## Central Bank Digital Currency Development Enters the Next Phase _IMF Blog, November 20, 2023_ ## Source details **Canonical URL:** [Central Bank Digital Currency Development Enters the Next Phase](https://www.imf.org/en/blogs/articles/2023/11/20/central-bank-digital-currency-development-enters-the-next-phase) ## Other formats - [Markdown version](/en/blogs/articles/2023/11/20/central-bank-digital-currency-development-enters-the-next-phase/index.md) - [Structured JSON version](/en/blogs/articles/2023/11/20/central-bank-digital-currency-development-enters-the-next-phase/index.json) - [Bundle manifest](/en/blogs/articles/2023/11/20/central-bank-digital-currency-development-enters-the-next-phase/bundle-manifest.json) ## Bibliographic details - Authors: Tobias Adrian, Dong He, Tommaso Mancini-Griffoli, Tao Sun - Published: November 20, 2023 --- ### Overview - Title: Central Bank Digital Currency Development Enters the Next Phase - Authors: Tobias Adrian, Dong He, Tommaso Mancini-Griffoli, Tao Sun - Date: November 20, 2023 - Core point: Central bank digital currencies (CBDCs) can improve payment systems and financial inclusion if appropriately designed; poorly designed CBDCs could pose risks. - Strategic recommendation: In most cases, it would be useful for countries to continue exploring CBDC carefully and systematically. ### Current adoption and status - Countries that have introduced CBDCs: The Bahamas, Jamaica, and Nigeria. - Exploration stage: More than 100 countries are in the exploration stage. - Leading central banks mentioned: Brazil, China, the euro area, India, and the United Kingdom. ### IMF resources and knowledge-sharing - IMF initiative: Launched a virtual CBDC Virtual Handbook to collect and share knowledge with policymakers and to serve as a basis for the IMF’s engagement with country authorities. - Handbook approach: Intended as a living document to be updated and expanded as the IMF’s body of knowledge and analysis grows and as new lessons and insights emerge from countries. - Published chapters so far cover process and policy topics (summaries below). ### Summaries of published chapters - How Should Central Banks Explore Central Bank Digital Currency? - Central banks will take different paths depending on the degree of digitalization of the economy, the legal and regulatory frameworks, and the central bank’s capacity. - Proposes a dynamic decision-making process in which central banks can proceed despite uncertainty, and adjust the pace, scale, and scope of their initiatives in response to changes in domestic and international conditions. - A Guide to Central Bank Digital Currency Product Development. - Provides a step-by-step guide to address complex requirements and risks associated with CBDCs. - Introduces the 5P methodology: preparation, proof-of-concept, prototypes, pilots, and production. - Implications of Central Bank Digital Currencies for Monetary Policy Transmission. - Analyzes how CBDCs would likely affect monetary policy. - Summarizes: In general, policy transmission is not expected to be affected much under normal circumstances, but the effects can be more significant in an environment with low interest rates or financial market stress. - Implementing capital flow management measures with CBDC. - Explains how CBDCs could be designed to facilitate cross-border payments while still managing capital flows. - Notes that programmable payment infrastructure could allow some capital-flow management measures to be implemented more efficiently and effectively with a CBDC compared to the traditional approach. - Central Bank Digital Currency's Role in Promoting Financial Inclusion. - Positions CBDCs as a risk-free and widely acceptable form of digital money with potentially lower costs and greater accessibility. - If properly designed to replicate some properties of cash, CBDCs could gain acceptance as a payment mechanism for financially excluded populations and be an entry point to the broader formal financial system. ### Risks, policy considerations, and analytical priorities - Design trade-offs: Benefits are more likely to come in time, depending on policies pursued by countries, the private sector’s response, and the evolution of technology. - Monetary policy: Monitor effects on policy transmission, especially under low interest rates or financial market stress. - Capital flows and cross-border payments: Explore CBDC design options that facilitate cross-border payments while enabling capital-flow management measures; leverage programmability of payment infrastructure. - Financial inclusion: Design CBDCs to replicate key properties of cash to increase acceptance among financially excluded populations. - Other assessment areas to continue: financial stability, cybersecurity, and cross-border payments. ### IMF engagement and collaboration outlook - Future work: IMF will keep assessing potential effects of CBDCs across multiple areas and build on the first five chapters with new publications planned for next year. - Collaboration: IMF will continue collaboration with other global bodies, including the Group of Twenty and the Bank for International Settlements. - Ongoing assistance: The IMF will continue assisting countries exploring CBDCs. *Source: Central Bank Digital Currency Development Enters the Next Phase — Tobias Adrian, Dong He, Tommaso Mancini-Griffoli, Tao Sun; November 20, 2023* --- ## References - [speech](https://www.imf.org/en/News/Articles/2023/11/15/sp-111423-the-digital-finance-voyage-a-case-for-public-sector-involvement) - [CBDC Virtual Handbook](https://www.imf.org/en/Topics/fintech/central-bank-digital-currency/virtual-handbook) - [How Should Central Banks Explore Central Bank Digital Currency?](https://www.imf.org/en/Publications/fintech-notes/Issues/2023/09/08/How-Should-Central-Banks-Explore-Central-Bank-Digital-Currency-538504) - [A Guide to Central Bank Digital Currency Product Development](https://www.imf.org/en/Publications/fintech-notes/Issues/2023/09/08/A-Guide-to-Central-Bank-Digital-Currency-Product-Development-538496) - [Implications of Central Bank Digital Currencies for Monetary Policy Transmission](https://www.imf.org/en/Publications/fintech-notes/Issues/2023/09/15/Implications-of-Central-Bank-Digital-Currencies-for-Monetary-Policy-Transmission-538517) - [Implementing capital flow management measures with CBDC](https://www.imf.org/en/Publications/fintech-notes/Issues/2023/09/15/Capital-Flow-Management-Measures-in-the-Digital-Age-2-Design-Choices-for-Central-Bank-538509) - [Central Bank Digital Currency's Role in Promoting Financial Inclusion](https://www.imf.org/en/Publications/fintech-notes/Issues/2023/09/22/Central-Bank-Digital-Currency-s-Role-in-Promoting-Financial-Inclusion-538728) _Source: https://www.imf.org/en/blogs/articles/2023/11/20/central-bank-digital-currency-development-enters-the-next-phase_