Cross-border payments do not appear to be a priority as countries all over the world to engage with their own digital currency projects, a new report says.
While global governments are competing to become the first country in the world to issue a central bank digital currency (CBDC), no CBDC project really focuses on cross-border payments, according to a new study released by the Bank for International Settlements (BIS).
No ongoing global CBDC projects explicitly focus on cross-border payments
The BIS’ new CBDC revelation is part of the bank’s quarterly review, the “International banking and financial market developments,” issued on March 1. In the report, the international financial institution analyzed existing CBDC initiatives alongside major global issues in the market such as the impact of the new coronavirus (Covid-19) outbreak in China.
According to the BIS, there are at least 17 governments exploring the use of central bank digital currencies over the world to date, including countries like Iceland, Norway, Brazil and Israel. However, none of the 17 global CBDC projects analyzed by the BIS is focused on facilitating cross-border payments, despite a number of global authorities outlining CBDC’s potential for faster, cheaper and less risky cross-border payments.
The BIS report reads:
“Regarding the focus on cross-border interlinkages, no CBDC project has an explicit focus on payments beyond the central bank’s jurisdiction. It is noteworthy that several central banks are working on cross-border payment trials with a consumer focus in parallel to their CBDC efforts.”
Additionally, the BIS noted that some global jurisdictions such as Denmark and Switzerland believe that the costs of a retail CBDC would outweigh the benefits at the current stage of development. However, a larger number of countries continue to actively develop retail CBDCs, with at least third of all global banks claiming that they consider issuing a retail CBDC as a medium-term priority, the report notes.
European Central Bank president outlines CBDC potential for cross-border transfers
The fact that no global CBDC project is focused on cross-border payments would seem like further proof of officials’ unwillingness to experiment with a new type of national currency on a global level.
However, Christine Lagarde, the president of the European Central Bank voiced her positive stance toward CBDC in terms of more effective cross-border payments in early January 2020.
Similarly, the central banks in countries like Canada, the United Kingdom and Singapore also believe that CBDCs can help improve counterparty credit risk for cross-border interbank payments, as reported by Cointelegraph in November 2019.
As such, Sweden started testing its digital currency project, the e-krona, on Feb. 20, 2020, as reported by Cointelegraph. The Bahamas, the island country that rolled out its CBDC project known as Project Sand Dollar in December 2019, plans to adopt its own digital currency across the whole country in the second half of 2020, according to the governor of the Central Bank of the Bahamas.
