As central banks worldwide continue to contemplate the issuance of central bank digital currencies (CBDC), a recent paper from the International Monetary Fund (IMF), written by André Reslow, Gabriel Soderberg, and Natsuki Tsuda, explores the potential benefits and challenges of implementing retail CBDCs for cross-border payments.
The paper emphasises the importance of factoring in cross-border implications from the start when designing retail CBDC systems, even if cross-border payments are not immediately available. This proactive approach aligns with the G20 Roadmap’s priority to consider international dimensions in CBDC design, avoiding unintended barriers for future stages.
While the focus is on retail CBDCs, many lessons are also applicable to wholesale CBDCs and other forms of digital money. Retail CBDCs provide households with direct access to central bank money, reducing the need for intermediaries domestically. In cross-border payments, intermediaries for currency conversion and market access are still needed but are fewer, thus lowering credit and settlement risks.
The paper suggests that central banks should design retail CBDC systems to be modular and flexible, allowing them to integrate with different arrangements as the cross-border payment landscape evolves. The paper also enforces that international collaboration is paramount, with organisations like the IMF, World Bank, and Bank for International Settlements noted as playing crucial roles in fostering cooperation and providing guidance.
To ensure effective integration of cross-border considerations, the paper suggests that central banks should establish a cross-border workstream in their CBDC exploration efforts. The paper provides an analytical framework and key design considerations to assist central banks in this endeavour, promoting seamless and efficient cross-border payment systems.
For further details, the full paper is available to download here.
