The Central Banks in Singapore, South Africa, Malaysia, and Australia plan to pilot a cross-border payment scheme by using different Central Bank Digital Currencies (CBDCs).
Also, it is important to note that the Bank of International Settlement’s Innovation Hub (BIS) is spearheading the cross-border payment initiative.
Furthermore, in collective statements issued by Monetary Authority of Singapore, the South African Reserve Bank, the Bank Negara Malaysia, and the Reserve Bank of Australia, it has been disclosed that the aim of the scheme is to help “develop prototype shared platforms for cross-border transactions using multiple CBDCs”.
Additionally, the statement disclosed that digital platform would help “financial institutions to transact directly with each other in CBDCs, which could eliminate the need for intermediaries and reduce the time and cost of transactions”.
Mr. Fraziali Ismail, the Assistant Governor of the Bank Negara Malaysia, in his statement, disclosed that, the platform will be the basis for similar international payment platform.
“The multi-CBDC shared platform has the potential to leapfrog the legacy payment arrangements and serve as a foundation for a more efficient international settlement platform”.Mr. Fraziali Ismail
Meanwhile it is expected that in early 2022, the initiative will publish its results on different technical, governance and operating designs.
Also, many governments and monetary authorities around the world are exploring the use of the CBDCs. The CBDCs are digital forms of existing cash currencies.
Countries like China are employing retail focused CBDCs design to replicate physical cash in circulation.
Whereas other countries are mainly considering the use of wholesale CBDCs to improve the internal operations of their financial systems.
Also, most digital payments globally are in the early stages and are focused domestically. An example is Ghana’s E-cedi, which is part of the Ghana government’s ‘Cash-Lite’ agenda.
Furthermore, by establishing global frameworks and standards for the operation of CBDCs, it can be accepted internationally for transactions.
Digital money revolution
This digital payment innovations are already a reality, and it is in operation in about 110 countries globally, the IMF disclosed.
These digital currencies ranges from the Bahamas’ Sand Dollar, the People’s Bank of China’s eCNY, Bank of Ghana’s e-cedi, and the Stablecoin among others.
Meanwhile, countries like the USA and other economies are still understudying the benefits and drawbacks of the digital dollar.
However, the IMF in a blog post disclosed the need to enact the right policies to control the operations of digital currencies globally.
“There is a window of opportunity to maintain control over monetary and financial conditions, and to enhance market integration, financial inclusion, economic efficiency, productivity, and financial integrity.
“But there are also risks of stepping back on each of these fronts. We must enact the right policies today to reap the gains tomorrow”.International Monetary Fund (IMF)
Meanwhile, plans are underway to explore using CBDCs for cross-border transaction within the central banks of China, Hong Kong, Thailand, and the United Arab Emirates (UAE). Also, this initiative is led by the BIC.
In the nutshell, the initiative is intended to assess if the digital payment scheme will allow transactions to be settled more easily and cheaply across regional borders.