This book provides a thorough introduction and historical overview of the principles and practices of digital currency and fintech in Asia. It covers the theory of central bank digital currency and examines regulatory aspects, economic digitalization, financial inclusion, and the role of SMEs. Selected case studies offer in-depth insights into recent fintech developments in major economies, including Australia; Hong Kong, China; Indonesia; Japan; the People's Republic of China; the Republic of Korea; and Thailand. The book also makes a valuable supplement for introductory courses on finance, governance, and economics, as it appeals to a broad range of readers, including university students, academics, finance practitioners, and policy makers.
We study the optimal design of a central bank digital currency (CBDC) in an environment where agents sort into cash, CBDC and bank deposits according to their preferences over anonymity and security; and where network effects make the convenience of payment instruments dependent on the number of their users. CBDC can be designed with attributes similar to cash or deposits, and can be interest-bearing: a CBDC that closely competes with deposits depresses bank credit and output, while a cash-like CBDC may lead to the disappearance of cash. Then, the optimal CBDC design trades off bank intermediation against the social value of maintaining diverse payment instruments. When network effects matter, an interest-bearing CBDC alleviates the central bank's tradeoff.
This paper marks the launch of a new IMF series, Fintech Notes. Building on years of IMF staff work, it will explore pressing topics in the digital economy and be issued periodically. The series will carry work by IMF staff and will seek to provide insight into the intersection of technology and the global economy. The Rise of Digital Money analyses how technology companies are stepping up competition to large banks and credit card companies. Digital forms of money are increasingly in the wallets of consumers as well as in the minds of policymakers. Cash and bank deposits are battling with so-called e-money, electronically stored monetary value denominated in, and pegged to, a currency like the euro or the dollar. This paper identifies the benefits and risks and highlights regulatory issues that are likely to emerge with a broader adoption of stablecoins. The paper also highlights the risks associated with e-money: potential creation of new monopolies; threats to weaker currencies; concerns about consumer protection and financial stability; and the risk of fostering illegal activities, among others.
Following the companion paper on the new policy challenges related to the adoption of digital forms of money, this paper presents an operational strategy for the IMF to continue delivering on its mandate of ensuring domestic and international financial and economic stability. The paper begins by summarizing the forces driving the adoption of digital forms of money, and the new policy questions that emerge. It then focusses on how the IMF’s core activities and output will need to evolve, including surveillance, capacity development, and analytical foundations. It ends by discusses how the IMF intends to partner with other organization, and to grow and structure internal resources to fulfill this vision.
A cutting-edge look at how accelerating financial change, from the end of cash to the rise of cryptocurrencies, will transform economies for better and worse. We think weÕve seen financial innovation. We bank from laptops and buy coffee with the wave of a phone. But these are minor miracles compared with the dizzying experiments now underway around the globe, as businesses and governments alike embrace the possibilities of new financial technologies. As Eswar Prasad explains, the world of finance is at the threshold of major disruption that will affect corporations, bankers, states, and indeed all of us. The transformation of money will fundamentally rewrite how ordinary people live. Above all, Prasad foresees the end of physical cash. The driving force wonÕt be phones or credit cards but rather central banks, spurred by the emergence of cryptocurrencies to develop their own, more stable digital currencies. Meanwhile, cryptocurrencies themselves will evolve unpredictably as global corporations like Facebook and Amazon join the game. The changes will be accompanied by snowballing innovations that are reshaping finance and have already begun to revolutionize how we invest, trade, insure, and manage risk. Prasad shows how these and other changes will redefine the very concept of money, unbundling its traditional functions as a unit of account, medium of exchange, and store of value. The promise lies in greater efficiency and flexibility, increased sensitivity to the needs of diverse consumers, and improved market access for the unbanked. The risk is instability, lack of accountability, and erosion of privacy. A lucid, visionary work, The Future of Money shows how to maximize the best and guard against the worst of what is to come.
Technology is changing the landscape of the financial sector, increasing access to financial services in profound ways. These changes have been in motion for several years, affecting nearly all countries in the world. During the COVID-19 pandemic, technology has created new opportunities for digital financial services to accelerate and enhance financial inclusion, amid social distancing and containment measures. At the same time, the risks emerging prior to COVID-19, as digital financial services developed, are becoming even more relevant.
Handbook of Blockchain, Digital Finance, and Inclusion, Volume 1: Cryptocurrency, FinTech, InsurTech, and Regulation explores recent advances in digital banking and cryptocurrency, emphasizing mobile technology and evolving uses of cryptocurrencies as financial assets. Contributors go beyond summaries of standard models to describe new banking business models that will be sustainable and will likely dictate the future of finance. The volume not only emphasizes the financial opportunities made possible by digital banking, such as financial inclusion and impact investing, but it also looks at engineering theories and developments that encourage innovation. Its ability to illuminate present potential and future possibilities make it a unique contribution to the literature. - Explores recent advances in digital banking and cryptocurrency, emphasizing mobile technology and evolving uses of cryptocurrencies as financial assets - Explains the practical consequences of both technologies and economics to readers who want to learn about subjects related to their specialties - Encompasses alternative finance, financial inclusion, impact investing, decentralized consensus ledger and applied cryptography - Provides the only advanced methodical summary of these subjects available today
Digitalization is reshaping economic activity, shrinking the role of cash, and spurring new digital forms of money. Central banks have been pondering wheter and how to adapt. One possibility is central bank digital currency (CBDC)-- a widely accessible digital form of fiat money that could be legal tender. This discussion note proposes a conceptual framework to assess the case for CBDC adoption from the perspective of users and central banks. It discusses possible CBDC designs, and explores potential benefits and costs, with a focus on the impact on monetary policy, financial stability, and integrity. This note also surveys research and pilot studies on CBDC by central banks around the world.
Handbook of Blockchain, Digital Finance, and Inclusion, Volume 2: ChinaTech, Mobile Security, and Distributed Ledger emphasizes technological developments that introduce the future of finance. Descriptions of recent innovations lay the foundations for explorations of feasible solutions for banks and startups to grow. The combination of studies on blockchain technologies and applications, regional financial inclusion movements, advances in Chinese finance, and security issues delivers a grand perspective on both changing industries and lifestyles. Written for students and practitioners, it helps lead the way to future possibilities. - Explains the practical consequences of both technologies and economics to readers who want to learn about subjects related to their specialties - Encompasses alternative finance, financial inclusion, impact investing, decentralized consensus ledger and applied cryptography - Provides the only advanced methodical summary of these subjects available today
Collection of papers and presentation slides on the subject of digital (crypto)currencies Article contributors are experts with much seniority and experience in their respective fields, and who hail from established and prestigious research institutions Examines the emerging field of private digital currencies from the perspective of economic research and theories.
