General allocations of SDRs are distributed across the IMF membership in proportion to IMF quota shares

What happens to the SDRs once they are allocated? What can they be used for?

The IMF's SDR Department keeps records of SDR allocations to members and holdings of SDRs by members and prescribed holders; the SDR Department is also the channel through which all transactions and operations involving SDRs are conducted.
Once allocated, members can hold their SDRs as part of their foreign exchange reserves or sell or use part or all of their SDR allocations. Members can exchange SDRs for freely usable currencies among themselves and with prescribed holders; such exchange can take place under a voluntary arrangement or under a mandatory designation plan on members with sufficiently strong external positions, which serves as the ultimate backstop for the SDR market. Since 1987, the SDR market has functioned through voluntary arrangements, without the need to activate the designation plan.
IMF members can also use SDRs in a range of other authorized operations among themselves (e.g. loans, payment of obligations, pledges) and in operations and transactions involving the IMF, such as the payment of interest on and repayment of loans, or payment for quota increases.

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