Cross-Border Payments and the Difference Between Bulk and Individual Central Bank Digital Currencies (CBDCs)
In the ever-evolving world of digital currency, the focus on retail Central Bank Digital Currencies (CBDCs) for cross-border payments is gaining momentum. This shift is evident as numerous countries explore and discuss the implementation of retail CBDCs to enhance their national payment systems and foster financial inclusion.
Recently, Canada has decided to put its retail CBDC project on hold, while other nations forge ahead. For instance, Brazil is set to launch its retail CBDC, Drex, in 2025. Unlike many CBDC projects that prioritize blockchain, Drex is designed for scalability and interoperability within a centralized system. This development is expected to significantly impact cross-border payment mechanisms, particularly in cooperation with neighbouring countries also experimenting with CBDCs.
Thailand is another country mentioned in the same breath as Brazil, indicating active collaboration on interoperability and cross-border payment use cases. A broad group of other nations across Asia, Latin America, and Africa are also actively exploring interoperability and integration opportunities.
China, too, is part of this global trend, employing a hybrid model of retail and wholesale CBDCs. The e-CNY, China's digital currency, aims to combine the convenience of retail functionality with wholesale-level security, thereby enhancing cross-border payment potential.
European countries are also joining the fray, with many adopting similar hybrid models. The goal is to deliver faster, safer, and more cost-effective cross-border payments through varied technical and collaborative approaches.
The Bank for International Settlements (BIS) is at the forefront of this movement, with its Project mBridge aiming to create a multi-CBDC platform shared across countries. This project exemplifies the collaborative spirit driving the development of retail CBDCs for cross-border payments.
For those interested in staying updated on these developments, Joe Baker, the author of this article, offers a free newsletter on cross-border payments. Access to the article, including the wide range of research and analysis on global cross-border payments, can be gained by creating a free account. Joe Baker's LinkedIn profile is also available for those wishing to connect.
In conclusion, the global interest in retail CBDCs for cross-border payments is undeniable. Over 100 central banks are currently engaged in retail CBDC development, signifying a shared commitment to reducing costs, increasing efficiency, and delivering faster, safer cross-border payments. The future of digital currency in global transactions is an exciting prospect, and the developments in retail CBDCs are a significant step towards realising this potential.
[1] Source for Brazil, Thailand, and other countries: https://www.cbinsights.com/research/central-bank-digital-currency-cbdc-cross-border-payments/ [2] Source for China and Europe: https://www.cbinsights.com/research/central-bank-digital-currency-cbdc-cross-border-payments/ [3] Source for various countries: https://www.imf.org/en/Publications/GFSR/Issues/2021/04/26/Global-Financial-Stability-Report-April-2021-Chapter-3-Cross-border-payments-and-the-potential-role-of-central-bank-digital-currencies-47555
- The development of retail CBDCs, such as Brazil's planned launch of Drex in 2025, Thailand's ongoing collaboration, and China's e-CNY hybrid model, are transforming the cross-border payment industry, particularly in cooperation with other nations exploring similar digital currencies (technology, general-news, finance, industry).
- European countries, like many others, are also leveraging hybrid models to deliver faster, safer, and more cost-effective cross-border payments, reflecting a broader trend of global interest in retail CBDCs across various industries (technology, finance, general-news, industry).
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