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Cover FinTech Notes
Digital Currencies and Energy Consumption
Mr. Itai Agur, Jose Deodoro, Xavier Lavayssière, Soledad Martinez Peria, Mr. Damiano Sandri, Hervé Tourpe, and Mr. German Villegas Bauer

points constitutes the layer of user payment means. In credit card payments, the core processing involves the data centers of the card issuer as well as those of the banks. Merchants receive credit card payments on their bank accounts, and users make periodic payments to clear their card balances. Here, user payment means are composed of physical cards and point-of-sale terminals. In digital currencies that rely on DLT systems, consensus mechanisms underlie the trust in the core processing function, whereas digital wallets are the main means of user payment access. A

Keywords:
energy consumption; novel payment instrument; clearance system; credit card transactions; DLT system; Central Bank digital currencies; Digital currencies; Payment systems
Cover FinTech Notes
Digital Currencies and Energy Consumption
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.
Keywords:
Payments; Energy efficiency; Environmental impact; Crypto assets; Bitcoin; Central Bank Digital Currency; CBDC; Distributed Ledger technology; DLT; CBDC user payment; energy consumption; FINTECH note; title page; user payment; Virtual currencies; Blockchain and DLT; Digital currencies; Central Bank digital currencies; Payment systems; Global
Cover FinTech Notes
Front Matter
Mr. Itai Agur, Jose Deodoro, Xavier Lavayssière, Soledad Martinez Peria, Mr. Damiano Sandri, Hervé Tourpe, and Mr. German Villegas Bauer

those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management. Publication orders may be placed online or through the mail: International Monetary Fund, Publication Services P.O. Box 92780, Washington, DC 20090, U.S.A. T. +(1) 202.623.7430 publications@imf.org IMFbookstore.org elibrary.IMF.org Contents Executive Summary I. Introduction II. Payment System Components III. Comparing Energy Use Across Crypto Assets Comparing Consensus Mechanisms: PoW and Non-PoW DLT Systems Impact

Keywords:
Fintech; Consumption
Cover FinTech Notes
Distributed Ledger Technology Experiments in Payments and Settlements
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.
Keywords:
FTN; distributed ledger technology; transaction; market; counterparty; settlement system; DLT payment transaction; permissioned DLT network; DLT implementation; DLT prototype; DLT solution; Blockchain and DLT; Payment systems; Liquidity; Credit risk; Securities settlement systems; Global
Cover FinTech Notes
Blockchain Consensus Mechanisms: A Primer for Supervisors
Parma Bains
Technology plays an increasingly important role in financial services. With the pace of technological inno-vation moving ever faster, the role new technology plays in the provision of financial services is becoming increasingly fundamental. New technology can generate efficiencies for firms, lowering costs that can be passed on to end users. It can increase access to financial services and products for consumers, particularly the most vulnerable; however, new technology can also create new risks and unintended consequences that can harm financial stability, consumer protection, and market integrity. This primer is designed for financial supervisors at central banks, regulatory authorities, and government departments. It adds to existing literature by summarizing key aspects of popular consensus mechanisms at a high level, with a specific focus on how such mechanisms may impact the mandates of supervisors and policymakers when deployed in financial services markets. It could also help inform IMF staff on policy development and technical assistance related to crypto assets, stablecoins, and blockchains.
Keywords:
fintech, blockchain, distributed ledger technology, proof-of-stake, proof-of-work, crypto assets, stablecoins, central bank digital currencies, Bitcoin, BigTech; Blockchain consensus mechanism; bitcoin mining; FINTECH note; A. consensus mechanism; B. consensus mechanism; Blockchain and DLT; Virtual currencies; Technological innovation; Global
Cover FinTech Notes
Keeping Pace with Change: Fintech and the Evolution of Commercial Law
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.
Keywords:
fintech, commercial law, technological innovations, distributed ledger technology, tokens, artificial intelligence, Internet of Things, automated conrtracting, smart contracts, registries, contract law, securities and negotiable instruments, company law, secured transactions, insolvency, digital technology; FINTECH note; B. contract law; evolution of commercial law; publication order; DLT network; Blockchain and DLT; Smart contracts; Technological innovation; Emerging technologies; Securities
Cover IMF Staff Country Reports
Australia: Financial Sector Assessment Program-Technical Note-Supervision, Oversight and Resolution Planning of Financial Market Infrastructures
International Monetary Fund. Monetary and Capital Markets Department
This paper analyzes systemic risks related to Financial Market Infrastructures (FMI) in Australia, in particular central counterparties (CCP). Supervision and oversight of FMIs is well-established with supervisory expectations importantly strengthened over the past few years. It is recommended that the Reserve Bank of Australia considers reviewing its approach to payment systems oversight, in particular by providing greater clarity as regards requirements for systemically and less systemically important payment systems. The IMF team suggests that Australian authorities could benefit from the experiences of and lessons learned by other jurisdictions through their regular and more specialized coordination and communication efforts with other supervisors and resolution authorities. The authorities should also review, and could benefit from, the experiences of and lessons learned in the formulation and codification of Australia’s bank and insurer resolution regime. Enforcement powers for the supervision of CCPs and Securities Settlement Systems should however be strengthened in accordance with the Principles for Financial Market Infrastructures.
Keywords:
ISCR; CR; CS facility; payment system; RBA-ASIC MOU; ASX Clear; RBA assessment; Payment systems; Bank resolution framework; PFM information systems; Principles for Financial Market Infrastructures; Financial market infrastructure; Global
Cover Departmental Papers
FinTech in Sub-Saharan African Countries: A Game Changer?
Mr. Amadou N Sy, Mr. Rodolfo Maino, Mr. Alexander Massara, Hector Perez-Saiz, and Preya Sharma
FinTech is a major force shaping the structure of the financial industry in sub-Saharan Africa. New technologies are being developed and implemented in sub-Saharan Africa with the potential to change the competitive landscape in the financial industry. While it raises concerns on the emergence of vulnerabilities, FinTech challenges traditional structures and creates efficiency gains by opening up the financial services value chain. Today, FinTech is emerging as a technological enabler in the region, improving financial inclusion and serving as a catalyst for the emergence of innovations in other sectors, such as agriculture and infrastructure.
Keywords:
DPPP; DP; money transfer operator; market structure; monetary policy; sub-Saharan Africa country; account penetration; agents in sub-Saharan Africa; anchors inflation; market share; money multiplier; payment system provider; technical efficiency; trade-offs FinTech; Mobile banking; Fintech; Blockchain and DLT; Sub-Saharan Africa; East Africa; Africa; Global; sub-Saharan Africa relative; FinTech in Sub-Saharan Africa; benefits of FinTech; IMF Library; efficiency gain; Technological innovation
Cover FinTech Notes
Behind the Scenes of Central Bank Digital Currency: Emerging Trends, Insights, and Policy Lessons
Gabriel Soderberg, Ms. Marianne Bechara, Wouter Bossu, Ms. Natasha X Che, Sonja Davidovic, Mr. John Kiff, Ms. Inutu Lukonga, Mr. Tommaso Mancini Griffoli, Tao Sun, and Akihiro Yoshinaga
Central banks are increasingly pondering whether to issue their own digital currencies to the general public, so-called retail central bank digital currency (CBDC). The majority of IMF member countries are actively evaluating CBDCs, with only a few having issued CBDCs or undertaken extensive pilots or tests. This paper shines the spotlight on the handful of countries at the frontier in the hope of identifying and sharing insights, lessons, and open questions for the benefit of the many countries following in their footsteps. Clearly, what can be gleaned from these experiences does not necessarily apply elsewhere. The sample of countries remains small and country circumstances differ widely. However, the insights in this paper may inspire further investigation and allow countries to gain time by building on the experience of others. Importantly, the purpose of this paper is not to evaluate the courses taken by different jurisdictions, but to study and discuss their key experiences and lessons. The paper studies six advanced CBDC projects, drawing on collaboration and exchanges with the respective central banks to get insights beyond what has previously been published. Unless a specific published source is cited, all information stems from interviews and workshops with members of CBDC project teams in each jurisdiction.
Keywords:
digital currency; central banks; fintech; CBDC; cross-border payments; distributed ledger technology; off-line capacity; anonymity; Sand Dollar; e-CNY; DCash; e-krona; e-peso; technology supplier; ensuring resilience; CBDC communication; technology choice; central bank representative; Central Bank digital currencies; Currencies; Blockchain and DLT; Caribbean
Cover Policy Papers
Considerations on the Role of the SDR
International Monetary Fund. Finance Dept., International Monetary Fund. Monetary and Capital Markets Department, International Monetary Fund. Research Dept., International Monetary Fund. Strategy, Policy, &, Review Department, International Monetary Fund. Statistics Dept., and International Monetary Fund. Legal Dept.
This paper explores whether a broader role for the SDR could contribute to the smooth functioning and stability of the international monetary system (IMS). Recent staff assessments highlighted that the IMS has displayed considerable resilience. But episodes of stress point also to some weaknesses, including in external adjustment mechanisms; limitations of official liquidity provisions through the Global Financial Safety Net (GFSN); and large-scale reserve accumulation—with systemic side effects. Those weaknesses, together with the expansion of the SDR basket, have renewed interest in the SDR and motivated a discussion of whether there is an economic rationale for a broader SDR role. The paper looks into how those weaknesses can be mitigated by three concepts of the SDR: the official SDR, the reserve asset administered by the IMF (O-SDR); SDR-denominated financial instruments, or “market SDRs” (M-SDR); and the SDR as a unit of account (U-SDR). However, the paper does not propose specific reform options.
Keywords:
PP; unit of account; U.S. dollar; foreign exchange; central bank; exchange rate; current account; monetary policy; Currencies; International monetary system; Reserve currencies; Reserve assets; International liquidity; Global