Major international financial institutions are urging central banks to design their CBDCs in advance with the possibility of future interoperability.
Central bank digital currencies (CBDC) should be initially designed with interoperability to avoid such issues in the future. This is the view expressed in a report by the Future of Payments Working Group (FoP), which brings together representatives from the Bank for International Settlements (BIS), the International Monetary Fund (IMF) and the World Bank (WB).
Currently, a lot of CBDC projects are being actively developed, but key aspects of their architecture for future interoperability remain unaddressed. Therefore, international cooperation in the development of common standards for central bank digital currencies is needed to overcome existing problems with cross-border payments using CBDCs.
The report analyzes the largest CBDC projects already launched or ready to be launched: Jasper-Ubin, Aber, Prosperus, MAS, Helvetia, mBridge, HSBC, Jura, Dunbar, e-CNY, Sand Dollar, DCash and eNaira.
Interoperability or adoption of common CBDC standards will allow payment service providers (PSPs) to operate across systems. Interoperability will reduce costs, speed up transactions, and make banking services more accessible and transparent.
The coordinated development of CBDCs will also improve anti-money laundering (AML) and user verification mechanisms (KYC). But for this, central banks should join forces to work on digital currency interoperability. And this should be done at an early stage of development, while the opportunity remains.
Recall that the widespread introduction of CBDCs is expected by both representatives of financial institutions and ordinary users. According to a recent survey by The Economist, about 65% of users expect a central bank digital currency to completely replace physical currency in their country over the next decade.
