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Central Bank Digital Currency: New Opportunities for Cross-Border Payments

Author

Listed:
  • Galina V. Semeko

    (Institute of Scientific Institute of Scientific Information for Social Sciences, Russian Academy of Sciences (INION RAN), Moscow 117418, Russian Federation)

Abstract

In the context of the rapid growth of international cash flows under the influence of globalization and digitalization of the world economy, the disadvantages of the correspondent banking network for crossborder money transfers are becoming increasingly obvious. Cross-border payments continue to be largely based on the old correspondent banking model, which has not quite benefited from the flow of innovations. New technologies have the potential to facilitate fast, low-cost, transparent and scalable payments. There is a need to modernize international payment systems and to develop alternative payment instruments based on new financial technologies. Central banks and the payments industry are considering ways to improve cross-border systems. One of the most relevant and widely discussed new payment instruments is the central bank digital currency (CBDC). А consensus has been reached in the global community on the expediency and profitability of introducing this new form of fiat money into retail payments, and a large number of countries are implementing relevant projects. In contrast, the promotion of the CBDC in the field of wholesale payments is lagging behind. However, studies confirm viability of using the CBDC in wholesale cross-border payments. A number of central banks are working on wholesale cross-border payment models, and international cooperation among central banks on wholesale CBDC, including for cross-border payments, is intensifying. The article discusses how cross-border wholesale CBDC can address challenges of the existing correspondent banking arrangement. The main purpose is to analyze the results of the most advanced international projects aimed at creating cross-border payment systems based on CBDC and distributed ledger technology. The design features of the proposed payment models, their effectiveness and potential risks are considered.

Suggested Citation

  • Galina V. Semeko, 2022. "Central Bank Digital Currency: New Opportunities for Cross-Border Payments," Finansovyj žhurnal — Financial Journal, Financial Research Institute, Moscow 125375, Russia, issue 4, pages 108-121, August.
    • Handle: RePEc:fru:finjrn:220407:p:108-121
    DOI: 10.31107/2075-1990-2022-4-108-121
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    References listed on IDEAS

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    1. Raphael A. Auer & Giulio Cornelli & Jon Frost, 2020. "Rise of the Central Bank Digital Currencies: Drivers, Approaches and Technologies," CESifo Working Paper Series 8655, CESifo.
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    More about this item

    Keywords

    central bank digital currency; cross-border payments; cross-border payment system; multicurrency payment system; distributed ledger technology; Bank for International Settlements;
    All these keywords.

    JEL classification:

    • B27 - Schools of Economic Thought and Methodology - - History of Economic Thought since 1925 - - - International Trade and Finance
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E59 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Other
    • E65 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Studies of Particular Policy Episodes

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