Central Bank Exploration of Wholesale CBDC (IMF)
The IMF published a Fintech Note that examines how central banks are exploring the use of wholesale central bank digital currency (CBDC) to modernize wholesale payment and settlement systems. The note critically analyzes the trade-offs inherent in various implementation architectures, noting that while “common ledger” models (where wholesale CBDC and tokenized assets are issued and exchanged on the same ledger) can facilitate atomic settlement and programmability, they introduce contagion risks and governance challenges. The note also warns that the coexistence of wholesale CBDC and traditional reserves could drive liquidity fragmentation and complicate monetary policy operations, suggesting that central banks rigorously evaluate whether these risks outweigh the utility of alternative solutions. One alternative, RTGS links, uses technical bridges or synchronization operators to coordinate the settlement of tokenized asset transactions with payment on existing central bank real-time gross settlement (RTGS) systems. The note also discusses private-sector common ledger solutions that use as payment instruments privately-issued tokenized money like stablecoins and tokenized deposits, including stablecoins backed by central bank money (e.g., Bank of England “omnibus” accounts). [Source: IMF]
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I produce a monthly digest of digital fiat currency (DFC) developments exclusively for the official sector (e.g., central banks, ministries of finance and international financial institution (e.g., the BIS, IMF, OECD, World Bank)) plus academics and firms that are active in the DFC space (commercial banks, technology providers, consultants, etc.). (DFCs include central bank digital currency (CBDC), stablecoins and tokenized deposits.) It goes out via email on the first business day of every month, and if you’re interested in being on the mailing list, please email me at john@kiffmeister.com.
