Cross-Border Payments with Retail Central Bank Digital Currencies

By Andre Reslow, Gabriel Soderberg, Natsuki Tsuda

May 15, 2024

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Format: Chicago

Andre Reslow, Gabriel Soderberg, and Natsuki Tsuda. Cross-Border Payments with Retail Central Bank Digital Currencies, (USA: International Monetary Fund, 2024) accessed December 30, 2024

Summary

Many central banks are currently exploring the possibility of issuing retail central bank digital currency (CBDC). While the primary objective varies between jurisdictions, many central banks consider improved cross-border payments as a potential benefit and previous work has shown that CBDC can help overcome some of the frictions in cross-border payments. CBDC is a safe and liquid asset reducing the number of financial intermediaries and the settlement risk. Designing CBDC systems for cross-border payments is not fundamentally different from tailoring other payment systems. However, the roles and responsibilities might be slightly different in a CBDC system, and the central bank may play a more pivotal role given CBDC’s nature as public money as opposed to commercial bank money. This note draws lessons from ongoing experimentation and research to identify design and policy considerations when developing retail CBDC systems so it may be compatible for cross-border payments. The note focuses on retail CBDC—a CBDC primarily targeting households and non-financial firms—and leaves wholesale CBDC considerations for future work, although many of the discussions are applicable to wholesale CBDC and other forms of money as well.

Subject: Anti-money laundering and combating the financing of terrorism (AML/CFT), Central Bank digital currencies, Central Banks, Crime, Currencies, Economic sectors, Financial institutions, Foreign exchange, Money, Nonbank financial institutions, Technology

Keywords: Anti-money laundering and combating the financing of terrorism (AML/CFT), Capital flow management, Capital flow management measure, CBDC design consideration, Central bank digital currencies, Cross-border payment, Cross-border payments, Currencies, ENaira, Fintech, Foreign exchange, Global, IMF Library, Nonbank financial institutions, Provider restriction

Publication Details

Pages:

43
Volume:

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DOI:

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Issue:

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Series:

Fintech Notes No 2024/002
Stock No:

FTNEA2024002
ISBN:

9798400272035
ISSN:

2664-5912

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