Currently, central banks are accelerating the research work of Central Bank Digital Currency (CBDC). As a new type of currency, some countries have issued and tested the operability of the currency in practice. Government agencies of various countries are generally concerned about the potential of digital currencies in promoting financial inclusion, improving transaction efficiency, and improving cross-border payments.
Recently, the Bank for International Settlements (BIS) in a report entitled “Multi-national central bank digital currency deployment and the future of cross-border payment” The sexual aspect was studied. The report pointed out that although the international market has a clearing system for cross-border payment transactions in the context of globalization, the system has shortcomings in terms of transaction duration and transparency. For cross-border companies, cross-border transactions will incur additional costs, leading to high cross-border payment costs. In addition, most cross-border payments are settled through correspondent banks. This process usually involves multiple parties, which increases the resistance and risk of transactions.
With the long-term development of globalization, the international market needs to build a better cross-border payment system, and the central bank’s digital currency may become a solution to this problem. BIS has proposed the Multi-CBDC bridge (Multi-CBDC bridge), which is to establish an association system for central bank digital currencies of different countries to improve the efficiency of cross-border transfer of funds. BIS believes that as governments increase the promotion of central bank digital currencies, the interoperability of central bank digital currencies among different countries has become crucial. Although any central bank that issues digital currency hopes to use digital currency to better achieve the country’s public policy goals, with the evolution of globalization, central banks of various countries need to consider the possible impact of their central bank digital currencies from an international perspective.
BIS mentioned that the Multi-CBDC bridge will use distributed ledger technology (DLT) to facilitate real-time cross-border transactions and build a network prototype that supports various central bank digital currencies. There are three modes to realize the plan as follows:
(1) The first model is to make the central bank digital currency systems of various countries compatible with each other when they are established. This model requires the establishment of a globally common technical standard and legal framework, but it will take several years to establish these unified standards and enable participants to implement them.
(2) The second model is to connect the digital currency systems of central banks in various countries. This requires the introduction of a shared technology interface between the digital currency systems of central banks of various countries, or the adoption of a common clearing mechanism.
(3) The third model involves recreating a system for multiple central bank digital currencies. This mode not only has the advantages of the second connection mode, it is also integrated.
According to another BIS latest survey on central banks, the proportion of central banks that have researched and discussed digital currency issuance has increased by about one-third in the past four years, and central banks of various countries are accelerating their next implementation plans. At present, a total of 86% of central banks in the world are developing central bank digital currencies; about 60% of central banks are conducting digital currency-related experiments, and 14% of central banks are promoting digital currency issuance and pilot arrangements. Among them, the Central Bank of the Bahamas is the only central bank that has officially issued its central bank digital currency. In addition, the retail central bank digital currency (Retail CBDC) issued to the public has also received increasing attention from central banks.
At the BIS seminar in April 2021, China also put forward a series of international proposals for central bank digital currencies, including the global use rules of central bank digital currencies, privacy issues (monitoring and information sharing) involved, etc. Mu Changchun, director of the Digital Currency Research Institute of the People’s Bank of China, stated that “the digital currency systems of central banks in different jurisdictions and exchanges should be interoperable” and that “information flow and capital flow should be synchronized to facilitate monitoring by regulatory agencies. Transaction compliance. “At the same time, the European Central Bank is also exploring the introduction of a digital euro in the next five years. Considering privacy issues, the European Central Bank is studying the possibility of introducing “anonymous credentials” that will allow users to privately transfer a limited amount of digital currency within a limited time.
Author/ Translator: Jamie Kim
Bio: Jamie Kim is a technology journalist. Raised in Hong Kong and always vocal at heart. She aims to share her expertise with the readers at blockreview.net. Kim is a Bitcoin maximalist who believes with unwavering conviction that Bitcoin is the only cryptocurrency – in fact, currency – worth caring about.