The Bank for International Settlements (BIS) issued a report on Tuesday on central bank digital currencies (CBDC). Dubbed “Inthanon-LionRock to mBridge: Building a multi CBDC platform for international payments”, the report lists benefits of CBDC as it pertains to the reduction of cross-border payments costs. Furthermore, it states that a CBDC can reduce the transaction throughput of cross-border payments from up to five business days to a few seconds.
A group of central banks from Asian countries arrived at this CBDC-capability conclusion at a recently concluded forum. The aforementioned forum, dubbed the Project Inthanon-LionRock, included the China, UAE, and Hong Kong governing monetary authorities. An official report stated:
“The prototype demonstrates a substantial increase in cross-border transfer speed from days to seconds, as well as the potential to reduce several of the core cost components of correspondent banking.”
Furthermore, the report also stated a PricewaterhouseCoopers estimate from the phase two prototype results. It revealed a reduction of up to 50% in the transaction costs of cross-border payments. In addition, the BIS report suggested that the speed and cost benefits of CBDC go further in jurisdictions devoid of certain traits, including excessive correspondent banking relationships.
Upon completing the phase two project, the ‘mCBDC Bridge’ will transition into its third phase.