SWIFT and Accenture have published a new paper outlining how CBDCs could work in the real world, with a particular focus on cross-border payments.
The emergence of CBDCs is gathering speed with more than half of the world’s central banks actively considering their introduction, the paper says. The reasons vary including: to compensate for the reduced use of physical notes; to improve payments in digital retail; to respond to private cryptocurrencies that could threaten the role of fiat money; and to improve resilience and reduce risk in wholesale markets.
“Whatever the motivation, the momentum toward CBDCs seems clear and growing. Some central banks are already conducting live experiments, and the potential for currency evolution is being framed by some as a possible revolution in how value is exchanged.”
The paper offers guidance on how international financial systems and the financial community can prepare for the eventual introduction and adoption of CBDCs, with a focus on the possible move in payments to new forms of currency internationally. It outlines how CBDCs would work for cross-border payments and how they would integrate with the mix of currencies that already exist.
The paper lists key requirements for CBDCs to be a viable solution in international payments, including: a scalable interchange mechanism; interoperability; a foreign exchange mechanism; standardised interoperable rich data; financial crime compliance; a strong governance model; and compatible local infrastructure.
SWIFT is planning to experiment with CBDCs over the coming months. Its trials will explore how its platform could interact with the cross-border use of CBDCs.
“In collaboration with the community, SWIFT intends to explore its role further – both as a carrier of authenticated information about CBDC transactions, as it does today for fiat currencies, and as a carrier of actual CBDC value in whatever form it is issued,” SWIFT said.
The paper, available here, is aimed at advancing the dialogue around the impact of CBDCs on global payments.