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.

11 months ago

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