Wednesday, 11 August, 2021
The Digital Regulator
Cross-border challenges of a Central Bank Digital Currency and Global Stablecoins
On 9 July 2021, the Bank for International Settlements (BIS), the International Monetary Fund (IMF) and the World Bank, issued a Joint ReportReportlink1 to the G20, which analyses how CBDCs could facilitate faster, cheaper, more transparent, and more inclusive international payments. The report concludes that reaping such benefits will require significant conceptual and practical work and effective multilateral collaboration and the implementation of new infrastructures, in short, a long timeline. In these circumstances, could the implementation of a GSC in open collaboration with monetary authorities deliver those efficiency and inclusiveness enhancements to the international payments system more swiftly? After all, last year, the G20 made the enhancement of cross-border payment a priority, and the G7, in June this year, reiterated that no GSC should launch unless it is properly regulated. Open collaboration with the monetary authorities would ensure appropriate consideration to the impacts of a GSC rollout on monetary policies and on the management of cross-border flows. The alternative is to perpetuate the drawbacks of the current international payments system for the foreseeable future.
Challenges of Implementing CBDC-based Cross-border Payments
On 9 July 2021, the BIS, the IMF and the World Bank issued a Joint Report titled, ‘Central bank digital currencies for cross-border paymentsCentral bank digital currencies for cross-border paymentslink1’ (henceforth, ‘the report’) for the G20. The report identifies crucial aspects in the design and implementation of a CBDC-based cross-border payment system to deliver faster, cheaper, more transparent and more inclusive international payments. The report examines the infrastructural aspects and macroeconomic issues surrounding a CBDC-based cross-border payment system. We summarise the report, draw conclusions and speculate about the opportunity for a GSC to deliver more swiftly efficient.
In conclusion, the report on CBDCs for cross-border payments issued by the BIS, the IMF and the World Bank for the G20 is a landmark analysis of the challenges that a CBDC-based international payment system needs to address to improve the current international payment system— unanimously perceived as slow, expensive, opaque and insufficiently inclusive.
Other Noteworthy Developments
We continue to witness exponential growth in CBDC pronouncements by central banks. This suggests that many countries may be about to implement wholesale and / or retail CBDCs.
The SEC continues to delay the authorisation of a bitcoin ETF in the USA. Yet, the general opinion is that the authorisation is a matter of ‘when’ as opposed to ‘if’ and that the SEC will authorise the first bitcoin ETF soon.
The Financial Action Task Force (FATF) informed that the revised Guidance on virtual assets and VASPs would be finalised in October. The EU intends to propose a new crypto-dedicated Anti-Money Laundering agency.
Last year, the G20G20link1 declared the enhancement of cross-border payment as a policy priority. In June 2021, the G7G7link1 reiterated that no GSC should launch unless it is properly regulated. The report issued by the BIS, the IMF and the World Bank on 9 July 2021, ‘Central bank digital currencies for cross-border payments’, shows that the nature of the issues to analyse and resolve before the emergence of a CBDC-based international payment system necessitate that it will require a longer timeline. In these circumstances, it is worth speculating about the possibility of resolving the drawbacks of the current international payment system (inefficiency and lack of inclusion) by introducing a GSC in collaboration with the monetary authorities, to consider and prioritise unwanted macroeconomic risks. The alternative seems to be the perpetuation of the current pitfalls for the foreseeable future.
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