Multi-CBDC arrangements and the future of cross-border payments

Cross-border payments are inefficient, and technology could play a role in making them better. One means could be through interoperating central bank digital currencies (CBDCs), forming multi-CBDC (mCBDC) arrangements. This paper explores dimensions of payment system interoperability, how they could feature in mCBDC arrangements and where potential benefits lie. These benefits are especially relevant for emerging market economies poorly served by the existing correspondent banking arrangements. Yet competing priorities and history show that these benefits will be difficult to achieve unless central banks incorporate cross-border considerations in their CBDC development from the start and coordinate internationally to avoid the mistakes of the past.

JEL classification: E42, E51, E58, F31, G21, G28, L50, O32.

Keywords: central bank digital currency, CBDC, multi-CBDC arrangements, mCBDC, mCBDC bridge, cross-border payments, payment systems, central banking, digital currency, stablecoins, remittances.