Programmability in Payment and Settlement

IMF Working Papers, August 16, 2024

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Programmability in payment and settlement has yet to realize its potential to support policy goals such as efficiency, safety, and innovation.
The paper proposes a comprehensive framework for understanding and evaluating programmability.
It bridges policy discussions with technical considerations by describing programmatic models to inform and guide the development of digital finance.

External programmatic access: the ability for external participants to access the system data and functions with code.
Internal programmatic capabilities: the extent to which internal execution of programs is supported and guaranteed.
Strategies are developed based on these dimensions to guide system design and policy choices.

By developing strategies based on the two dimensions, financial institutions, regulators, and related actors can:
- improve resilience
- reduce costs
- improve interoperability
- manage associated risks

The resulting hybrid systems are coordinated efforts balancing:
- advantages of permissionless blockchains, such as composability
- regulatory requirements
- a wider range of technologies
The paper describes these programmatic models to inform and guide the development of digital finance.

Develop strategies grounded in the two key dimensions (external programmatic access; internal programmatic capabilities).
Enable financial institutions, regulators, and related actors to use those strategies to:
- enhance resilience
- lower costs
- increase interoperability
- manage risks associated with programmability
Pursue hybrid system designs that balance composability benefits from permissionless blockchains with regulatory requirements and technological diversity.