Cross-Border Payments with Retail Central Bank Digital Currencies: Design and Policy Considerations (IMF Fintech)

Summary

• The framework analyzes cross-border retail CBDC payments across 5 core elements: access, communication, currency conversion, compliance, and settlement.p.8
• Project Icebreaker explored retail cross-border payments by interlinking the test systems of 3 central banks via a central hub.p.7
• Project Nexus created a blueprint connecting the test systems of 3 established instant payment systems into a cross-border retail payment network.p.18
• The Project Icebreaker payment execution protocol operates across 8 distinct phases using Hashed Time Lock Contracts.p.35

Key insights

1. Adopting international messaging standards like ISO 20022 helps facilitate cross-border interoperability between financial systems.p.8
2. Evaluating access policies for end users and intermediaries is paramount because wide access lowers currency conversion costs while potentially increasing capital flow volatility.p.8
3. Providing instant settlement and 24/7 availability helps decrease settlement and liquidity risks.p.8
4. Incorporating programmability can deliver efficiency gains by enabling synchronous payment versus payment settlement.p.8
5. Designing flexible or modular technical architecture helps domestic CBDC systems plug into evolving cross-border arrangements.p.8
6. Integrating smart CFMs allows central banks to automate capital flow management instructions directly within digital currency architectures.p.24