Three Central Banks Could Use Crypto for Cross-Border Payments
Financial regulators of Canada, Singapore, and the United Kingdom have proposed using central bank-issued cryptocurrency (CBDC) to speed up cross-border payments.
A joint study of the three Central Banks states that CBDCs have several advantages in cross-border payments. Among them, availability 24 hours a day and anonymity. Moreover, it eliminates the risks of theft.
According to the report, two types of cryptocurrency can be used for such purposes: Wholesale-CBDCs and retail CBDCs. Each of them can be applied in three scenarios.
In the first scenario, W-CBDC should be tied to a specific national currency and used only in a specific country. In the second, regulators suggest developing W-CBDC, which can be used in each country. But it will be tied to only one fiat currency.
In the third scenario, Central Banks propose to develop a W-CBDC, backed with several fiat currencies. Such a cryptocurrency can be used in various jurisdictions. But, according to the study, such a model may suffer from volatility, manipulation and investment activity.
The study does not say whether regulators are going to take any action to implement each of the scenarios.