2024-05-14-IMF-Cross-Border_Payments_with_Retail_Central_Bank_Digital_Currencies_43页_826kb

Cross-Border Payments with Retail CBDC: Key Design Considerations

Retails Central Bank Digital Currency (CBDC) has potential to improve cross-border payments by reducing intermediaries and settlement risk. However, its design must account for macroeconomic and regulatory implications across borders.

Five Core Elements Framework

Payments are analyzed through five interconnected elements:

• Access: Determines who holds CBDC and transaction restrictions. Non-resident access must balance inclusion with risks like currency substitution. Foreign exchange providers need regulated access.

• Communication: Payment initiation standards (ISO 20022 messaging, QR codes) and infrastructure choices (APIs, central hubs) enable interoperability.

• Currency Conversion: Models involve intermediaries or central banks managing forex liquidity and exchange rates. 24/7 funding mechanisms are critical for efficient conversion.

• Compliance: Includes AML/CFT standards, capital flow management measures (CFMs), and data privacy. Smart CFMs can automate rule enforcement.

• Settlement: Instant payments (24/7 availability) reduce settlement risk. PvP mechanisms like HTLC enable atomic cross-currency transfers.

Key Recommendations

• Central banks should factor cross-border implications early, especially regarding interoperability and 24/7 functionality.
• International coordination on standards (ISO 20022) and compliance lowers friction. Flexible system designs allow for interoperability with varied cross-border options.

Proposed Actions

1. Ensure 24/7 settlement and PvP mechanisms.
2. Adopt modular designs to integrate multiple payment corridors.
3. Enhance privacy while supporting automated compliance checks.
4. Explore regional liquidity solutions for underserved corridors.

These design choices significantly influence CBDC's effectiveness in secure, efficient international payments.