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Towards the holy grail of cross-border payments

Author

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  • Bindseil, Ulrich
  • Pantelopoulos, George

Abstract

The holy grail of cross-border payments is a solution allowing cross-border payments to be immediate, cheap, universal, and settled in a secure settlement medium. The search for such a solution is as old as international commerce and the implied need to pay. This paper describes current visions how to eventually find this holy grail within the next decade, namely through (i) modernized correspondent banking; (ii) emerging cross-border FinTech solutions; (iii) Bitcoin; (iv) global stablecoins; (v) interlinked instant payment systems with FX conversion layer; (vi) interlinked CBDC with FX conversion layer. For each, settlement mechanics are explained, and an assessment is provided on its potential to be the holy grail of cross-border payments. Several solutions are suitable for improving cross-border payments significantly, and some could even be the holy grail. JEL Classification: E42, E58, F31

Suggested Citation

  • Bindseil, Ulrich & Pantelopoulos, George, 2022. "Towards the holy grail of cross-border payments," Working Paper Series 2693, European Central Bank.
    • Handle: RePEc:ecb:ecbwps:20222693
    Note: 327704
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    File URL: https://www.ecb.europa.eu//pub/pdf/scpwps/ecb.wp2693~8d4e580438.en.pdf
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    References listed on IDEAS

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    1. Gai, Prasanna & Kapadia, Sujit, 2010. "Contagion in financial networks," Bank of England working papers 383, Bank of England.
    2. George Pantelopoulos, 2021. "Can Central Banks circumvent the impossible trinity within their operational frameworks? Theory and evidence," The World Economy, Wiley Blackwell, vol. 44(7), pages 2041-2075, July.
    3. Bindseil, Ulrich, 2020. "Tiered CBDC and the financial system," Working Paper Series 2351, European Central Bank.
    4. Stephanie Bolt & David Emery & Paul Harrigan, 2014. "Fast Retail Payment Systems," RBA Bulletin (Print copy discontinued), Reserve Bank of Australia, pages 43-52, December.
    5. Jim Bolton & Francesco Guidi‐Bruscoli, 2021. "‘Your flexible friend’: the bill of exchange in theory and practice in the fifteenth century," Economic History Review, Economic History Society, vol. 74(4), pages 873-891, November.
    6. Sean Foley & Jonathan R Karlsen & Tālis J Putniņš, 2019. "Sex, Drugs, and Bitcoin: How Much Illegal Activity Is Financed through Cryptocurrencies?," The Review of Financial Studies, Society for Financial Studies, vol. 32(5), pages 1798-1853.
    7. Tara Rice & Goetz von Peter & Codruta Boar, 2020. "On the global retreat of correspondent banks," BIS Quarterly Review, Bank for International Settlements, March.
    8. Morten Linnemann Bech & Umar Faruqui & Takeshi Shirakami, 2020. "Payments without borders," BIS Quarterly Review, Bank for International Settlements, March.
    9. Massimiliano Renzetti & Serena Bernardini & Giuseppe Marino & Luca Mibelli & Laura Ricciardi & Giovanni Maria Sabelli, 2021. "TIPS - TARGET Instant Payment Settlement The Pan-European Infrastructure for the Settlement of Instant Payments," Mercati, infrastrutture, sistemi di pagamento (Markets, Infrastructures, Payment Systems) 1, Bank of Italy, Directorate General for Markets and Payment System.
    Full references (including those not matched with items on IDEAS)

    Citations

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    Cited by:

    1. George Pantelopoulos, 2024. "Can external sustainability be decoupled from the NIIP?," International Economics and Economic Policy, Springer, vol. 21(1), pages 89-116, February.
    2. Bindseil, Ulrich & Pantelopoulos, George, 2022. "A brief history of payment netting and settlement," IBF Paper Series 02-22, IBF – Institut für Bank- und Finanzgeschichte / Institute for Banking and Financial History, Frankfurt am Main.
    3. Huseyin Oguz Genc & Soichiro Takagi, 2024. "A literature review on the design and implementation of central bank digital currencies," International Journal of Economic Policy Studies, Springer, vol. 18(1), pages 197-225, February.
    4. Manahov, Viktor & Li, Mingnan, 2024. "Stablecoins: New perspectives for travel and tourism," Annals of Tourism Research, Elsevier, vol. 107(C).
    5. Luzie Thiel & Jochen Michaelis, 2023. "Digitales Zentralbankgeld: Warum wagt niemand den ersten Schritt?," Vierteljahrshefte zur Wirtschaftsforschung / Quarterly Journal of Economic Research, DIW Berlin, German Institute for Economic Research, vol. 92(3), pages 5-8.

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    More about this item

    Keywords

    bitcoin; CBDC; correspondent banking; cross-currency payments; interlinking; stablecoins;
    All these keywords.

    JEL classification:

    • E42 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Monetary Sytsems; Standards; Regimes; Government and the Monetary System
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • F31 - International Economics - - International Finance - - - Foreign Exchange

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