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Ongoing economic and financial digitalization is making individual data a key input and source of value for companies across sectors, from Big Tech and pharmaceuticals to manufacturers and financial services providers. Data on human behavior and choices—our “likes,” purchase patterns, locations, social activities, biometrics, and financing choices—are being generated, collected, stored, and processed at an unprecedented scale. This note argues for development of international agreement on common minimum principles for the data economy. These principles could reduce policy divergences that will arise in the global digital economy, in part reflecting different national contexts and priorities. For example, individual countries may place different emphasis on privacy, but a common understanding of definitions and perimeters of applicability of privacy protection mandates could mitigate avoidable divergences. Many of the other domestic policy approaches being proposed for managing the data economy—for example, on interoperability and data portability to address competition or on the introduction of data fiduciaries to manage consent—could also benefit from common principles on their international application. Likewise, there is scope for international coordination on compilation and sharing of data sources from private digital companies—for regulatory and public policy purposes—including as recognized by the Group of Twenty (G20) ministers in their July 2021 call for a renewed Data Gaps Initiative.

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The purpose of this note is to assist countries in their understanding and mitigation of the money laundering (ML), terror financing (TF), and financing of the proliferation of weapons of mass destruction (PF) risks related to virtual assets (VAs). This is the first of two Fintech Notes dedicated to VAs and anti-money laundering and combating the financing of terrorism (AML/CFT). This first note is broad in scope. It explains why VAs are vulnerable for misuse for ML/TF/PF purposes and clarifies which assets and service providers should be subject to AML/CFT measures. It discusses the measures that all countries should take, and the type of action necessary in instances of criminal misuse of VA. A second Fintech note focuses on the AML/CFT regulatory and supervisory framework for virtual asset service providers (VASPs). Both notes are based on Financial Action Task Force (FATF) standards and draw heavily on the FATF’s 2019 “Guidance for a Risk-Based Approach to Virtual Assets and Virtual Asset Service Providers.” They aim at providing policy makers and authorities with AML/CFT responsibilities with an overview of the legal and operational considerations that the implementation of a sound AML/CFT framework for VAs and VASPs raises. In some instances, the notes make reference to specific types of VAs, VASPs, and related products. These references are made for illustrative purposes only, and do not constitute an endorsement of the specific VAs, VASPs, and related products. Finally, at the time of drafting, no country had been assessed against the new standards and many country authorities were in the process of establishing how best to incorporate the new standards in their AML/CFT framework. For these reasons, this note does not refer to specific country examples.

Anti-money laundering and combating the financing of terrorism (AML/CFT) --- Blockchain and DLT --- Blockchains --- Corporate crime --- Crime & criminology --- Crime --- Crime--Economic aspects --- Criminology --- Currency crises --- Databases --- Digital currencies --- Distributed ledgers --- Economic & financial crises & disasters --- Economic sectors --- Economics of specific sectors --- Economics --- Economics: General --- Financial crises --- Financial services industry --- Foreign Exchange --- Government and the Monetary System --- Illegal Behavior and the Enforcement of Law --- Industries: Financial Services --- Informal Economy --- Informal sector --- Macroeconomics --- Monetary Systems --- Money laundering --- Payment Systems --- Regimes --- Standards --- Technological innovations --- Technology --- Underground Econom --- Virtual currencies --- White-collar crime

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The departmental paper, "Rise of Digital Money: Implications for Pacific Island Countries," delves into the fast-evolving landscape of digital money in a diverse region of extremes in size, remoteness and dispersion, highlighting its significant macroeconomic and financial consequences. It provides an overview of the development of digital money and payment systems in Pacific Island Countries (PICs), assessing potential benefits and risks, with a focus on how they can harness digital technology to enhance financial inclusion and payment efficiency while minimizing risks. To this end, the paper also examines the prerequisites for successfully adopting various forms of digital money and proposes a strategic framework for policy decisions. The paper underscores the potential of digital money in advancing public policy goals, like financial inclusion and improved cross-border connectivity – given the specific characteristics of the region – while cautioning against the risks of rapid and inadequately regulated adoption. Accordingly, it advocates a gradual, well-informed approach, tailored to PICs' unique monetary and financial circumstances, including the presence of national currencies and the maturity of payment systems. Moreover, the paper suggests that a regional approach could help address capacity and scalability challenges in introducing new digital money forms and payment methods in PICs.

Anti-money laundering and combating the financing of terrorism (AML/CFT) --- Central Bank digital currencies --- Central Banks and Their Policies --- Corporate crime --- Crime --- Criminology --- Currencies --- Distributed ledgers --- Economics --- Financial Institutions and Services: Government Policy and Regulation --- Financial services industry --- Government and the Monetary System --- Illegal Behavior and the Enforcement of Law --- Industries: Financial Services --- International agencies --- International Agreements and Observance --- International Economics --- International institutions --- International Monetary Arrangements and Institutions --- International organization --- International Organizations --- Monetary economics --- Monetary Systems --- Money and Monetary Policy --- Money laundering --- Money --- Payment Systems --- Political Economy --- Political economy --- Public Policy --- Regimes --- Standards --- Technological innovations --- Technology --- White-collar crime

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Digitalization of the economy provides both challenges and opportunities. Central banks should ensure that they have the capacity to continue to meet their policy objectives in the digital age. It is in this context that central bank digital currency (CBDC) should be evaluated. If designed appropriately, CBDCs could allow central banks to modernize payment systems and future-proof central bank money as the pace and shape of digitalization continues to evolve. However, the decision to proceed with CBDC exploration and an eventual launch would need to be jurisdiction specific, depending on the degree of digitalization of the economy, the legal and regulatory frameworks, and the central bank’s internal capacity. This paper proposes a dynamic decision-making framework under which the central bank can make decisions under uncertainty. A phased and iterative approach could allow central banks to adjust the pace, scale, and scope of their CBDC projects as the domestic and international environment changes.

Banking --- Banks and Banking --- Banks and banking --- Banks and banking, Central --- Banks --- Central Bank digital currencies --- Clearinghouses --- Commercial banks --- Currencies --- Depository Institutions --- Distributed ledgers --- Economic & financial crises & disasters --- Economic sectors --- Economics of specific sectors --- Economics: General --- Finance --- Finance: General --- Financial institutions --- Financial markets --- Financial services industry --- General issues --- Government and the Monetary System --- Industries: Financial Services --- Innovation --- Intellectual Property Rights: General --- Macroeconomics --- Micro Finance Institutions --- Monetary economics --- Monetary Policy, Central Banking, and the Supply of Money and Credit: General --- Monetary Systems --- Money and Interest Rates: General --- Money and Monetary Policy --- Money --- Mortgages --- Payment Systems --- Payment systems --- Publicly Provided Goods: General --- Regimes --- Research and Development --- Standards --- Technological Change --- Technological innovations --- Technology