The IMF, World Bank, and Bank of International Settlements (BIS) have proposed the G20 in a joint report. They stated that a cross-border network of central bank digital currencies (CBDCs) would bring massive benefits to the world economy. They plan to underpin it by effective technological integration and proactive international cooperation,
The Joint Report
The report focuses on expanding the horizon beyond central banks’ specific CBDC research for domestic needs. Moreover, highlighting the importance of global synchronization and finding common ground between diverse national initiatives. So they can reap the potential advantages of digital currency.
The joint report thinks that the formation of CBDCs could provide a “clean slate” for the global financial system. This would enable it to improve the efficiency of cross-border payments if appropriately managed significantly.
Due to many intermediaries operating across multiple time zones across the correspondent banking process, the existing system for cross-border payments is hampered by significant transaction delays and expense charges, as per the research.
Furthermore, cross-border flows are usually opaque and difficult to track. This presents a threat to anti-money laundering (AML) and counter-terrorist financing (CFT) implementation.
Balancing The Potential Advantages
Over the past decade, the degradation of cross-border banking relationships has left some nations struggling to integrate into the global financial system effectively.
The research balances the potential advantages of CBDCs for enhanced efficiency and increased financial inclusion against the global macro-financial consequences and dangers associated with their broad usage for cross-border flows.
What does the Research say?
According to the research, a global push for CBDC issuance would include tight integration of multiple CBDCs and consistency of design choices and specific steps to minimize these macro risks.
The foundation would include coordinated tactics, standardized practices, and a degree of structural integration, covering the establishment of new international payment infrastructures to targeted regulations. Limiting foreign CBDC ownership or transfers, for example, could be part of the latter.