Central banks of Canada, Singapore and UK propose digital currency for cross-border payments
The reserve banks of Canada, Singapore and the United Kingdom named central bank digital currencies (CBDCs) as being one of the solutions that can be used to simplify cross-border payments, making the whole system more transparent and secure.
The report called “Cross-border Interbank Payments and Settlements” states that Central Bank Digital Currencies (CBDCs) offer a multitude of advantages, including 24-hour availability, anonymity, as well as eliminating counterparty credit risk for participants.
There were three models outlined in the report. The first one is focused on a specific currency and therefore can only be processed under a specific jurisdiction. In the second one, the three large banks propose a currency-specific CBDC, which would be transmittable and exchangeable beyond the domestic jurisdictions, requiring banks to support different currencies. The third model involves multiple currencies, which can be transmitted or exchanged in all the participating jurisdictions. According to the report, this model does have some drawbacks, including volatility and investment activity.
The benefits of switching from traditional cross-border payment methods were the focus of the report. According to the banks, this would allow resolving issues of poor availability and fragmented standards, as well as the necessity to go through multiple intermediaries. If implemented, this could very well open a new era for cryptocurrencies, experts say.