Analysis: Central Bank Digital Currencies Can Slash Costs of Cross-Border Payments

Published: Dec. 1, 2023 8:01 p.m. GMT+8

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The development of central bank digital currencies (CBDCs) should fully tap the role of the existing infrastructure and technology to enable interoperability between CBDC systems of different jurisdictions as well as with existing payment systems.

In 2020, the G20 included central bank digital currencies (CBDCs) as part of its initiative to address the three major challenges in cross-border payments: high cost, low efficiency and low transparency.

However, concerns soon emerged among some economies regarding currency substitution, weakened capital management, and privacy issues, which were also concerns for China. So, in 2020, the People’s Bank of China (PBOC) introduced the three principles of “no disruption,” “compliance” and “interoperability” in cross-border CBDC cooperation, which have been proposed by the Bank for International Settlements (BIS) as the basic principles for the multiple-CBDC bridge (mBridge) project that involves China.