Expanding Efforts in Central Bank Digital Currency Development
A groundbreaking survey published this week reveals that 94% of central banks worldwide are now working on Central Bank Digital Currencies (CBDCs), with a significant focus on enhancing cross-border payments. The survey, conducted by the Bank for International Settlements, involved 86 central banks from around the world.
Building Interoperable Frameworks
The current strategies for cross-border payments using CBDCs aim to create interoperable frameworks, often through collaboration across jurisdictions. For instance, the Project Inthanon-Lionrock, a joint initiative between the central banks of Thailand and Hong Kong, is designed to establish systems that enable different countries' CBDCs to work seamlessly together, facilitating cross-border transactions.
Integration with Stablecoins and AI
Many pilots combine CBDCs with stablecoins, creating dual-layer mechanisms that enhance liquidity and enable near real-time settlement, reducing costs and settlement times in cross-border payments. Additionally, intelligent payment routing systems powered by Artificial Intelligence (AI) optimize the payment paths by analysing foreign exchange rates, transaction sizes, and other factors to minimise cost and maximise speed, while AI-based fraud detection improves security.
National Strategies and Technological Architectures
Different countries are adopting various technological architectures for their CBDCs. Some, like the Bahamas and Nigeria, use private permissioned blockchains, while others, such as Jamaica, opt for centralised ledgers. The two-tier model, involving central banks issuing CBDCs and financial intermediaries distributing them, is common.
Multidisciplinary Considerations
Discussions in 2025 also highlight governance, consumer protection, strategic autonomy, and the impact on monetary sovereignty as central to the design of CBDC systems supporting international payments.
Wholesale and Retail Focus
Around 68% of central banks are working on CBDCs that combine solutions for both wholesale and retail. Slightly under a third of central banks are focusing exclusively on retail solutions for CBDCs. Ensuring the singleness of money is a significant driver for many central banks.
Progress and Challenges
While abstract research on CBDCs has dropped, the number of live or close-to-live CBDCs remains very low. However, there has been a much greater increase in retail CBDC proof-of-concepts among Advanced Economies (AEs) compared to Emerging Markets and Developing Economies (EMDEs). In 2023, there has been an increase in the number of central banks engaging in both proof-of-concepts and full pilot initiatives for CBDCs.
Convergence between AEs and EMDEs
There is some convergence between AE central banks and those in EMDEs in their work on CBDCs. Advanced Economies, like those in Europe and North America, have seen a significant jump in the number of banks running pilots and proof-of-concepts for CBDCs. Emerging Markets and Developing Economies, such as China and Brazil, are also making strides in this area.
Potential Threats and Efficiency Gains
Potential threats from new forms of privately issued money are a concern for many central banks. On the retail side, potential efficiency gains are seen as key by many central banks. Cross-border payments continue to be a key driver for many central banks on the wholesale side.
In summary, the current strategies for CBDC cross-border payments emphasise building interoperable frameworks often in collaboration across countries, incorporating stablecoins for liquidity, employing AI to optimise transactions, and ensuring regulatory and operational resilience—all aimed at overcoming traditional challenges of cross-border payments such as high costs, slow settlement, and limited transparency.
- The integration of AI into CBDC systems is being considered, with AI-powered payment routing systems designed to optimize cross-border transactions by analyzing foreign exchange rates, transaction sizes, and other factors.
- The focus on data and cloud computing in the banking-and-insurance, finance, and technology industries is evident, as different countries are adopting various technological architectures for their CBDCs, including private permissioned blockchains and centralized ledgers.
