Cross border payments do not appear to be a priority for countries around the world to participate in their own digital currency projects, according to a new report.
A new study released by the bank for International Settlements shows that although governments around the world are competing to become the first country to issue central bank digital currency (CBDC), no CBDC project really focuses on cross-border payment.
There is no ongoing global CBDC project specifically focusing on cross-border payment
The latest CBDC information disclosed by BIS is part of its quarterly report “development of international banking and financial markets” released on March 1. In the report, international financial institutions analyzed existing CBDC initiatives and the impact of major global issues in the market, such as the outbreak of the new coronavirus (covid-19) in China.
So far, at least 17 governments around the world are exploring the use of central bank digital currencies, including Iceland, Norway, Brazil and Israel, the BIS said. Although some global authorities have outlined the potential of CBDC for faster, cheaper and lower risk cross-border payment, none of the 17 global CBDC projects analyzed by bis focuses on promoting cross-border payment.
The BIS report is as follows:
As far as cross-border interconnection is concerned, no CBDC project explicitly focuses on payments outside the jurisdiction of the central bank. It is worth noting that several central banks are carrying out cross-border payment pilot projects focusing on the progress of consumers and CBDC.
In addition, BIS pointed out that some global jurisdictions, such as Denmark and Switzerland, believe that at the current stage of development, the cost of retail CBDC will exceed the revenue. However, the report points out that more and more countries continue to actively develop retail CBDC, and at least one third of global banks claim that they will issue retail CBDC as a medium-term priority.
The president of the European Central Bank outlined the potential of CBDC’s cross-border transfer
The fact that global CBDC projects do not focus on cross-border payments seems to be further evidence that officials are reluctant to test a new national currency on a global scale.
However, Christine Lagarde, President of the European Central Bank, said she was positive about CBDC and believed that more effective cross-border payments would be achieved by early January 2020.
Similarly, cointegration reported in November 2019 that the central banks of Canada, the United Kingdom and Singapore also believe that CBDC can help improve the credit risk of counterparties in cross-border inter-bank payments.
Sweden began testing its digital currency project e-krona on February 20, 2020, according to cointegration. The Bahamas launched the CBDC project in December 2019, known as project sand dollar. According to the governor of the Bahamas central bank, the Bahamas plans to adopt its own digital currency nationwide in the second half of 2020.
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