Central Bank CBDC’s Could Enhance Cross Border Payments: BIS, IMF, World Bank at G20
While Central banks seem to be focusing more on the domestic use of cross-border networks of central bank digital currencies (CBDC), the Bank of International Settlements (BIS) believes CBDCs should be used beyond borders.
CBDC Proposed At G20
Although cross-border networks are usually criticized for their high cost, low speed, limited access, and insufficient transparency, the global finance triumvirate believe CBDC could change that.
The report analyzed how CBDCs could facilitate enhanced cross-border payments through integration and cooperation. This includes basic compatibility tests and finding common ground between various national efforts in order to reap the full benefits of digital currencies.
The report then dwelled on the importance of interoperability between CBDCs since various CBDCs would roll out at different paces in several jurisdictions.
“If different jurisdictions' CBDC projects are coordinated effectively, the clean slate presented by CBDCs might be leveraged to enhance cross-border payments,” the paper explained.
While no central bank has launched a CBDC yet, most CBDC studies and development efforts from the apex banks have been largely focused on domestic use and not cross-border payments.
When central banks were asked earlier this year whether they were thinking of exploring CBDCs' cross-border use, the majority said no.
The survey which was carried out in the first quarter of 2021 with 50 central banks as participants showed that most central banks have not yet taken a firm position on the CBDC issue.
While more than 25% were considering allowing retail CBDC use by non-residents, 14 and nearly 20% said that they are not yet considering this but may do so in the future. Only 8% of the central banks initially considered allowing cross-border retail issued CBDC, while others said they might do so in the future.
Central Banks Exploring CBDCs
Several central banks around the world are currently working on studying or developing pilot tests for digital fiat. Different countries seem to have taken different approaches to CBDCs in terms of design, research, and development efforts.
China's digital yuan is still leading the game. The country has distributed more than 200 million yuan in digital currency as part of pilot projects across the country. It has conducted trials of its digital currency across different provinces, including Shenzhen, Suzhou, Xiongan, and Chengdu.
China also intends to test its digital yuan with foreign athletes and visitors during the Beijing Winter Olympics to be held in 2022.