According to a BIS report based on a multi-CBDC pilot, international remittance speed has also improved significantly.
The Bank for International Settlements (BIS) has issued a report extolling the virtues of central bank digital currencies (CBDC), particularly in lowering the cost of cross-border payments.
According to a report published on Tuesday titled “Inthanon-LionRock to mBridge: Building a multi CBDC platform for international payments,” CBDCs can reduce cross-border payment transaction throughput from three to five business days to a few seconds.
The stated claim is one of the findings of phase two of Project Inthanon-LionRock, which involved the central banks of China, the United Arab Emirates, and the Hong Kong Monetary Authority.
According to the report, “the prototype demonstrates a significant increase in cross-border transfer speed from days to seconds, as well as the potential to reduce several of the core cost components of correspondent banking.”
According to the report, a PricewaterhouseCoopers estimate based on the results of the phase two prototype suggested a potential 50% reduction in the cost of cross-border payments.
According to the BIS report, the speed and cost benefits of CBDCs can be even more significant in jurisdictions where robust correspondent banking relationships do not exist.
With phase two completed, the project, now known as “mCBDC Bridge,” will enter the third phase, which will include additional pilot studies as well as the development of a possible roadmap for large-scale testing.
The mCBDC Bridge project is one of many multi-central bank digital currency projects that appear to be shifting toward greater collaboration in the field of national digital currencies.
Australia, Malaysia, Singapore, and South Africa recently announced a joint CBDC initiative.
These collaborative efforts are also championed by entities such as the BIS and the International Monetary Fund as more beneficial to the current financial landscape, particularly given the growing popularity of cryptocurrencies.
Indeed, the BIS has long advocated for CBDCs as a counter-measure to the proliferation of cryptocurrency and stablecoins in global payments.