25 March 2021

BIS: Multi-CBDC arrangements and the future of cross-border payments

Cross-border payments are inefficient, and technology could play a role in making them better. One means could be through interoperating central bank digital currencies (CBDCs), forming multi-CBDC (mCBDC) arrangements.

This paper explores dimensions of payment system interoperability, how they could feature in mCBDC arrangements and where potential benefits lie. These benefits are especially relevant for emerging market economies poorly served by the existing correspondent banking arrangements. Yet competing priorities and history show that these benefits will be difficult to achieve unless central banks incorporate cross-border considerations in their CBDC development from the start and coordinate internationally to avoid the mistakes of the past.

Cross-border payments are ever more vital for economies, especially transactions
underpinning tourism, e-commerce and remittances, which have grown substantially
over the last decade (Coeuré (2019) and Graph 1, left-hand panel). Yet such payments
are often slow, opaque and expensive.2 Improvement is a priority for globally
coordinated policy efforts, and a multi-year G20 “roadmap” is coordinating efforts
(G20 FMCBG (2020) and CPMI (2020)).

As well as driving improvements to current systems, central banks are exploring
the opportunities central bank digital currencies (CBDCs) might bring to cross-border
payments (Carstens (2020 (a, b), 2021), Group of central banks (2020) and Graph 1,
right-hand panel). CBDCs are a widely researched new form of digital central bank
money, which are just starting to be issued and piloted in some jurisdictions.3
Improving cross-border payments efficiency is an important motivation for research
(right-hand panel).

Full paper

BIS

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