2018-11-16 16:05 |
In a November 2018 report by the Bank of Canada, Bank of England and the Monetary Authority of Singapore, emerging technologies and opportunities in the banking industry have been explored including the use of Wholesale Central Bank Digital Currencies. The report has been compiled and collated by KPMG and also includes inputs from commercial banks such as HSBC, TD Bank, OCBC Bank and UOB.
Challenges of Central BanksThe report goes on to list the following challenges Global Central Banks are facing particularly with the popular RTGS (Real Time Gross Settlement) system:
Operating old/legacy infrastructure Access to the RTGS system is limited to only eligible financial institutions Profitability and complexity of corresponding banking Foreign exchange costs of converting to different currencies Lack of transparency for the end user Unavailability of the services in certain jurisdictions Three Solutions Proposed by the ReportThe report goes on to provide the following three solutions to the aforementioned hurdles faced by Central Banks and other financial institutions when making cross-border transactions.
Enhancing the preexisting RTGS and SWIFT systems Central Banks to allow RTGS operators of different jurisdictions to open accounts in their (central bank’s) books in the currency of the given RTGS operator Issuing a Wholesale Central Bank Digital Currency (W-CBDC) Wholesale Central Bank Digital Currencies (W-CBDCs)It is with the third proposed solution that we are most interested in. This solution is further classified into three models.
The first includes W-CBDCs that are currency specific and can only be exchanged within the issuing country and not other jurisdictions.
The second involves currency specific W-CBDCs that can be exchanged beyond their home jurisdictions. It involves commercial banks holding multiple W-CBDC wallets with their home central bank. Each central bank will in turn support multiple W-CBDCs.
The third model involves one universal W-CBDC backed by multiple currencies. It will in turn be accepted in all participating jurisdictions.
Summing it up, the report by the Bank of Canada, Bank of England and the Monetary Authority of Singapore goes to show that the traditional cross-border payment systems are not efficient and need to be updated as technology evolves. One possible way of updating how funds move across borders, is the implementation of Central Bank Digital Currencies as explained in the 3 above models.
What are your thoughts on the proposed use of Central Bank Digital Currencies? Please let us know in the comment section below.
The post 3 Global Central Banks Propose Digital Currencies to Ease Cross Border Transactions appeared first on Ethereum World News.
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