With the increasing development of new commercial and central bank digital instruments, the IIF observes that the prudential treatment of such instruments is an emerging issue that warrants greater attention given the significant role these new asset types may play in the future economy. This topic will form part of the agenda for the IIF Digital Currencies Roundtable in Washington on April 10, and we this brief ‘primer’ paper outlines some of the important policy issues that will need to be considered further, illustrated by some potential scenarios.
With these instruments potentially becoming more sophisticated and widely-utilized in the coming years, there is an opportunity to provide greater clarity for all participants.
It is stressed that these considerations identified are not exhaustive, and also that these are not unique issues for digital coins. The emergence of these instruments does not necessarily need a whole new framework – rather, it may be that for regulatory treatments to reflect the underlying risk profiles, we need to develop new definitions and calculation methodologies that can support the existing regulatory framework.
The IIF will be exploring these issues further, with plans to provide industry recommendations on design considerations and prudential treatments later in 2019.