The International Monetary Fund (IMF) is working on a concept of global infrastructure to ensure settlement interoperability between digital currencies issued by central banks.
A new class of cross-border payment systems
The director of the International Monetary Fund told a conference in Morocco that the IMF was working on a principle of interoperability. According to her, the concept implies a “shared infrastructure”. This would help avoid the emergence of settlement blocs, which is the last thing anyone wants when seeking to avoid further economic fragmentation. The International Monetary Fund has outlined the outlines of the new cross-border payment system, which it says uses a single ledger to record and register central bank digital currency (CBDC) transactions, programmability and improved currency management. ‘information.
The new platform concept was unveiled on June 19 at a CBDC policy roundtable held in Morocco. The event was organized in partnership with the Central Bank of Morocco. At the event, Director of the International Monetary Fund’s Money and Capital Markets Department, Tobias Adrian, said the new platform could benefit both individual and institutional users by offering faster transaction times and fees. significantly lower. He added,
“Some of the $45 billion paid out to remittance providers each year could then go back into the pockets of the poor.”
In addition, the new platform can help central banks intervene in foreign exchange markets, resolve disputes and consolidate information on capital flows. It can also be adapted to domestic, wholesale and retail CBDCs.
Further details about the platform, called XC (Cross-Border Payments and Contracting) Platform, were disclosed in a IMF FinTech rating. The note was co-authored by the Director of the International Monetary Fund’s Monetary and Capital Markets Department and released the same day as the announcement.
“The XC platforms provide a single trusted ledger – a document representing ownership rights – on which standardized digital representations of central bank reserves in any currency can be exchanged.”
The XC platform was designed on the same model as the infrastructure of central bank digital currencies. It would consist of a stand layer with a single layer and access to the layer would be gradually expanded. At present, institutions must have a reserve account with their respective central bank in order to be able to carry out cross-border transactions. However, the XC platform would directly allow the trading of central bank token reserves, with liquidity still coming from institutions that held reserve accounts.
The XC platform will also offer a programming layer that would give institutions the ability to innovate and customize their services as needed, while an AML layer would help meet privacy protections and terms of trust. The platform would also not require a CBDC. Instead, the platform would facilitate interoperability between assets and money tokenized by the private sector and create standards and a safe environment for programming financial contracts.
In a press release, the IMF The Managing Director said,
“As we head into the next IMF and World Bank Annual Meetings in 2023, I just wrapped up an excellent roundtable with Bank Al Maghrib Governor Abdellatif Jouahri on Central Bank Digital Currencies (CBDCs) in as part of the High-Level Policy Roundtable on Central Bank Digital Currencies: The Role of the Public Sector in Money and Payments – A New Vision.”
The rise of CBDCs
According to a report by the Atlantic Council, 11 countries have launched their own central bank digital currency. Additionally, all G7 countries are currently in the development stage of establishing a CBDC. A total of 114 countries, representing 95% of the world’s gross domestic product, are planning to create a central bank digital currency. This is in stark contrast to just 35 countries in 2020. Proponents of central bank digital currencies say they can provide significantly better financial services to citizens, while critics say they pose a considerable risk to privacy.
Although there are signs of division, the United States is also exploring CBDCs, with treasury officials saying the agency is looking into privacy issues associated with CBDCs. Assistant Secretary for Financial Institutions at the US Treasury, Graham Steele, told the Transform Payments US 2023 conference that retail CBDCs have advantages and disadvantages, with a privacy challenge. Some lawmakers, such as the Governor of Florida and Republican presidential candidate Ron DeSantis, have openly opposed CBDCs. DeSantis had signed a bill banning CBDCs, making Florida the first state to do so.
“The movement to establish a central bank digital currency is an attempt to monitor and control the finances of Americans. This would violate privacy, limit consumer choice and undermine market competitiveness.
Republican Senator Ted Cruz also opposed CBDCs and even proposed banning the Federal Reserve from issuing a CBDC.
Disclaimer: This article is provided for informational purposes only. It is not offered or intended for use as legal, tax, investment, financial or other advice.