Digital Money, Cross-Border Payments, International Reserves, and the Global Financial Safety Net: Preliminary Considerations
IMF Notes, January 4, 2024
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- Digital Money, Cross-Border Payments, International Reserves, and the Global Financial Safety Net: Preliminary Considerations
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Bibliographic details
- Authors: Seunghwan Kim, Alex Miksjuk, Narayan Suryakumar, Anita Tuladhar, Delia Velculescu, Yiqun Wu, Jimena Zuniga, Nick Hallmark
- Published: January 4, 2024
- Series: IMF Notes
- DOI: https://doi.org/10.5089/9798400253478.068
Executive overview
- Rapid advent of digital money (DM) and assets raises questions about implications for the functioning of the international monetary system (IMS).
- Digital technologies feature low transaction costs, accessibility, ease of automation, and integration into existing digital services.
- These features may bring opportunities in the form of higher financial interconnectedness and inclusion but may also add to risks.
- The paper explores implications of DM for the IMS from the perspective of:
- cross-border payments,
- international reserves and the supply of global safe assets,
- the global financial safety net (GFSN).
Empirical analyses and modeling
- Presents empirical analyses of:
- the effect of payment efficiency on international currency adoption for payment/transaction purposes, and
- the effect of payment efficiency on reserve currency holdings.
- Includes an illustrative modeling scenario of a DM-induced shock for the potential demand for global financial safety net resources.
Key themes and considerations
- Cross-border payments:
- Focus on how DM and payment efficiency may affect international currency adoption for payment/transaction purposes.
- International reserves and global safe assets:
- Examination of implications for reserve currency holdings and the supply of global safe assets.
- Global financial safety net:
- Analysis includes an illustrative DM-induced shock scenario to assess potential demand for GFSN resources.
- Opportunities and risks:
- Opportunities: higher financial interconnectedness and inclusion driven by DM features.
- Risks: new vulnerabilities stemming from digital technologies and their integration into the IMS.
Content in this bundle
- insea2024001 — Executive Summary