Many powerful stakeholders are desperate to cut down on costly cross-border remittance fees. In this context, the IMF had noted that more than 100 countries are reportedly looking into CBDC development. Of late, several central banks have been working together to achieve the same.
To that end, a report by J.P. Morgan and Oliver Wyman recently showed just how much money could be saved with the use of multiple or multi-currency Central Bank Digital Currencies known as mCBDCs.
Banking on CBDCs
Bringing international central banks together to create and test a platform for CBDC remittances in various currencies is no easy – or affordable – feat. The savings must justify the input costs. Well, to make a long story short, the report claimed,
“A full-scale mCBDC network which facilitates 24/7 real-time, cross-border payments and FX PvP settlements could save global corporates nearly $100 billion annually.”
A reader might naturally wonder how much is bleeding out at the moment. According to the report, cross-border transaction flows in 2020 were around $23.5 trillion. However, the cost of making these transactions possible, excluding foreign exchange fees, was about $120 billion.
The report noted this value was approximately one-third of Singapore’s GDP. If that wasn’t enough, the average settlement time was reportedly two or three days.
In other words, mCBDCs could reduce costs by up to 80%.
