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In the past decades, privately owned payment systems (e.g., PayPal, M-Pesa, Alipay, and Square) have gained widespread popularity. Recently, various cryptocurrencies further caused a fundamental reorientation of domestic and international monetary and payment technologies, as well as of policies and regulatory frameworks governing payment systems (Brunnermeier, James, and Landau, 2019; Adrian and Mancini-Griffoli, 2019; Cong, Li, and Wang, 2021a). Many countries around the globe react to these trends by actively researching on Central Bank Digital Currencies (CBDCs, see, e.g., Bech and Garratt, 2017; Duffie, 2021; Duffie and Gleeson, 2021), as revealed by the sharp rise in the number of central banks in the process of developing their own digital currencies (Boar, Holden, and Wadsworth, 2020; Boar and Wehrli, 2021).1 Due to their potential to be safer, cheaper more efficient, interoperable, and versatile, digital currencies have the potential to challenge or even replace traditional fi...

Capital flows can bring substantial benefits for countries but also carry risks. They help smooth consumption and finance investment, diversify risks, and contribute to a more efficient allocation of resources. They can also foster economic growth by transferring technology and managerial skills, stimulating financial sector development, and generating incentives for better governance and stronger macroeconomic policies. At the same time, large and volatile flows can pose macroeconomic and financial stability risks, which can be magnified by gaps in a country’s financial and institutional infrastructure. To mitigate such risks while retaining policy autonomy, many IMF member countries, particularly emerging market and developing economies with less-developed financial markets, maintain some form of restrictions on capital flows. Capital flow management measures (CFMs) can be part of a broader policy toolkit to help countries reap the benefits of capital flows while managing the associa...

How societies organise their monetary systems is a consequence of the interaction of ideas (e.g. should a central bank target price stability?) with technology (e.g. how good are we at issuing money that is hard to counterfeit?). This interaction is dynamic: improvements in technology drive how we think about money and, vice versa, changes in our ideas about money lead to developing new monetary technologies. Also, it is a punctuated interaction: periods of rapid change are intersected among long years of stability. Right now, we are living in one of those times of quick transformation. The internet, advanced cryptography, and fast computational power mean that it is well within the realm of feasibility to completely change our financial system. And these technologies have led the private sector to introduce new ideas in the form of digital currencies, from bitcoin to Facebook’s diem. In response to this technological and private sector pressure, central banks are considering a move fr...