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Parma Bains

, efficient, and instrumental in creating an honest network. This, in turn, limits risks to market integrity. The concept of open competition forms an important element of the BFA; therefore, consensus mechanisms should seek to be collaborative, egalitarian, interoperable, and inclusive. Consensus mechanisms must not favor certain members over others; DLT networks should be open to as many participants as possible while ensuring these participants are “known,” to protect financial integrity (through customer due diligence). Such consensus mechanisms should not create

José Garrido, Ms. Yan Liu, Joseph Sommer, and Juan Sebastián Viancha
This note explores the interactions between new technologies with key areas of commercial law and potential legal changes to respond to new developments in technology and businesses. Inspired by the Bali Fintech Agenda, this note argues that country authorities need to closely examine the adequacy of their legal frameworks to accommodate the use of new technologies and implement necessary legal reform so as to reap the benefits of fintech while mitigating risks. Given the cross-border nature of new technologies, international cooperation among all relevant stakeholders is critical. The note is structured as follows: Section II describes the relations between technology, business, and law, Section III discusses the nature and functions of commercial law; Section IV provides a brief overview of developments in fintech; Section V examines the interaction between technology and commercial law; and Section VI concludes with a preliminary agenda for legal reform to accommodate the use of new technologies.
José Garrido, Ms. Yan Liu, Joseph Sommer, and Juan Sebastián Viancha

covered by commercial law. This note focuses on the technological developments that are most impactful on business activities, such as DLT, automated contracting, smart contracts, and tokens. A. Distributed Ledger Technology DLT, often confused or associated with “blockchain,” is essentially a database (see Box 2 ). 5 In general terms, a DLT network is a means used to maintain and share digital records instantaneously across a network of participants through nodes. Regardless of whether the network is intended to serve an existing platform or network or is

Mr. Ghiath Shabsigh, Mr. Tanai Khiaonarong, and Mr. Harry Leinonen

international monetary system are discussed. The note aims to provide a balanced view with considerations for practical implementation and probable long-term applications and benefits for payment system developments. Distributed Ledger Technology DLT enables entities to carry out transactions in payment and settlement systems without necessarily relying on a central authority to maintain a single ledger. 2 DLT networks could be open or closed (per-missioned) depending on their participation policies. Various DLT protocols have been used so far in experiments in

Mr. Ghiath Shabsigh, Mr. Tanai Khiaonarong, and Mr. Harry Leinonen
Major transformations in payment and settlements have occurred in generations. The first generation was paper-based. Delivery times for payment instruments took several days domestically and weeks internationally. The second generation involved computerization with batch processing. Links between payment systems were made through manual or file-based interfaces. The change-over period between technologies was long and still some paper-based instruments like checks and cash remain in use. The third generation, which has been emerging, involves electronic and mobile payment schemes that enable integrated, immediate, and end-to-end payment and settlement transfers. For example, real-time gross settlement systems have been available in almost all countries. DLT has been viewed as a potential platform for the next generation of payment systems, enhancing the integration and the reconciliation of settlement accounts and their ledgers. So far, experiments with DLT experimentations point to the potential for financial infrastructures to move towards real-time settlement, flatter structures, continuous operations, and global reach. Testing in large-value payments and securities settlement systems have partly demonstrated the technical feasibility of DLT for this new environment. The projects examined analyzed issues associated with operational capacity, resiliency, liquidity savings, settlement finality, and privacy. DLT-based solutions can also facilitate delivery versus payment of securities, payment versus payment of foreign exchange transactions, and efficient cross-border payments.
José Garrido, Ms. Yan Liu, Joseph Sommer, and Juan Sebastián Viancha

, cryptocurrencies are tokens that do not provide any right to the holder, but users may agree to exchange goods or services against them on a voluntary basis and may be necessary for the DLT network to operate, as they are used as an “internal unit of value” that compensates users for their contributions. On cryptocurrencies, see He and others 2016 and Adrian and Mancini Griffoli 2019 . On the broader category of crypto assets, see Cuervo and others 2019 . In addition, other examples such as stablecoins and Central Bank Digital Currency will not be addressed in this note

Mr. Itai Agur, Jose Deodoro, Xavier Lavayssière, Soledad Martinez Peria, Mr. Damiano Sandri, Hervé Tourpe, and Mr. German Villegas Bauer

technologies (DLTs). This paper examines the implications for energy consumption from different forms of crypto assets based on their distinct design elements. It investigates how the takeaways from this evaluation can inform the design of environmentally friendly central bank digital currencies (CBDCs). The energy consumption of crypto assets can vary greatly depending on two design elements of the supporting DLT network . The first element is the consensus mechanism used to achieve agreement about the present state of the network. Resulting energy needs range from very

Mr. Itai Agur, Jose Deodoro, Xavier Lavayssière, Soledad Martinez Peria, Mr. Damiano Sandri, Hervé Tourpe, and Mr. German Villegas Bauer
Whether in crypto assets or in CBDCs, design choices can make an important difference to the energy consumption of digital currencies. This paper establishes the main components and technological options that determine the energy profile of digital currencies. It draws on academic and industry estimates to compare digital currencies to each other and to existing payment systems and derives implications for the design of environmentally friendly CBDCs. For distributed ledger technologies, the key factors affecting energy consumption are the ability to control participation and the consensus algorithm. While crypto assets like Bitcoin are wasteful in terms of resources, other designs could be more energy efficient than existing payment systems.
Nadine Schwarz, Ke Chen, and Maksym Markevych

Report to the G20 Finance Ministers and Central Bank Governors on So-called Stablecoins, FATF, 2020. 18 See: https://www.fatf-gaf.org/publications/fatfrecommendations/documents/12-month-review-virtual-assets-vasps.html . A second FATF review is ongoing at the time of publication. 19 ”Token” is a very general term and relates to a representation of anything (tangible or intangible, of economic value or not, a stake, a voting or access right, etc.) in a particular ecosystem. Tokens can be explained as lines of code embedded in DLT networks that may serve

International Monetary Fund

substitution of savings into more stable foreign currencies. 5. The adoption of digital money will be further buoyed by rapid changes in technology and infrastructure, services and service providers, consumer preferences, and the congruence of these trends. 6. The underlying technology and infrastructure are advancing rapidly . Distributed ledger technologies (DLTs) are becoming faster, more secure, more energy efficient, and increasingly scalable—they should soon be able to process large amounts of transactions seamlessly. Furthermore, DLT networks are becoming