Examining Virtual Currencies: Risks and Uncertainties of a Novel Payment Technology in International Development

This exploratory brief discusses the implications that virtual currencies, and to a lesser extent central bank-issued digital currencies (CBDCs), might pose for stakeholders in international development contexts. Over the last few years, the emergence of these payment innovations has elicited significant interest in their potential impact on long-standing development challenges, such as the advancement of cheap cross-border payments, financial inclusion, and inclusive digital economies. However, as this brief discusses, the capacity of these innovations to advance objectives such as these remains uncertain, underscoring the importance of due diligence and responsible, evidence-based approaches to these innovations.

This exploratory brief offers:

• A high-level primer on virtual currencies.
• Illustrative scenarios for how the virtual currency landscape might evolve.
• Illustrative ways the development community might account for potential impacts. 

This exploratory brief follows an earlier publication Blockchain Primer, that discussed the implications that distributed ledger technology might pose for development.