IMF, World Bank and BIS advocate the G20 for the central bank for digital currencies
In a joint report, the International Monetary Fund (IMF), the World Bank and the Bank for International Settlements (BIS) proposed to the G20 to set up a cross-border digital currency network of the Central Bank Central Bank (CBDC), supported by effective technology integration and proactive international ones Working together can bring significant benefits to the global economy.
The report focuses on broadening the horizon beyond individual central bank studies of domestic demand CBDCs and stresses the importance of coordinating work at the global level and finding common ground between different national efforts to take full advantage of the digital currency.
When used skillfully, the IMF, World Bank and BIS believe that the creation of CBDCs can be a “clean vehicle” that enables the global financial system to make financial institutions more efficient.
The report paints a grim picture of the current cross-border payments system, plagued by long transaction delays and high costs in the agent banking process due to the large number of intermediaries operating across different time zones.
In addition, cross-border flows are often opaque and difficult to track, which is a problem in anti-money laundering (AML) and terrorist financing (CFT) implementation. Over the past decade, the weakening of cross-border banking relationships has made it difficult for some countries to fully integrate into the global financial system.
The report looked at the significant benefits that CBDCs can offer to increase efficiency and improve economic inclusion versus the potential global macroeconomic impact and risks associated with widespread use.
These challenges include dealing with sudden capital inflows due to smoother cross-border flows and the potential impact on countries’ ability to control exchange rates. If foreign currencies become easier to earn, store and spend, widespread currency substitution could undermine country monetary independence and pose risks to both the issuer and the recipient country.
The report notes that accelerating the release of CBDCs around the world requires the tight integration of multiple CBDCs and the homogeneity of design decisions, as well as specific measures to minimize these macro risks.
The platform will not only focus on concept and design, but will also cover coordination strategies, standardization practices and structural levels of integration, from creating new international payment infrastructures to targeting guidelines. The latter may include, for example, the introduction of restrictions on holding or transferring foreign CBDCs.
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In addition to extensive infrastructure cooperation on technological interoperability and access to payment systems, a similar level of regulatory coordination is required, implying an alignment of supervision and the supervisory framework for cross-border flows and a combination of measures to combat money laundering and terrorist financing.
While most countries do research or pilot development for CBDCs, central banks have taken different approaches to CBDC design and conducted their research and development efforts in different ways. China’s digital yuan is an international leader, and many countries have tested CBDCs for cross-border use, including France, Switzerland, Singapore, and Bahrain, to name a few.