Senior officials at the International Monetary Fund (IMF) on Monday called for strengthening international cooperation to improve cross-border payments as many central banks are exploring the issuance of digital currencies.
"Changes to cross-border payments have a bearing on the stability of the international monetary system, on financial inclusion, and on the efficiency of trade and financial markets," Tobias Adrian, financial counselor and director of the IMF's Monetary and Capital Markets Department, and Kristalina Georgieva, managing director of the IMF, wrote in a blog post on the IMF's website.
"And reforms may unlock innovation and much needed growth, particularly following the COVID-19 crisis. But a leap forward will only be possible if the world works together," they wrote, adding countries need cooperation in four broad areas to ensure that improvements to cross-border payments are "effective, sustainable, safe, and equitable."
First, solutions to cross-border payments must be designed and pursued "with all countries in mind," as countries differ considerably in implementation capacity, existing infrastructure and financial sector development, they noted.
Second, cooperation is essential to overcome countries' "inaction bias" and ensure solutions are widely applicable, according to the two IMF officials.
Third, the IMF officials noted that cooperation is critical to build solutions that benefit from the experience and perspective of all relevant actors, such as central banks, regulators, data protection agencies and international organizations.
Lastly, cooperation means recognizing the macro-financial effects that one country's policies can have on others, they said, adding the use of digital money could raise significant risks to financial integrity.
The blog post came as the IMF on Monday published a staff paper on the macro-financial implications of new forms of digital money available across borders, including central bank digital currencies and the so-called global stablecoins proposed by large technological companies or platforms.
"Digital money adoption across borders also entails risks and policy challenges," the paper noted, adding it could "raise pressures for currency substitution and worsen vulnerabilities from currency mismatches."
"They could reduce the ability of local authorities to run monetary policy. Without appropriate safeguards, they could facilitate illicit flows and make it harder for regulatory authorities to enforce exchange restrictions and capital flow management measures," the paper said.