Another piece on the growing experimentation with CBDCs, this one posted in Banking & Finance. Various central banks have been quite active in testing x-border CBDC exchanges with their neighbors, as we have been tracking on these pages. It is also interesting to note that although the Fed continues to participate in various studies, there is a healthy institutional skepticism about CBDCs, which does not seem to be widely shared at this point, given the spreading activity.
This referenced announcement describes x-border CBDC exchanges of Singapore dollars and Euros, between the MAS and the Banque de France, the central bank of France.
‘This is the first multi-CBDC experiment that applied automated market making and liquidity-management capabilities to reap cross-border payment and settlement efficiencies, said the two central banks in a joint statement….Currently, cross-border payments rely on correspondent bank arrangements that have limited transparency on foreign exchange rates, restricted operating hours of payment infrastructure, and currency settlement delays due to differences in time zones.’
The posting goes on to describe in limited detail how the simulated transactions were completed. Although the piece mentions JPMorgan’s Onyx platform and a permissioned blockchain network using Quorum technology, we would guess this is the JPMorgan Interbank Information Network (IIN).
So the various potential benefits of x-border CBDCs are reviewed (more visibility, faster, cheaper, etc), including a reduction in KYC complications given the bypassing of X number of correspondent banks, which is the traditional path for x-border B2B transactions. There will be more of these announcements going forward and we’ll keep you posted.
‘Sopnendu Mohanty, chief fintech officer of MAS, said that this multi-CBDC experiment has “broken new ground” by decentralising financial infrastructure to improve liquidity management and market making services. “It charts the path for scalable CBDC networks in which central banks and commercial banks can work together to achieve the vision of cheaper, safer and more efficient infrastructure for cross-border payments,” he said….Valérie Fasquelle, director of Infrastructures, Innovation and Payments at Banque de France, said: “It is an opportunity to construct arrangements for multiple-CBDC models, improving cross-border payments and increasing harmonisation of post-trade procedures.” ‘
Overview by Steve Murphy, Director, Commercial and Enterprise Payments Advisory Service at Mercator Advisory Group
