Such risks could be reduced if central banks offer digital national currencies, which the IMF defines as a "widely available DLT-based representation of fiat money".

Such a move would allow central banks to retain control of monetary policy should privately issued virtual currencies gain significant traction, help stabilise exchange rates, increase the security of global settlement systems, and boost the efficiency of the new, decentralised service economy, according to the paper.

However, the IMF observed the issue of central bank digital currencies is "deeply political and complex" and will require many tough decisions, including around distribution and access, warranting a gradual approach.

Britain, Canada, China and Singapore are among those studying central bank-issued digital currencies.

The Reserve Bank of Australia's head of payments, Tony Richards, said last year it was not actively considering the issue but said it was possible that some sort of digital version of the Australian dollar might emerge in the longer term.

ASIC chairman Greg Medcraft is advising the IMF on fintech disruption. Louise Kennerley

Regulator disruption

The IMF "staff discussion note", titled Fintech and financial services: Initial consideration, published on Monday night, also examines how regulators should respond to the "possibility [that] now looms that entities driven by fintech may emerge as competitive alternatives to traditional financial intermediaries, markets, and infrastructures".

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Regulators will need to be "nimble, experimental and cooperative" and countries will need new rules and standards to ensure the integrity of data, algorithms, and platforms.

The unbundling and migration of services from intermediaries to networks "may require regulators to rely less on entity-based regulation and more on activity-based regulation," the IMF said, adding "licensing regimes will need to be redesigned to bring new types of service providers within the regulatory perimeter where appropriate".

IMF managing director Christine Lagarde wants to increase fintech expertise at the international body and in March said Australian Securities and Investments Commission chairman Greg Medcraft had joined an IMF fintech advisory committee, which met at its spring meeting in Washington DC in April and provided insight for this report.

The IMF pointed to big uncertainties for regulators as fintech develops, including the impact on competition and market volatility.

Financial technology is generally seen as pro-competitive but the IMF said the "emergence of large closed networks reduces opportunities for competition".

Meanwhile, greater reliance on automated transactions "could potentially increase market volatility due to higher asset price correlations", and the "wider adoption of certain algorithms and technological solutions may increase vulnerabilities to cyber attack".

And while emerging technologies may accelerate the speed and volume of transactions, "it is not clear whether this would promote financial stability through more efficient price discovery, or lead to greater volatility and instability," it said, pledging to facilitate more international collaboration on the issues.

Other members of the "IMF high level advisory group on fintech'' working with Mr Medcraft include Ant Financial Services chief strategy officer Long Chen, MIT professor Robert Merton, senior deputy governor at the Bank of Canada, Carolyn Wilkins, and the bosses of blockchain start-ups Ripple, Chain and Digital Asset Holdings.