Cross-border payments don’t seem to be a priority for countries around the world engaging in their own CBDC projects, according to the BIS report. But several central banks are working on cross-border payment trials, alongside their CBDC efforts.
02 March, 2020 | AtoZ Markets – The Bank for International Settlements (BIS) has released its Q1 2020 report, which details several conclusions and reflections the institution has made on digital currencies. Research includes Central Bank Digital Currencies (CBDC), peer-to-peer currencies, asset tokenization, and cross-border payments.
About CBDC Project in BIS Report
World’s governments compete to become the first country in the globe to issue a CBDC. However, no CBDC project focuses on cross-border payments, says a new study published by the BIS. The BIS also examines how new entities that are developing new payment platforms have emerged. These platforms compete with traditional payment systems provided by banks, and the incumbents themselves are redeveloping their systems.
According to the BIS, at least 17 governments are exploring the use of central bank digital currencies around the world to date. It includes countries like Canada, Iceland, Norway, Brazil and Israel. But, none of the 17 global CBDC projects analyzed by the BIS aims to facilitate cross-border payments. But several global authorities have highlighted the potential of the CBDC for faster, cheaper and less risky cross-border payments. The BIS report says:
“About the emphasis on cross-border interconnections, no CBDC project is explicitly focused on payments beyond the jurisdiction of the central bank. Several central banks are working on trials consumer-oriented cross-border payments, alongside their CBDC efforts. “
BIS Offers Potential Architectures for CBDCs
The BIS also talks about the technical considerations for a CBDC and the needs of consumers. Besides, the BIS offers three potential architectures for CBDCs: indirect, direct and hybrid models. The first involves a tiered structure that relies on various banks, while the central bank handles wholesale payments. The second model involves only the central bank, and the third is a hybrid of the two systems. The conclusion that emerges is that the banks must share the results of the CBDC pilot projects to agree on an ideal model.
Some global jurisdictions such as Denmark and Switzerland believe that the costs of a retail CBDC would outweigh the benefits at this stage of development. However, more countries continue to actively develop retail CBDCs, with at least one-third of all global banks. They consider issuing a retail CBDC a medium-term priority, notes the report.
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