• The Bank for International Settlements (BIS) has completed a pilot study of the use of central bank digital currencies (CBDCs) for cross-border payments.
• Results showed that CBDCs can be used to complete international transfers in seconds, with almost full autonomy and reduced costs and risks.
• The project was praised by central banks from Norway, Sweden, and Israel as contributing to global efforts to improve cross-border payments.
Bank for International Settlements Completes Pilot Study
The Bank for International Settlements (BIS) has completed a pilot study of the use of central bank digital currencies (CBDCs) for cross-border payments in collaboration with central banks in Norway, Sweden, and Israel. The purpose of the study was to test the technical feasibility of transfers across borders using different CBDCs, as well as to understand key technical and policy choices and trade-offs involved.
Results: Faster Transactions & Lower Costs
The results of the study revealed that central banks will have almost full autonomy when it comes to designing their own CBDCs while still making them interoperable with other CBDCs for cross-border transactions. Additionally, the study showed how a new CBDC system can reduce costs and lower settlement and counterparty risks for users. Most notably, it demonstrated that cross-border transactions involving multiple CBDCs can be completed in just seconds – compared to several days with today’s commonly used SWIFT system for international transfers.
Reactions From Central Banks
Torbjørn Hægeland, Executive director for Financial Stability at Norway’s central bank commented that this project “contributes to an important global effort” on improving cross-border payments. Similarly, Aino Bunge from Sweden’s central bank praised how this could “greatly benefit end users” by enabling instant cross-currency transactions.
About the BIS
The BIS is often referred to as the ‘central bank of central banks’ and is headquartered in Basel, Switzerland. It is led by former Bank of Mexico Governor Agustín Carstens who has been critical towards Bitcoin (BTC). He has referred to Bitcoin as “a combination of a bubble, a Ponzi scheme and an environmental disaster.”
Conclusion
This pilot confirms that there are great potential benefits associated with using CBDCs for international payments – faster transaction times and greater cost savings among others – but also shows us that there are many remaining questions about how these systems should best be designed going forward.