{
  "title": "Central Bank Independence and the Development of Payments and CBDCs",
  "publication": "IMF News, January 10, 2023",
  "sourceUrl": "https://www.imf.org/en/news/articles/2023/01/10/sp-central-bank-independence-development-payments-and-cbdc",
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  "summary": "Independence has long been a cornerstone of central banking. This is particularly true for the monetary policy function, which is firmly entrenched in central banks’ legislative mandates and practices.",
  "publishDate": "2023-01-10",
  "sections": [
    {
      "heading": "Overview",
      "content": "- Title: Central Bank Independence and the Development of Payments and CBDCs\n- Event: International Symposium on Central Bank Independence, Stockholm\n- Speaker: Tobias Adrian, IMF Financial Counsellor and Director of the Monetary and Capital Markets Department\n- Date: January 10, 2023\n- Key premise: Independence is a cornerstone of central banking, particularly for the monetary policy function, and must be preserved as central banks’ mandates expand to include payments and CBDCs."
    },
    {
      "heading": "Evidence on independence and monetary policy",
      "content": "- Numerous studies validate the critical importance of independence for monetary policies aimed at low and stable inflation.\n- IMF’s Central Bank Legislation Database shows most countries’ central bank laws contain “anchors” to safeguard central bank independence.\n- Rationale: Insulating monetary policy from political interference helps avoid long-term risks to economic and financial stability and prevents short-term political gains from producing long-term pain such as higher inflation."
    },
    {
      "heading": "Independence in the era of CBDCs",
      "content": "- Independence extends beyond monetary policy:\n  - Basel Core Principles enshrine operational independence for the banking supervisor.\n  - Principles for Financial Market Infrastructures encompass independence for payment systems and other financial market infrastructures.\n- CBDC implications:\n  - Operation of CBDCs—wholesale or retail—should in no case undermine independence.\n  - Central banks must clearly communicate CBDC functions and interactions with monetary, payments, financial stability, and financial integrity policies; communications may evolve over time.\n  - Additional safeguards for independence might be required depending on CBDC design and intended uses; amendments to existing legislation or new legislation may be needed.\n  - Transparent and accountable arrangements are key.\n  - The IMF’s Central Bank Transparency Code provides guidance through principles and best practices across central banking functions and promotes transparency to shape accountability and stakeholder dialogue."
    },
    {
      "heading": "Challenges in CBDC exploration",
      "content": "- No firmly established principles exist yet for deciding whether to issue CBDCs or how to design them.\n- Technological uncertainty questions include:\n  - Which technology is best suited for CBDC?\n  - Should centralized or decentralized technologies be used?\n  - How should data be managed?\n  - What are the macro-financial implications of cross-border CBDC use?\n  - How to manage cyber security and other risks related to CBDC?\n- Emerging consensus areas:\n  - “Tiered wallets” and “managed anonymity” designs: small-value transactions similar to cash; larger-value transactions require fuller identity information.\n  - Two-tier operational model: private firms (e.g., commercial banks) act as intermediaries between central banks and end users.\n- Operational and adoption concerns:\n  - Ensuring sustainable business models for intermediaries (cost recovery, merchant adoption).\n  - Designing incentives for intermediaries to secure sufficient CBDC adoption and promote policy goals such as financial inclusion.\n- Policy design principle: No “one size fits all”; countries need flexibility to design CBDCs to meet particular policy objectives while learning from global experience to minimize repeated mistakes."
    },
    {
      "heading": "Role of the IMF",
      "content": "- IMF functions:\n  - Facilitate information-sharing and capacity development on CBDCs to ensure member countries can access knowledge and build institutional capacity.\n  - Integrate developments around digital money into regular surveillance: Article IV and FSAP missions consider potential effects from digital money.\n  - Step up capacity development activities on digital money; work with authorities on risk mitigation and sound design principles.\n  - Help ensure domestic CBDC decisions serve as a sound foundation for a stable global payments system.\n- Multilateral cooperation:\n  - IMF coordinates and cooperates with the World Bank, the Bank for International Settlements, the Financial Stability Board, and domestic authorities to achieve better outcomes."
    },
    {
      "heading": "Key takeaways and policy recommendations",
      "content": "- Preserve central bank independence across all functions, including new payments and CBDC roles.\n- Communicate clearly and transparently about CBDC objectives, functions, and interactions with monetary, payments, financial stability, and financial integrity policies.\n- Consider legal and institutional safeguards—amend existing legislation or introduce new legislation where necessary—to protect independence given CBDC design choices.\n- Favor transparent and accountable arrangements, leveraging guidance such as the IMF’s Central Bank Transparency Code.\n- Encourage international information-sharing and capacity development to:\n  - Learn from other countries’ experiences;\n  - Minimize the risk of repeating costly mistakes;\n  - Support policy objectives like financial inclusion while managing macro-financial and cyber risks.\n- Allow significant policy space for country-specific CBDC designs rather than advocating a universal template.\n\nInternational Monetary Fund — Central Bank Independence and the Development of Payments and CBDCs (Tobias Adrian, January 10, 2023).\n\n---\n\n\n References\n\n- Tobias Adrian\n- Speeches\n- PRESS CENTER\n- IMF’s Central Bank Legislation Database\n- Central Bank Transparency Code\n- effectively manage risks\n- https://www.imf.org/en/home\n\nSource: https://www.imf.org/en/news/articles/2023/01/10/sp-central-bank-independence-development-payments-and-cbdc"
    }
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    "Published: January 10, 2023",
    "Title: Central Bank Independence and the Development of Payments and CBDCs",
    "Event: International Symposium on Central Bank Independence, Stockholm",
    "Speaker: Tobias Adrian, IMF Financial Counsellor and Director of the Monetary and Capital Markets Department",
    "Date: January 10, 2023",
    "Key premise: Independence is a cornerstone of central banking, particularly for the monetary policy function, and must be preserved as central banks’ mandates expand to include payments and CBDCs.",
    "Numerous studies validate the critical importance of independence for monetary policies aimed at low and stable inflation.",
    "IMF’s Central Bank Legislation Database shows most countries’ central bank laws contain “anchors” to safeguard central bank independence.",
    "Rationale: Insulating monetary policy from political interference helps avoid long-term risks to economic and financial stability and prevents short-term political gains from producing long-term pain such as higher inflation.",
    "Independence extends beyond monetary policy:",
    "CBDC implications:",
    "No firmly established principles exist yet for deciding whether to issue CBDCs or how to design them.",
    "Technological uncertainty questions include:",
    "Emerging consensus areas:",
    "Operational and adoption concerns:",
    "Policy design principle: No “one size fits all”; countries need flexibility to design CBDCs to meet particular policy objectives while learning from global experience to minimize repeated mistakes.",
    "IMF functions:",
    "Multilateral cooperation:",
    "Preserve central bank independence across all functions, including new payments and CBDC roles.",
    "Communicate clearly and transparently about CBDC objectives, functions, and interactions with monetary, payments, financial stability, and financial integrity policies.",
    "Consider legal and institutional safeguards—amend existing legislation or introduce new legislation where necessary—to protect independence given CBDC design choices.",
    "Favor transparent and accountable arrangements, leveraging guidance such as the IMF’s Central Bank Transparency Code.",
    "Encourage international information-sharing and capacity development to:",
    "Allow significant policy space for country-specific CBDC designs rather than advocating a universal template.",
    "[Tobias Adrian](http://www.imf.org/external/np/bio/eng/ta.htm)",
    "[Speeches](https://www.imf.org/en/news/searchnews)",
    "[PRESS CENTER](http://presscenter.imf.org/)",
    "[IMF’s Central Bank Legislation Database](https://legacydata.imf.org/?sk=cb79523e-b2f8-4b4f-b304-0ab16198872f)",
    "[Central Bank Transparency Code](https://www.imf.org/external/datamapper/CBT/)",
    "[effectively manage risks](https://www.imf.org/en/Publications/WP/Issues/2021/04/23/Central-Bank-Risk-Management-Fintech-and-Cybersecurity-50278)",
    "[https://www.imf.org/en/home](https://www.imf.org/en/home)"
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