In a pilot program explored using central bank digital currencies (CBDCs) to make cross-border payments, it was found that the transactions could be slashed from days to just seconds, the Bank for International Settlements (BIS) said.
The Bank for International Settlements, the international financial institution owned by central banks, published a report on Tuesday saying cross-border payments via central bank digital currencies (CBDCs) can be made in seconds compared to the existing three to five days.
Not only that, but the CBDC payments can also help reduce transaction costs by over 50% in comparison to the payments passed via a network of correspondent banks.
The deduction was made in response to a pilot program conducted by the BIS which initially involved central banks in Hong Kong and has expanded to include China and the central banks of the UAE.
Two weeks earlier, the head of the BIS Innovation Hub, Benoît Cœuré said that central bank banks should have their own CBDCs in order to compete with the advent of stabelcoins and crypto-assets being already there. At the time, he said:
“We should roll up our sleeves and accelerate our work on the nitty-gritty of CBDC design. CBDCs will take years to be rolled out, while stablecoins and crypto assets are already here. This makes it even more urgent to star.”
As central banks around the world race into researching their own domestic CBDCs, the international dimension of facilitating cross-border payments is certainly the most significant. In fact, certain central banks are already collaborating to explore the use of CBDCs in cross-border payments.
The G20 even made cross-border payments a priority with a focus on central bank digital currencies (CBDCs). In its discussion paper for retail CBDCs, the Bank of England (BoE) emphasized the possibility of central banks working together to link domestic CBDCs to ensure fast and efficient cross-border payments.
Furthermore, the Bank for International Settlements (BIS) is also leading research on cross-border payments via CBDC via interlinked CBDC systems and integrating multiple CBDCs in a single system.