BIS policy perspectives on wholesale CBDC

The Bank for International Settlements (BIS) published central bank digital currency (CBDC) policy perspectives from seven central banks: Bank of Canada; Swiss National Bank; European Central Bank; Bank of England; Bank of Japan; Board of Governors Federal Reserve System; and Sveriges Riskbank.

On the topic of wholesale CBDCs, the paper noted that the evolving payments landscape requires central banks to give some consideration to how CBDCs may be used for wholesale and cross-border use cases. Jurisdictions issuing CBDC will likely want to enable cross-border payments between them.

Enabling, let alone enhancing, cross-border payments via a retail or wholesale CBDC will require central banks to collaborate and make substantial decisions about how CBDCs connect across respective jurisdictions, as well as approaches to nonresident access.

There have been several experiments looking into whether wholesale CBDCs can help to improve cross-border payments and the settlement of tokenized assets both domestically and across borders. As financial institutions usually already have access to central bank money in digital form, discussion of wholesale CBDC tends to focus on central bank money which utilizes new technologies such as distributed ledger technology (DLT).

Compared with today’s central bank reserves, wholesale CBDC might enable programmability, composability and tokenization within the future financial system. For example, wholesale CBDC could facilitate delivery versus payment settlement in central bank money for tokenized assets and allow for efficiency gains in “atomic settlement”.

Many experiments with wholesale CBDC for cross-border payments have enabled a wider set of participants to have direct access to central bank systems. Broadening access arrangements to a wider set of participants (domestically and/or internationally) would be a significant policy choice that could also be undertaken without CBDC.

Therefore, further work is needed to understand how value could be drawn through issuing a wholesale CBDC – particularly what it may provide over and above upgrades and improvements to existing systems. Making improvements with CBDCs may also require central banks to consider the role of further governance and standardization or alignment in areas beyond messaging standards.

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