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on Payment Systems and Financial Technology |
| By: | Bo Li; Mr. Tommaso Mancini-Griffoli; Mr. Marcello Miccoli; Brandon Joel Tan; Ms. Longmei Zhang |
| Abstract: | Payment stablecoins are privately issued digital money with the potential to enhance payment efficiency, foster innovation, and improve financial inclusion. At the same time, they are vulnerable to runs and associated welfare losses. One way to lower run risk is to require stablecoin issuers to hold safe assets. But doing so may lower issuers’ profitability and thus their incentive to provide stablecoins, hampering payment innovation and product variety. This paper offers a theoretical framework to navigate the tradeoff between maintaining stability and incentivizing issuance. Based on the Diamond and Dybvig (1983) model of bank runs, the paper shows that an unregulated private equilibrium is suboptimal. Stablecoin issuers hold risky assets to maximize profits, increasing run risk. A social planner can improve the equilibrium by requiring the backing of stablecoins with a safe asset (such as central bank reserves in a narrow bank setting), and creating conditions for other sources of revenue for issuers (such as central bank reserves remuneration or policies for payment data utilization). The model offers a baseline for the ongoing policy discussion while identifying considerations for further study. |
| Keywords: | Stablecoins; reserve backing; digital money; Stablecoin issuer; stablecoin issuer; payment innovation; payment efficiency; issuers' profitability; International reserves; Bank deposits; Commercial banks; Financial statements; Global |
| Date: | 2026–04–10 |
| URL: | https://d.repec.org/n?u=RePEc:imf:imfwpa:2026/074 |
| By: | Daniel Aronoff; Kristian Praizner; Armin Sabouri |
| Abstract: | Bitcoin transaction fees will become more important as the block subsidy declines, but fee formation is hard to study with blockchain data alone because the relevant queueing environment is unobserved. We develop and estimate a structural model of Bitcoin fee choice that treats the mempool as a market for scarce blockspace. We assemble a novel, high-frequency mempool panel, from a self-run Bitcoin node that records transaction arrivals, exits, block inclusion, fee-bumping events, and congestion snapshots. We characterize the fee market as a Vickery-Clarke-Groves mechanism and derive an equation to estimate fees. In the first-stage we estimate a monotone delay technology linking fee-rate priority and network state to expected confirmation delay. We then estimate how fees respond to that delay technology and to transaction characteristics. We find that congestion is the main determinant of delay; that the marginal value of priority is priced in fees, which is increasing in the gradient of confirmation time reduction per movement up in the fee queue; and that transactor choice of RBF, CPFP, and block conditions have economically important effects on fees. |
| Date: | 2026–04 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2604.17183 |
| By: | Daniel Aronoff; F. Christopher Calabia; Anders Brownworth; Ashwanth Samuel; Neha Narula |
| Abstract: | U.S. dollar stablecoins are increasingly used as payment and settlement instruments beyond cryptocurrency markets. With the enactment of the GENIUS Act in 2025, the United States established the first comprehensive federal framework governing their issuance, backing, and supervision. This paper evaluates the financial, technological, and regulatory risks that may arise as GENIUS-compliant stablecoins scale into mainstream use. We show that maintaining par-value redemption may depend not only on backing-asset quality, but also on the functioning of Treasury and repo markets, the balance-sheet capacity of broker-dealers, and the operational reliability of blockchain-based transaction rails. Even conservatively backed stablecoins can face stress from redemption surges, market-intermediation bottlenecks, or technological disruptions. We argue that durable stability will likely require an integrated approach spanning financial-market infrastructure, prudential regulation, and software governance. While grounded in U.S.\ law, the analysis identifies principles that are relevant for regulators in other jurisdictions developing stablecoin regimes. |
| Date: | 2026–04 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2604.17167 |
| By: | Joseph Abadi; Jesús Fernández-Villaverde; Daniel R. Sanches |
| Abstract: | We present a micro-founded monetary model of the world economy to study international currency competition. Our model features both “unipolar” equilibria, with a single dominant international currency, and “multipolar” equilibria, in which multiple currencies circulate internationally. Long-run equilibria are highly history-dependent and tend towards the emergence of a dominant currency. Governments can compete to internationalize their currencies by offering attractive interest rates on their sovereign debt, but large economies have a natural advantage in ensuring the dominance of their currencies. We calibrate the model to assess the quantitative importance of these mechanisms and study the dynamics of the international monetary system under counterfactual scenarios. |
| Keywords: | dominant currency; international monetary system; strategic complementarities; history dependence |
| JEL: | E42 E58 G21 |
| Date: | 2026–04–15 |
| URL: | https://d.repec.org/n?u=RePEc:fip:fedpwp:103040 |
| By: | Greitens, Jan |
| Abstract: | This paper contributes to current debates surrounding the digital euro and US stablecoins by unpacking the present day relevance of two important episodes in monetary history: Prussia's effort in the 18th century to implement a uniform coinage standard across the Holy Roman Empire, and the 19th century Currency School Banking School debate. While the ECB presents the digital euro as a conservative measure designed to preserve the existing two tier system and the euro as a currency anchor, Prussia's failed reform efforts show that political will must be accompanied by political clout for a monetary standard to become widely accepted. Meanwhile, the US is promoting stablecoins backed by government debt in order to foster innovation and extend the dominance of the dollar. Based on a close reading of Hayek, this paper critiques currency competition as a justification for stablecoins. The risk of a fragmented monetary system no longer amenable to central bank control is also discussed with reference to the Currency School Banking School debate, which discloses the perennial importance of balancing stability with elasticity while alsoavoiding fragmentation. In this way Prussian and British historical experience with monetary system reform sheds valuable light on the parameters that policymakers should consider when devising or assessing proposals for digital money, as a failure could lead to uncertainty and the fragmentation of the monetary system or excessive rigidity in the money supply. |
| Keywords: | Digital Euro, Monetary Anchor, Gresham's Law, Currency Competition, Stablecoins |
| JEL: | E42 E58 N13 |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:ibfpps:340050 |
| By: | Maria Chiara Cavalleri; Ivania García-Cascante; Andualem Mengistu; Andualem Mengistu; Gerardo Uña; Mona Wang |
| Abstract: | This paper evaluates the impact of Costa Rica’s adoption of SUPRES, a digital treasury platform that centralizes and automates cash transfer payments for social assistance programs. While most GovTech literature has focused on service delivery improvements, the effects of digitalization on treasury operations remain largely unexplored. Addressing this gap, we provide an empirical assessment of how GovTech reforms support treasury efficiency by improving cash management and reducing opportunity costs of borrowing for treasury. Using administrative data and survey evidence, this analysis finds that average lead times for the analyzed social cash programs fell with the adoption of SUPRES - from 9–13 days before the reform to 2-3 days after-, generating estimated opportunity cost savings for the Treasury exceeding USD 4 million, at a relatively low implementation cost, highlighting the strong value-for-money of this reform. In 2020, the pre-SUPRES opportunity cost was about 1.1% of total domestic short-term interest payments, underscoring the importance of digital treasury reforms for managing liquidity. Although the savings are modest compared to GDP, they are significant for treasury operations, especially during tight cash periods. Survey responses from administrative staff indicate enhanced operational efficiency, transparency, and inter-institutional coordination following SUPRES adoption. Beyond treasury efficiency gains, the reform also strengthens targeting, expands financial inclusion, and supports the diversification and resilience of the social payments ecosystem by enabling a multi‑bank payment model. Overall, the analysis shows how relatively low‑cost digital treasury reforms can deliver meaningful efficiency gains in cash management while generating broader operational and financial inclusion benefits. |
| Keywords: | GovTech; public financial management; chash management; social assistance; digital treasury reform; Costa Rica; SUPRES |
| Date: | 2026–04–10 |
| URL: | https://d.repec.org/n?u=RePEc:imf:imfwpa:2026/077 |
| By: | Filippin, Maria Elena (Central Bank of Ireland and Uppsala University) |
| Abstract: | This paper examines how household-targeted government policies influence financial market participation conditional on financial literacy, focusing on potential Central Bank Digital Currency (CBDC) adoption. Due to the lack of empirical CBDC data, I use the 2012 introduction of retail Treasury bonds in Italy as a proxy to study how financial literacy affects households’ likelihood to engage with a new government-backed retail instrument. Using the Bank of Italy’s Survey on Household Income and Wealth, I show that households with some but low financial literacy are more likely to participate in the Treasury bond market than other groups following the introduction of the new instrument. Based on these findings, I develop a theoretical model to study how financial literacy affects CBDC demand through portfolio choice - low-financially literate households with limited access to risky assets allocate more resources to CBDC, while high-financially literate households use risky assets to safeguard against income risk. |
| Keywords: | Central Bank Digital Currency, Financial literacy, Government policies, Market participation, Treasury bonds. |
| JEL: | E42 E58 G11 G18 G53 |
| Date: | 2026–04 |
| URL: | https://d.repec.org/n?u=RePEc:cbi:wpaper:05/rt/26 |
| By: | George Cui; Kailin Gao |
| Abstract: | We employ novel data and theoretical frameworks to investigate how a social media platform facilitates information exchange among firms. Our analysis is based on an extensive dataset comprising over 20 million firm-to-firm online interactions on a prominent social platform where participants share information about international trade. We document four empirical patterns. First, we find that firms’ exports grow significantly after the firm begins using the social media platform. Second, firms located geographically closer exchange more information. Third, firms in sectors that have stronger production network relationships interact more on the platform. Finally, firms in more developed regions are more likely to adopt the social media platform. Motivated by these empirical patterns, we develop a quantitative general equilibrium trade model with information frictions and endogenous learning and information sharing. |
| Keywords: | Information; Global Value Chains; Online Platforms; social media platform; IMF working papers; information sharing; novel data; information friction; Social networks; Exports; Stocks; Trade balance; Global; Asia and Pacific |
| Date: | 2026–04–03 |
| URL: | https://d.repec.org/n?u=RePEc:imf:imfwpa:2026/064 |
| By: | Filippin, Maria Elena (Central Bank of Ireland); Pelli, Michele (Central Bank of Ireland) |
| Abstract: | Trust is a central element of monetary and payment systems, and it plays a particularly important role when assessing the prospects for the digital euro. Ireland’s digitally advanced payment landscape provides useful context for understanding how households view the potential for digital euro adoption. Across the euro area, Irish respondents are the fourth most likely to report being willing to use the digital euro, with trust in the euro and institutions strongly associated with adoption intentions. While 90% of Irish respondents view the traditional form of physical euro positively, digital euro awareness remains below the euro area average (at 49%), highlighting the need for enhanced public communication as the project progresses. Digital euro awareness and adoption intentions within Ireland vary modestly across demographic groups, with men, older respondents, and the financially literate showing consistently higher awareness, willingness to adopt, and emphasis on key features such as security and business acceptance. |
| Date: | 2026–03 |
| URL: | https://d.repec.org/n?u=RePEc:cbi:stafin:2/si/26 |
| By: | Wellesley R. Rogers (Marymount University, USA) |
| Abstract: | The rapid adoption of artificial intelligence (AI) in banking has created a tension between cost efficiency and the trust-based relationships that underpin customer loyalty. This paper analyzes a large bank’s AI-enabled customer service transformation, during which a 19% reduction in personnel costs coincided with a 300% increase in customer complaints and a 9% customer loss. Drawing on research on AI service quality, trust, and reputational capital, chatbots in financial services, digital transformation strategy, and change management, the study diagnoses the bank’s core failure as the use of AI as a cost-focused gatekeeper rather than a human-aligned service capability. Using the Integrated Methodological Framework for Digital Transformation Strategy (IMFDS) and the ADKAR change management model, the paper links technical design choices and leadership decisions to darkside outcomes such as technological debt, perceived powerlessness, and erosion of trust. The analysis concludes with an evidence-based redesign of the bank’s service model, including a hybrid human–AI architecture, sentiment-driven escalation, AI quality assurance governance, and explainable AI (XAI) to restore transparency and accountability. These recommendations offer a practical roadmap for financial institutions seeking to balance automation with sustainable customer relationships in AIenabled service environments. |
| Keywords: | Artificial Intelligence, Digital Transformation, Customer Service, Banking, Chatbots, Trust And Loyalty |
| Date: | 2026–03 |
| URL: | https://d.repec.org/n?u=RePEc:smo:raiswp:0630 |
| By: | Irene Aldridge; Gavhar Annaeva; Leyla Beriker; Zhiheng Cai; Samyak Choudhary; Camila Godoy; Kaicheng Gong; Zitao Huang; Jonah Ji; Hetvi Kharvasiya; Heng Li; Yuxuan Li; Tianchi Ma; Qingcheng Meng; Ruiyang Shi; Ananya Shrivastava; Jiaqi Wang; Yifan Wang; Zihua Wu; Jiayang Xu; Yuheng Yan; Zijun Zeng; Bowen Zhang; Francesco Zhang |
| Abstract: | Blockchain technology is widely expected to reduce transaction costs by automating contract enforcement and eliminating intermediaries; yet, the execution costs imposed by network congestion have received little attention in the operations management literature. We study on-chain peak shaving, the systematic scheduling of Ethereum transactions toward low-congestion windows to reduce gas fee exposure. We use transaction-level data from seven firms across seven industries (N = 62, 142 transactions, January-March 2026). Gas fees vary significantly throughout the day: the peak-hour premium at 10 AM Eastern Time reaches USD 0.220 per transaction above the overnight baseline, driven primarily by speculative-arbitrage demand rather than operational activity. Firm-level scheduling responses are heterogeneous and not uniformly disciplined. Only three of seven firms transact disproportionately during off-peak hours; four transact counter-cyclically, concentrated in peak windows due to external deadlines or governance cycles. This heterogeneity is explained by two moderators: transaction deferrability and gas intensity. We formalize these into an On-Chain Scheduling Matrix that maps firms to four regimes: 1) full peak shaving, 2) selective peak shaving, 3) cost provisioning, and 4) accept-market-rate, with regime membership predicting both fee savings and residual cost floors (40-92 percent of actual expenditure). Theoretically, we extend Transaction Cost Economics to account for time-varying execution costs imposed by congestion externalities. In addition to extending Williamson's original cost taxonomy, we introduce a dual classification of gas fees as execution costs in timing but maladaptation costs in origin. The findings reposition on-chain gas-fee management alongside energy procurement and foreign exchange hedging as a domain requiring systematic operational planning. |
| Date: | 2026–04 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2604.19956 |