As the world moves towards cashless societies like CBDC, cash payments will become obsolete. This could mean that fiat currencies will cease to exist. Central banks have been aggressively creating Central Bank Digital Currencies to facilitate virtual transactions.
Many countries are currently developing or already have their Central Bank Digital Currency.
The Bank of International Settlements (BIS), which is moving forward with CBDC adoption for cross-border payments has started to test a multijurisdictional CBDC a month ago. BIS announced that the pilot project for the digital currency multi-jurisdictional central banks has been completed.
It took five weeks to complete the test, which involved $12 million of real value transactions and enabled over 160 cross border payments. Additionally, the pilot saw foreign currency transactions exceeding $22,000,000 between participating commercial banks.
The pilot was also attended by the UAE, Hong Kong and Thailand’s central banks. Daniel Eidan (Advisor and Solutions Architect, Bank of International Settlement) shared this information via a LinkedIn posting on Tuesday.
A Fully Functional CBDC Platform Is Now Emerging
Many financial professionals commented on the news. Maciej Jausz, a senior executive in eCommerce Business Development, inquired if the pilot looked at commercial aspects for cross-border payments.
Daniel Eidan said that although the pilot was focused on CBDC cross border payments and healthy CBDC, he would be interested in commercializing the program.
Eiden revealed further that the BIS would publish a detailed report by October. The pilot took place on the mBridge platform. The mBridge project (multi CBDC Bridge) was part of Inthanon-LionRock, a distributed ledger tech CBDC cross-border payment project. The project was initially limited to the Hong Kong Central bank and Thailand, and launched in September 2019.
First pilot studies are the initial step in the development of the multijurisdiction CBDC. After the first pilot study, the next stage will see the development of the multi-jurisdiction CBDC.
In September 2021, a BIS report stated that after revisions, a cross-border payment CBDC platform with fully developed functionality would be created. BIS would review the feedback received from minimum versions released and take into consideration any suggestions.
CBDCs gain global acceptance
A June 2022 report showed that about 90% of the world’s central banks are considering the adoption of CBDCs. The Atlantic Council reported that CBDCs have been launched in 11 countries. 15 of these are in their pilot phase while 26 others are in development.
Atlantic Council’s analysis also revealed that 46 CBDCs are in the research phase, ten are active, and two got canceled.
IMF published a September 2021 article online about how to improve digital infrastructures and cross-border payments. In the article, IMF discussed all aspects of cross-border payment risks and opportunities. The IMF also addressed the need for frameworks to ensure sustainable cross-border payment.
IMF recommends the following: Regulations of virtual assets service providers and stablecoins as cross-border payment gateways; Anti-money Laundering Laws.
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