According to researchers at the Bank for International Settlements (BIS), compatible government cryptocurrencies will open up opportunities for countries to improve the system of cross-border payments.
In a research note, BIS researchers Raphael Auer, Philipp Haene and Henry Holden presented potential cross-border payment mechanisms for several central bank digital currencies. The researchers say that the greatest efficiency will only be achieved if countries work together to remove banking barriers to a new, compatible form of money.
The authors of the report reject the idea of combining the world of digital payments with a cross-border global stablecoin issued by a private company such as Facebook. Compatible government cryptocurrencies are “preferable” to Facebook’s Diem project, they said. Convertible national cryptocurrencies “strengthen monetary sovereignty in the digital age,” while private cryptocurrencies simply transfer cross-border risks to another area.
To create a system of cross-border payments in compatible state cryptocurrencies, it is necessary to convince the largest central banks that cooperation is worth it. Many countries have already outlined their plans to issue state-owned cryptocurrencies, but concerns about competition with other central banks in this area are slowing progress. Central banks will need to coordinate policy, technical standards, data requirements, and regulation to create a viable and composable system.
The researchers noted that such cooperation can take a long time, as it took years to create a payment system in euros. Central banks can create a “shared distributed ledger” on the basis of which several state-owned cryptocurrencies will operate. But this is even more difficult. The multicurrency systems that usually foreshadow monetary unions are historically complex, and DLT governance and access issues do not make things easy.
In conclusion, the authors of the report said that central banks should think about cooperation in this area before launching isolated systems of state cryptocurrencies. Recall that last fall, the Central Bank of the Bahamas became one of the first banks to issue its own state-owned Sand Dollar stablecoin. The launch of the digital Bahamian dollar took place on October 20.
