Fintech Notes

Cross-Border Payments with Retail Central Bank Digital Currencies

Author/Editor:

Andre Reslow ; Gabriel Soderberg ; Natsuki Tsuda

Publication Date:

May 15, 2024

Electronic Access:

Free Download. Use the free Adobe Acrobat Reader to view this PDF file

Summary:

Many central banks are currently exploring the possibility of issuing retail central bank digital currency (CBDC). While the primary objective varies between jurisdictions, many central banks consider improved cross-border payments as a potential benefit and previous work has shown that CBDC can help overcome some of the frictions in cross-border payments. CBDC is a safe and liquid asset reducing the number of financial intermediaries and the settlement risk. Designing CBDC systems for cross-border payments is not fundamentally different from tailoring other payment systems. However, the roles and responsibilities might be slightly different in a CBDC system, and the central bank may play a more pivotal role given CBDC’s nature as public money as opposed to commercial bank money. This note draws lessons from ongoing experimentation and research to identify design and policy considerations when developing retail CBDC systems so it may be compatible for cross-border payments. The note focuses on retail CBDC—a CBDC primarily targeting households and non-financial firms—and leaves wholesale CBDC considerations for future work, although many of the discussions are applicable to wholesale CBDC and other forms of money as well.

Series:

Fintech Notes No 2024/002

Subject:

Anti-money laundering and combating the financing of terrorism (AML/CFT) Central Bank digital currencies Central Banks Crime Currencies Economic sectors Financial institutions Foreign exchange Money Nonbank financial institutions Technology

Frequency:

occasional