• CBDCs can help to enhance cross-border payments when authorities coordinate internationally.
• Implications extend beyond national borders, highlighting the need for multilateral collaboration on macro-financial consequences and interoperability.
• Enhancements in regulatory, supervisory and oversight frameworks are essential preconditions for CBDCs to reach their cross-border potential.

Central bank digital currencies (CBDCs) have the potential to enhance the efficiency of cross-border payments, as long as countries work together. This is the main conclusion of a joint report released today by the Committee on Payments and Market Infrastructures, the BIS Innovation Hub, the International Monetary Fund (IMF) and the World Bank.

The report analyses how CBDCs could facilitate enhanced cross-border payments, and how practical efforts are taking these considerations forward. Facilitating international payments with CBDCs can be achieved through different degrees of integration and cooperation, ranging from basic compatibility with common standards to the establishment of international payment infrastructures. The analysis highlights both the need for multilateral collaboration on macro- financial consequences as well as the importance of interoperability between CBDCs.

To date, no major jurisdiction has launched a CBDC and many design and policy decisions are still unresolved. Also, most CBDC investigations by central banks focus on domestic issues. In this context, this report is exploratory and examines cross-border implications with the assumption that CBDCs will become widely used. To achieve the potential benefits for public welfare while preserving financial stability, further exploration of design choices and their macro-financial implications is essential.

“Reforming cross-border payments to make them cheaper, faster and more reliable is a priority and the G20 has endorsed a roadmap to address the key challenges. Our work on CBDCs is one part of this comprehensive programme. While many of the roadmap’s actions seek to improve the existing cross-border payments ecosystem, CBDCs offer the opportunity to start with a ‘clean slate’. It is crucially important that central banks take the cross-border dimension into account, in their work on potential CBDCs and so avoid many of the challenges in today’s legacy technologies and processes,” said Sir Jon Cunliffe, Chair of the Committee on Payments and Market Infrastructures and Deputy Governor for Financial Stability of the Bank of England.

“In the future, national arrangements could become interoperable by means of multiple CBDC (mCBDC) arrangements between central banks. These would mitigate cross-border and cross- currency risks and frictions, while reinforcing the role of central bank money as an anchor for the payment system. The BIS Innovation Hub is collaborating with a number of central banks to establish prototypes and proofs of concepts to explore different uses of wholesale CBDC in a cross- border context.” said Benoît Cœuré, Head of the BIS Innovation Hub.

“The implications of CBDCs, even if only intended for domestic use, will go beyond borders. The macro-financial implications will ultimately depend on several factors such as the level and nature of international adoption – ranging from niche adoption to facilitate remittances in certain corridors to widespread currency substitution. This report offers an early assessment, and a more extensive and dynamic analysis that takes more factors into consideration will be necessary in the future,” said Tobias Adrian, Financial Counsellor and Director of the Monetary and Capital Markets Department, IMF.

“Faster, cheaper, more transparent and more inclusive cross-border payment services would deliver benefits for citizens, businesses, and economies worldwide, and increase economic growth, international trade, global development and financial inclusion. Central bank digital currencies are a potential pathway to improving international payments, but they bring risks for emerging market and developing economies and require a lot of work on regulatory and policy conditions to be successful. The World Bank welcomes consideration of these complex issues in the G20 and looks forward to informing this discussion,” said Indermit Gill, Vice President Equitable Growth, Finance and Institutions Practice Group, World Bank.