Central banks must take necessary steps to promote multinational interoperability and must make important decisions regarding the access of foreign financial institutions and investors to central bank digital currencies (CBDCs), according to a report by the Bank of International Settlements.
These are key steps to taking full advantage of benefits offered by CBDCs in cross-border payments, according to the report, Options for Access to and Interoperability of CBDCs for Cross-border Payments, which is jointly published by the BIS Committee on Payments and Market Infrastructures (CPMI), the BIS Innovation Hub, the International Monetary Fund and the World Bank.
This recognises that central banks have manifold reasons for developing CBDCs and, consequently, it is important to ensure interoperability across the different designs and cross-border arrangements that these central banks will employ, as well as linkage with non-CBDC payments systems.
The report evaluates these options based on five fundamental criteria: do no harm, enhance efficiency, increase resilience, assure coexistence and interoperability with non-CBDC systems, and promote financial inclusion.
The authors note that there is no “one size fits all” model for accessing CBDCs and promoting CBDC interoperability. Consequently, the report offers guidance for central banks regarding how they can best apply CBDCs to meet their cross-border payments objectives.
Reflecting on this central bank toolkit, Cecilia Skingsley, chair of the CPMI Future of Payments Working Group and first deputy governor of Sveriges Riksbank, the Swedish central bank, says: “By the end of 2021, more than a quarter of central banks were developing or running CBDC pilots. To make sure that cross-border functionalities are considered in time, central banks across the globe must collaborate at an early stage.
“Only then can CBDCs have a significant impact on the costs, speed, access and transparency of cross-border payments.”
