## Privacy Provision, Payment Latency, and Role of Collateral

_IMF Working Papers, July 31, 2020_

## Source details

**Canonical URL:** [Privacy Provision, Payment Latency, and Role of Collateral](https://www.imf.org/en/publications/wp/issues/2020/07/31/privacy-provision-payment-latency-and-role-of-collateral-49613)

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## Bibliographic details
- Authors: Charles M. Kahn, Caitlin Long, Manmohan Singh
- Published: July 31, 2020
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781513551944.001

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### Summary
- The paper examines shifts in the boundary between publicly and privately provided payments systems and the evolving role of collateral.
- Recent technological developments make it feasible to contemplate abolishing physical cash and replacing it with electronic alternatives such as digital tokens.
- Focus areas:
  - Privacy provision: increased awareness of and concern with privacy problems in payments systems.
  - Payment latency: how fintech developments are likely to reduce counterparty and interest rate risk for corporate treasurers.
- The paper ties privacy provision and payment latency through the lens of collateral, emphasizing the analogy of collateral reuse and digital tokens.

### Key findings and concepts
- Digital tokens present a feasible electronic alternative to physical cash.
- Privacy provision in payments systems raises heightened awareness and concern about privacy issues.
- Reduced payment latency in the fintech environment can lower counterparty risk and interest rate risk faced by corporate treasurers.
- Collateral plays a central role in linking privacy provision and payment latency, with an important analogy between collateral reuse and digital tokens.

### Policy implications and considerations
- Policymakers and markets should consider implications of replacing physical cash with electronic alternatives for privacy and collateral management.
- Design choices for payments systems and digital tokens need to account explicitly for:
  - Privacy provision and related user concerns.
  - Effects on payment latency and consequent counterparty and interest rate risk.
  - Operational and regulatory aspects of collateral reuse in a tokenized environment.

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_Source: https://www.imf.org/en/publications/wp/issues/2020/07/31/privacy-provision-payment-latency-and-role-of-collateral-49613_