Synchronicity will be key to CBDC and cross-border payments
As a Swiss consortium completes a wholesale central bank digital currency proof-of-concept, is the payments industry ready for CBDCs?
The Bank for International Settlements’ Innovation Hub Swiss centre, the Swiss National Bank and the financial infrastructure operator SIX confirmed a cross-border payments breakthrough on December 3.
The consortium had successfully explored the technological and legal feasibility of transferring digital assets through issuing a wholesale central bank digital currency (CBDC) onto a distributed digital asset platform and linking the digital asset platform to the existing wholesale payment system.
However, the consortium members acknowledged that while linking existing systems to new distributed ledger technology platforms could address policy and governance issues, it could also eliminate potential benefits. They observed that this project explored a wholesale CBDC and that a retail or general purpose CBDC would have different policy implications.
So what needs to be done to enable the use of CBDCs for cross-border payments – and what are the most likely use cases?
Markos Zachariadis is a professor and Greensill chair in financial technology & information systems at Alliance Manchester Business School.