<p>A group of researchers writing for the Bank of International Settlements released a paper last week that explores the implications of central bank digital currencies (CBDCs) and how varying approaches to these emerging technological applications could improve conditions for cross-border payments.</p> <p>To be sure, the paper comes as the majority of central banks hold an R&amp;D-centric posture when it comes to CBDCs. But <a href="https://www.theblockcrypto.com/post/95266/beijing-digital-yuan-cash-atm" target="_blank" rel="noopener">widening tests in China</a> and the launch of the so-called <a href="https://www.theblockcrypto.com/linked/81929/the-central-bank-of-the-bahamas-officially-launches-its-sand-dollar-digital-currency" target="_blank" rel="noopener">Sand Dollar</a> in the Bahamas last October are signals that such initiatives are likely to continue to grow in number.</p> <p>The paper -- "Multi-CBDC arrangements and the future of crossborder payments" -- digs into the wonky details of how CBDC systems, especially those involving multiple currencies within a single framework -- could ease some of the long-standing issues around cross-border payments, including AML/KYC regulations, slow processing times, and outdated technology. </p> <p>Notably, the paper's authors position such approaches against the emergence of stablecoins -- private digital currencies pegged to fiat currencies like the U.S. dollar -- writing that "[m]ulti-CBDC arrangements are preferable to proposals that involve the creation of a global private sector global stablecoin. Instead, they look to foster a diversity of convertible national currencies and strengthen monetary sovereignty in the digital age." </p> <p>But in order for any benefits from a multi-currency CBDC system to be realized, central banks will need to collaborate, per the report's authors.</p> <p>Once again, such collaboration is positioned in the context of competition with stablecoins. As the authors note:</p> <blockquote> <p>"Coordinating early and openly can help central banks in identifying unintended barriers. This will aid efficiency. Yet for those central banks aiming to avoid competition from global stablecoins, it is a question of safety. A positive way to prevent widespread use of private global currencies is by fostering an efficient and convenient way to convert currencies."</p> </blockquote> <p>"A CBDC, compatible with others and benefiting from a diverse and competitive market for services, would be a real public good. To achieve this, central banks will need to collaborate," the report concludes.</p>