The push by central banks to develop digital currencies entails both risks and benefits at the global and local levels.
Rapid progress in digital technologies has increased the likelihood of adopting new forms of digital currencies for both domestic and international transactions, according to the International Monetary Fund (IMF).
These include central bank digital currencies (CBDCs) and so-called global stable coins (GSCs) proposed by big technological companies, the report said.
It said these will increase competition, reduce transaction costs, expand access to services, and encourage financial participation via mobile devices.
“CBDCs and GSCs could make cross-border payments less costly and make it easier for households and small firms to have access to financial services,” the report said.
But it added it can also reduce the ability of local governments to conduct monetary policy and control domestic financial conditions.
“Digital money adoption across borders also entails risks and policy challenges,” it said, noting this could increase pressures for currency substitution.