Central Banks Seek Alternatives to CBDCs for Cross-Border Payments

Banking organizations worldwide are working to streamline cross-border payment processes, but the popularity of central bank digital currencies (CBDC) is waning in this context.

Central banks are actively focusing on improving cross-border payment systems, particularly to make them more cost-efficient. But to address this issue, central bank officials are increasingly favoring traditional instant payment systems over CBDCs. This is highlighted in a report by the Official Monetary and Financial Institutions Forum (OMFIF).

OMFIF analysts noted a steady increase in research activity on CBDCs but pointed out a decline in enthusiasm for their implementation. A key development in this process was the Bank for International Settlements (BIS) withdrawing from the mBridge project after four years of involvement.

The report explains that this decision was politically motivated, as the mBridge project is supported and developed by China and other states competing with Western countries. Besides, 11% of central banks reported reducing their use of the U.S. dollar, but the most popular solution for optimizing cross-border payments, according to the report, is the American FedNow system.

The OMFIF reports that approximately 47% of respondents would prefer to use FedNow to improve cross-border payments. The popularity of CBDCs in this context amounted to only 13%, although this figure reached 31% last year. The report also emphasizes that central banks aren’t ready to adopt stablecoins for cross-border payments.

FedNow, an American instant payment service for banking institutions, was officially launched in July 2023. As of September 2024, over half of American companies were already using the service and a similar platform called RTP to make instant payments.

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