Report urges central banks to work together on digital currency interoperability

The Bank for International Settlements, International Monetary Fund and World Bank say CBDCs should be scheduled in advance to avoid problems interoperability.

International agencies are urging central banks to consider interoperability early in the design of central bank digital currencies (CBDCs). The Bank for International Settlements (BIS) Committee on Payments and Market Infrastructures, the BIS Innovation Hub, the International Monetary Fund and the World Bank released a report on Monday examining three cross-border interoperability options that respond to challenges such as high costs, low speed, limited accessibility and lack of transparency.

This publication was a response to a 2020 report by the Committee on Payments and Market Infrastructures which identified 19 building blocks for improving cross-border payments. According to the authors, most work on CBDCs has so far focused on national policy goals. They then looked at variables such as accessibility of payment service providers (PSPs) and non-residents to wholesale and retail CBDCs and interaction with non-CBDC infrastructure.

Three approaches to interoperability were examined. Compatibility, or the adoption of common standards, would make it easier for PSPs to work across systems. Interconnection would allow system participants to establish contractual agreements, technical links, standards and operational components to transact between systems. The interconnection could be achieved through several models. Finally, a single technical system could host multiple CBDCs.

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International collaboration on the design of CBDCs is needed to overcome the challenges of cross-border payments, and...