Digital Money, Cross-Border Payments, International Reserves, and the Global Financial Safety Net: Preliminary Considerations

By Seunghwan Kim, Alex Miksjuk, Narayan Suryakumar, Anita Tuladhar, Delia Velculescu, Yiqun Wu, Jimena Zuniga, Nick Hallmark

January 4, 2024

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Seunghwan Kim, Alex Miksjuk, Narayan Suryakumar, Anita Tuladhar, Delia Velculescu, Yiqun Wu, Jimena Zuniga, and Nick Hallmark. Digital Money, Cross-Border Payments, International Reserves, and the Global Financial Safety Net: Preliminary Considerations, (USA: International Monetary Fund, 2024) accessed December 25, 2024

Summary

The rapid advent of digital money (DM) and assets raises questions about its implications for the functioning of the international monetary system (IMS). The low transaction costs of digital technologies, their accessibility and ease of automation, and their integration into existing digital services may bring opportunities in the form of higher financial interconnectedness and inclusion but may also add to risks. This paper explores the possible implications of DM for the IMS from the perspective of cross-border payments, international reserves and the supply of global safe assets, and the global financial safety net. To help inform the discussion, the paper presents empirical analyses of the effect of payment efficiency on international currency adoption for payment/transaction purposes as well as on reserve currency holdings, along with an illustrative modeling scenario of a DM-induced shock for the potential demand for global financial safety net resources.

Subject: Economic sectors, Financial crises

Keywords: Cross-border payments, Digital money, Global financial safety net, Global safe assets, International monetary system, International reserves

Publication Details

Pages:

22
Volume:

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DOI:

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Issue:

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Series:

IMF Notes No 2024/001
Stock No:

INSEA2024001
ISBN:

9798400253478
ISSN:

2957-4390

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