The central bank digital currency (CBDC) race is still one of the biggest talks of the financial world — so much so that central banks of multiple countries have recently teamed up to work on a joint CBDC. The countries in question include Australia, South Africa, Malaysia, and Singapore, whose central banks aim to conduct an international payments trial with CBDCs.
Inspired by the use of crypto for quick and seamless international transactions, the banks wish to determine whether using CBDCs for such purposes would result in cheaper and easier transactions, compared to what traditional methods can offer.
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This is one of the largest international efforts regarding central bank digital currencies, and it is arguably different from most other CBDC use cases. For example, most countries are focusing on researching, creating, and testing retail-focused CBDCs meant to replicate the circulating cash. Others are using the so-called wholesale CBDCs, aiming to improve their international financial systems.
Four countries’ banks aim to transcend limitations encountered so far
Of course, it is also worth noting that most projects are still in the very early stages, in addition to being domestically-focused. With that said, it is still rather difficult to develop global rules and frameworks for central bank digital currencies, and then use them internationally. The complications can be technical, sometimes political, and often both.
This is what is typically preventing banks and regulators from even trying to create a project for such purposes. However, this new team-up decided to give the idea a go, and try to create prototype shared platforms that would allow international transactions, using not one, but multiple CBDCs. The four central banks, led by the Bank of International Settlements’ Innovation Hub, said as much in their latest joint statement.
They believe that the platforms, closely tied to one another, would allow financial institutions to directly transfer significant amounts of money using CBDCs, and eliminate the need for intermediaries, as well as high cost, and lengthy procedures. The initiative is still in its early stages, and it is expected to publish the results of its research in early 2022. However, the banks seem quite excited about the idea, and very optimistic about its realization.
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