.
- Intermediaries participating in rCBDC platforms should abide by standardized contractual arrangements (a rulebook).
- rCBDC-specific provisions may be necessary to ensure rCBDC holdings are protected and legally segregated from intermediary assets, including in insolvency cases.
- Key functional aspects (limits on holdings, transaction amounts, service fees) must be anchored in law.
- Programmable payments raise novel legal questions about enforceability and risks warranting careful legal analysis.
- Ensuring offline functionality for inclusion and resilience must be supported by explicit legal provisions for settlement finality, convertibility, compensation mechanisms, and validity of ownership transfers.

### Wholesale CBDC (wCBDC) legal considerations
- wCBDC raises distinct legal issues due to its users (authorized institutions), purposes, and tokenization challenges.
- Jurisdictions must assess whether existing central bank laws allow wCBDC issuance or if legislative reform is necessary, particularly where wCBDC departs from balance-based reserves and is used as a tokenized instrument.
- Statutory authority must extend to issuing tokenized wholesale instruments and operating or outsourcing wCBDC platforms while maintaining central bank ultimate control.
- Legal clarity is essential regarding settlement finality and treatment of wCBDC tokens in cases of loss, unauthorized transfer, or good-faith acquisition.
- wCBDC tokens are designed to represent claims on central bank reserves, often linked to financial institutions' accounts in the RTGS system, creating legal complexity in synchronizing token records and central bank ledger balances to prevent double spending or issuance of unbacked tokens.

*International Monetary Fund — CENTRAL BANK DIGITAL CURRENCY: FURTHER NAVIGATING CHALLENGES AND OPPORTUNITIES*

### 40.      Given the diversity of national legal frameworks, legal responses to CBDC must be

### 40.      Given the diversity of national legal frameworks, legal responses to CBDC must be

### Legal frameworks and legislative context
- Legal responses to CBDC must be carefully tailored to align with domestic legal traditions and institutional structures; a uniform approach to legislation is not feasible.
- The legislative landscape for CBDC remains nascent worldwide, resulting in limited comparative legal analysis and judicial interpretation.
- As CBDC designs and technologies evolve, novel features may generate additional legal uncertainties and unique challenges.
- Emerging legislative initiatives, pilot implementations, and judicial decisions in certain jurisdictions offer useful reference points for formulation of legal and regulatory frameworks.

### Financial integrity considerations for rCBDC
- The design of rCBDC has important financial integrity implications; some design features may present greater risk or have more significant consequences for effective implementation of AML/CFT measures than others.
- Pure token-based models inherently present higher ML/TF risks than pure account-based models due to the lack of account management; however, proper mitigation measures can effectively manage such risks.
- Highly decentralized and permissionless systems could present higher risks due to reduced oversight.
- Highly centralized systems may be beneficial from a regulatory or law enforcement standpoint but may need to be balanced with appropriate safeguards.
- A direct, unintermediated rCBDC model8 may disrupt the current financial system by placing the central bank at the forefront of AML/CFT preventive measures.
- An indirect, intermediated model9 leverages existing infrastructure and more closely aligns with current policy and standards.

### Application of FATF standards and practical guidance
- This chapter analyzes the application of FATF standards in a rCBDC context and provides guidance on practical implementation while highlighting areas for further discussion.
- The chapter aims to guide policymakers and competent authorities on the implementation of the FATF Standards in a rCBDC setting and highlight specific aspects of the AML/CFT standards that may require further thought.
- There is currently limited information and guidance on the implementation of AML/CFT measures for rCBDC.
- AML/CFT assessor bodies have not assessed the AML/CFT regime of countries that have issued or piloted a CBDC, and it appears that no issuing jurisdiction has yet comprehensively applied the FATF standards in a rCBDC context.
- Limited information is available on the assessment and mitigation of ML/TF risks.

### Implementation challenges and risk assessment
- Implementation of AML/CFT measures pursuant to the FATF standards may present novel challenges for issuing jurisdictions; some aspects will be implemented similarly to traditional financial systems, while others may be harder to implement due to the novelty of rCBDCs.
- The notion of “account” in a rCBDC setting may raise new questions about application of the FATF standards.
- rCBDCs offer an opportunity to recalibrate some aspects of traditional financial systems and the international community may revisit the global approach to AML/CFT in some areas.
- Jurisdictions should develop a solid understanding of overall ML/TF risks at the national level and how various rCBDC design choices may affect the AML/CFT regime.
- Threats and vulnerabilities should be identified at the design stage, with a phased plan to enable data collection and analysis to advance risk understanding as the rCBDC is rolled out.
- Efforts should be ongoing, grounded in real-world data and on-the-ground experiences, with continual refinement of assessment criteria.

### AML/CFT obligations, roles, and oversight
- Actors in a CBDC ecosystem who meet the FATF’s definition of a financial institution, designated nonfinancial businesses and professions (DNFBPs), or virtual asset service provider (VASP) must be subject to AML/CFT obligations and supervision.
- Jurisdictions should understand the regulatory implications of their rCBDC models, including which intermediaries will play roles in CBDC distribution and activities.
- In some rCBDC models (such as direct, unintermediated), central banks may need to implement AML/CFT preventive measures—given the more prominent role central banks may play in executing transactions and legally holding accounts or wallets on behalf of customers—and countries will need to consider arrangements for AML/CFT oversight and align these with central bank independence.
- Even where a central bank does not assume AML/CFT obligations, the nature of its relationship with intermediaries impacts intermediation; intermediated models may see intermediaries acting as gatekeepers, but effective implementation challenges may still arise.

### Customer due diligence and “cash‑like” features
- Customer due diligence challenges may arise with certain design choices, such as those relating to "cash-like" features.
- Whether rCBDC models that allow certain types of accounts or wallets to be opened without identification by name violate the FATF’s prohibition on anonymous accounts is not entirely clear and will likely depend on specifics of the rCBDC model, including the type of information collected and whether that information could lead to identification of the customer.
- The demonstrated level of ML/TF risk will also be relevant.

### Strengthening payment systems — overview
- Two areas to help strengthen future payment systems are considered: (1) how lessons from FCS can inform rCBDC exploration to enhance payment system resilience; and (2) how central banks are exploring tokenized reserves to support innovation while preserving the role of central bank money.

### Payment ecosystem resilience in Fragile and Conflict-Affected States (FCS)
- Payment ecosystem resilience refers to the robustness of all interconnected layers that enable payments and their ability to sustain or restore operations during disruption.
- A payment ecosystem comprises five core layers: (1) users; (2) payment solutions, including emerging tools like stablecoins and rCBDCs; (3) intermediaries; (4) payment infrastructures for clearing and settlement; and (5) power and communications.
- Disruptions and risks often hit multiple layers simultaneously or cascade quickly, making comprehensive resilience measures essential.
- More than 1 billion people live in FCS today, and by 2030, these regions are expected to account for two‑thirds of the world’s extreme poor.
- Ensuring payment ecosystems can function or be rapidly restored is a critical policy priority; authorities are exploring options including stablecoins and rCBDCs.

### Lessons from FCS experiences and resilience practices
- Selected FCS experiences (Ukraine, West Bank and Gaza, Sudan, Yemen, Haiti, Tuvalu, and the Central African Economic and Monetary Community region) show there is no single model to improve resilience.
- Structural approach core practices to strengthen every layer of the payment ecosystem:
  - (1) redundancy and scalability to avoid single points of failure;
  - (2) distributed infrastructure and decentralization to provide backups and absorb demand surges;
  - (3) user‑centric accessibility and awareness to keep services usable during disruptions;
  - (4) operational and cybersecurity measures aligned with global standards;
  - (5) regulatory and legal frameworks combining strong foundations with agility in crisis.
- Specific resilience measures that have proven effective:
  - multisite operational architecture and reducing dependency on single-connectivity providers;
  - satellite networks, decentralized connectivity, cloud-based systems, and foreign infrastructure backups for distributed infrastructure;
  - continuity-focused payment design, secure digital ID, digital literacy, continued role of cash, and digital money as fallback tools to enhance user access and awareness;
  - contingency planning, coordinated incident response frameworks, pre-established crisis protocols, alternative operational arrangements, and close cooperation between regulatory bodies and payment intermediaries for operational resilience;
  - pre-crisis financial stability, regulatory flexibility, strengthened oversight, and use of foreign currencies to support short-term continuity for regulatory and legal strategies.

### rCBDC as a resilience tool in FCS
- A well-designed rCBDC could add a layer of resilience to fragile payment ecosystems, providing backup digital infrastructure and supporting emergency disbursements.
- Challenges include fragile institutions, low trust, cybersecurity risks, and evolving technology; rCBDC will strengthen resilience only if developed through deliberate planning, secure design, and close coordination across national and international partners.
- rCBDC can strengthen trust and diversify payment options in FCS as a complementary third form of central bank money; where confidence in the central bank is strong, rCBDC can offer a credible alternative to private or informal channels; where trust is weak, adoption will require clear communication, transparency, and partnerships.
- rCBDC should complement, not displace, cash and private digital money.
- rCBDC can offer a backup payment option and fill critical infrastructure gaps, providing an additional digital rail that can keep transactions flowing when private platforms fail and, in extreme cases, rebuild wholesale settlement or deliver retail payments directly when banks and payment service providers are offline.
- A direct, unintermediated rCBDC model should remain a last resort but could offer contingency for basic monetary functions when conventional payment infrastructure collapses.
- rCBDC design should consider resilience by design and clear yet flexible regulation; features include offline functionality, low‑tech payment options like Unstructured Supplementary Service Data (USSD), programmability for targeted aid transfer payments in emergencies, and DLT and cloud solutions for redundancy and fault tolerance.

### Central bank exploration of tokenized reserves
- DLT and tokenization in financial markets raise questions about the future role of central bank money; central banks supply commercial banks with central bank reserves for settlement and policy purposes and may consider making reserves available on DLT-based platforms to settle payments for tokenized assets.
- Tokenized reserves would be a direct liability of the issuing central bank and accessible to predefined institutions but would be issued on a DLT-based infrastructure.
- Central banks are exploring tokenized reserves to potentially enhance wholesale payment systems and preserve a role for central bank money if asset tokenization becomes more widespread.
- Programmability enabled by smart contracts could help automate conditional payments and complex workflows.10 Use cases include delivery-versus-payment (DvP), payment-versus-payment (PvP), and DvPvP; tokenized reserves allow for atomic settlement when money and assets are on the same ledger.11

### Implementation models, tradeoffs, and risks of tokenized reserves
- Two main ledger models:
  - (1) single ledger: tokenized reserves and tokenized assets exist on the same ledger—may offer advanced programmability and fully atomic settlement but can lead to contagion effects and financial stability risks due to tighter dependencies;
  - (2) compatible ledger: tokenized reserves exist on their own ledger interoperable with other ledgers—different tradeoffs versus single ledger.
- In either model, the central bank may operate the ledger or share responsibility with other participants.
- Tokenization could benefit monetary operations if central banks adopt coherent policies and operational safeguards; core operations like liquidity provision and interest rate steering would not change dramatically but could become more efficient through automation and programmability (e.g., smart contracts to automate open market operations and standing facilities or support 24/7 liquidity management).
- Risks include cybersecurity vulnerabilities, smart contract errors, and operational challenges; risk management frameworks will need to evolve.
- Coexistence of tokenized reserves with traditional reserves could lead to liquidity fragmentation; mitigation includes coordinated liquidity monitoring, improved liquidity forecasting, and interoperability between types of reserves.

### Alternative solutions to tokenized reserves
- Central banks should consider alternative solutions before adopting tokenized reserves:
  - Simpler RTGS links or “trigger solutions” to coordinate tokenized asset delivery on DLT with payments in traditional central bank reserves on RTGS;
  - Intermediaries with access to central bank reserves through omnibus accounts providing settlement services with their own liabilities fully backed by central bank reserves;
  - Privately-issued tokenized money for settlement (carries higher credit risk).
- RTGS links, omnibus accounts, privately-issued tokenized money, and tokenized reserves all support DvP settlement but vary in credit and liquidity risks; not all support advanced programmability or atomic settlement.
- Chosen solutions will depend on priorities, resources, legal and regulatory frameworks, and policy goals and could co-exist.
- Central banks should assess tokenized reserves with a balanced view of benefits and risks; strategic approaches and policy solutions will likely vary across jurisdictions.

*CENTRAL BANK DIGITAL CURRENCY: FURTHER NAVIGATING CHALLENGES AND OPPORTUNITIES — INTERNATIONAL MONETARY FUND*

### CONCLUSION AND NEXT STEPS

### CONCLUSION AND NEXT STEPS

### Summary of purpose and covered topics
- Paragraph 67: This paper informs the Executive Board about emerging issues related to CBDC.
- Paragraph 67: The six Handbook chapter topics covered in this paper are: financial stability, payments competition, legal considerations, financial integrity, payment resilience in FCS, and tokenized central bank reserves.
- Paragraph 67: These topics are based on extensive deliberations by IMF staff and their interactions with central banks of the IMF membership.

### Planned future publications and focus
- Paragraph 68: A fourth wave of Handbook chapters will be published in 2026.
- Paragraph 68: Forthcoming topics are expected to focus on "tokenized reserves and financial assets, the interaction with privately-issued money, and cross-border payments."

### Annex I — Table of Contents of the CBDC Virtual Handbook (year published and chapters marked as published)
- The Annex lists chapters across 2023, 2024, and 2025 and indicates chapters with a checkmark (✓) as published in those years. Chapters marked with ✓ include:
  - Chapter 1. Digital Money: Positioning CBDC ✓
  - Chapter 3. Elements of Thinking Through CBDC ✓
  - Chapter 4. A Central Bank Strategy for Tokenized Reserves Evaluation ✓
  - Chapter 5. Selected Legal Considerations for CBDCs ✓
  - Chapter 6. Cyber Resilience of the CBDC Ecosystem ✓
  - Chapter 10. CBDC Adoption Strategies for Intermediaries and Users ✓
  - Chapter 11. Financial Integrity Considerations ✓
  - Chapter 12. Data Use and Privacy Protection ✓
  - Chapter 13. Capital Flow Management Measures ✓
  - Chapter 14. Payment Resilience in Fragile and Conflict-Affected States: Lessons for CBDC ✓
  - Chapter 15. Project Management: 5P Framework ✓
  - Chapter 17. CBDC’s Role in Promoting Financial Inclusion ✓
  - Chapter 18. Evaluating the Impact on Monetary Policy Transmission ✓
  - Chapter 19. Evaluating the Implications of CBDC for Financial Stability ✓
  - Chapter 20. Retail CBDC for Cross-Border Payments ✓
  - Chapter 21. The Impact of CBDC on Payments Competition ✓
  - Chapter 22. Implications of Central Bank Digital Currencies for Monetary Operations ✓
- Note in Annex: "1 Scheduled for publication in November 2025. Future topics will be chosen on the basis of country needs."

### Key next steps and implications
- Continue publication of Handbook chapters (fourth wave in 2026).
- Prioritize forthcoming analysis on:
  - "tokenized reserves and financial assets"
  - "the interaction with privately-issued money"
  - "cross-border payments"
- Maintain engagement with IMF member central banks to refine topics based on country needs.

*IMF — CONCLUSION AND NEXT STEPS (from ppea2025041)*

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_Source: https://www.imf.org/-/media/files/publications/pp/2025/english/ppea2025041.pdf_