Crypto assets and central bank digital currencies potential implications for developing countries

This policy review provides an accessible, yet academically informed, discussion of main implications of crypto assets for the monetary, financial and payments systems in developing countries. It asks four main questions: (i) what are the trends and drivers of crypto adoption, and which developing countries have been concerned the most; (ii) what do the economics of crypto assets imply for the ease of payments, financial inclusion, privacy, illicit financial flows, and currency substitution, as well as the architecture of the international monetary system (IMS); (iii) how can regulation shape the evolution of crypto adoption and what solutions can central bank digital currencies (CBDCs) and fast retail payment systems provide; and (iv) are the monetary, financial and payments systems in developing countries ripe for embracing crypto assets? Crypto adoption has been strong in developing countries, probably because their financial systems tend to be narrower and less regulated, their macroeconomic stability lower, and their population younger and therefore more digitally savvy. The policy review recognizes that crypto assets promise to solve longstanding problems of financial markets in fostering financial inclusion and providing efficient, secure, and affordable monetary transfers, while preserving cash-like privacy.