Understanding that the current cross-border landscape remains fragmented, the International Monetary Fund (IMF) is exploring the use of a trusted ledger which would facilitate interoperability, safety, and efficiency for cross-border payments.
During the Atlantic Council conference held earlier this week, Tobias Adrian, Director of the Monetary and Capital Markets Department at the IMF, spoke about the potential of the unified ledger, which he referred to as XC. This was a continuation from a speech he gave in June, where he discussed XC’s main advantages:
- Settlement with central bank reserves offers safety
- Interoperability with national currencies and legacy systems
- Assists in managing information flows to resolve economic friction
- It relies on transparency and rule-based governance, in accordance with the international monetary system
The aim, Adrian noted, is to ensure payments get to their destination and to ensure compliance with anti-money laundering, counter terrorist financing, and Know Your Customer regulations.
Efforts Towards a More Unified Infrastructure
Despite the growing adoption of cross-border payments worldwide, the landscape is still lacking in faster, more affordable payments, messaging and trust between countries, and regulatory checks. But headways are gradually being made.
In response to these and other challenges, the Bank for International Settlements (BIS), along with central banks, and ASEAN countries launched Project Mandala to facilitate compliance processes in cross-border payments. Compliance procedures are automated, and the initiative offers real-time transaction monitoring, which helps boost transparency when it comes to policies specific to a country.
In 2021, Project mBridge was also launched by the BIS to use CBDCs to facilitate real-time cross-border transactions. It enables digital currencies from various jurisdictions to be connected within a unified infrastructure.
These efforts are the right step forward, but as previously mentioned, there’s still much work that needs to be done in the world of cross-border payments. At the Atlantic Council conference, Adrian noted while key strides will be made because of the XC platform, the 190 countries that make up IMF’s global membership will need work and take initiative to continue this momentum.