Central bank digital currencies can make cross border payments ‘faster and cheaper’, BIS says
- The Bank of International Settlements (BIS)-backed pilot scheme used blockchain to synchronise transaction data across participants in the payment chain
- The ‘mBridge’ pilot scheme involves the central banks of China, the United Arab Emirates, Hong Kong and Thailand
Central bank digital currencies (CBDCs) can slash the time needed for cross border payments to seconds from days and cut costs, the Bank of International Settlements (BIS) said, citing a pilot scheme to test the digital forms of fiat currencies.
The trial showed cross border transactions could be made in a few seconds, instead of three to five days, as CBDCs help skirt complicated arrangements under which payments are passed via a network of banks, the BIS said in a report on Tuesday.
CBDCs also helped reduce costs by up to 50 per cent, it added.
Typically, global banks with no network in a given country channel payments via a local bank that acts on its behalf.
Enabling faster and cheaper cross-border wholesale payments, including to jurisdictions that don’t benefit from a vibrant correspondent banking system, would be positive for trade and economic development
But the process has become long and complicated with banks cutting ties with potentially risky partners and withdrawing from some markets due to compliance and cost reasons.