Pilot Study Sets Out Benefits of Retail CBDCs for Cross-Border Remittances

A pilot study on Central Bank Digital Currencies (CBDCs) conducted by The Digital Dollar Project, in partnership with Western Union, BDO Unibank, and Accenture, outlined the potential advantages of retail CBDCs in cross-border remittances. The study highlights how CBDCs could address existing challenges faced by customers in international money transfers, laying the groundwork for future research and public-private collaborations to fully understand and maximize the benefits of CBDCs in this context.

Key Findings from Digital Dollar Project CBDC Pilot

The pilot study uncovered four primary benefits of retail CBDCs in cross-border remittances:

1. Alleviating Current Challenges: CBDCs have the potential to mitigate several existing issues in cross-border remittance transactions, enhancing the overall user experience.

2. The Need for Further Research: While the initial pilot study showed promise, a comprehensive understanding of CBDCs’ impact requires additional research and experimentation. Transparent public-private partnerships can play a vital role in advancing this exploration.

3. First Step Towards Advancing Public Discussion: The successful execution of the pilot study marks the initial phase of a long journey in stimulating public discourse and deliberation on the advantages and challenges posed by CBDCs in cross-border remittances.

The pilot study also highlighted that Distributed Ledger Technology (DLT) offers several advantages for cross-border remittances, including peer-to-peer transactions, atomic settlement, and enhanced transparency.

The use of DLT in designing a simulated retail CBDC (rCBDC) as a tokenized bearer instrument similar to physical cash streamlined customer transactions, reducing intermediaries, and improving speed and efficiency while lowering costs.

Moreover, DLT-based systems align with the Financial Stability Board’s (FSB) remittance targets, which include driving cost improvements, ensuring faster payment processing, enabling broader access to remittance services with proper AML/CFT checks, and minimizing data requirements for cross-border remittances. The study’s findings support the potential of DLT-based CBDCs to enhance cross-border payment systems in line with international standards.

Dangers of CBDCs

Not everyone is convinced that the benefits of CBDCs would outweigh the negatives. There’s been a considerable amount of pushback, particularly in the US, where a number of bills have been introduced that would ban CBDCs.

See Also

Ripple Launches “CBDC Innovate” Hackathon

In February this year, the Cato Institute, a US-based libertarian think tank, published a report warning about the potential dangers of central bank digital currencies (CBDCs). The Cato Institute’s CBDC report noted a number of concerns regarding the implementation of a digital dollar, including government surveillance and control of citizen’s finances, the ability to apply negative interest rates, and the potential for CBDCs to be programmable (in the sense that governments could theoretically dictate what users would be permitted to purchase with their CBDC).