- Support for CBDCs to improve cross-border payments dropped significantly, with 13% support in 2024.
- Central bankers now favor interlinking instant payment systems like U.S. FedNow over CBDCs.
- Tokenization is gaining traction, with over 40% of central banks planning related projects in the next few years.
Despite ongoing research efforts, central bankers need to be more enthusiastic about central bank digital currencies (CBDCs). The Official Monetary and Financial Institutions Forum’s (OMFIF) latest annual survey shows a marked drop in support for Central Bank Digital Currencies CBDCs to improve cross-border payments.
According to the latest Future of Payments survey by OMFIF, only 13% of respondents supported central bank digital currencies as a solution in 2024, a sharp drop from 31% in 2023. Instead, 47% of central bankers now favor interlinking instant payment systems, like the U.S. FedNow service, as a more viable option for improving cross-border payments.
Cross-Border Payments Reach $290 Trillion
On November 30, Swift tweeted about the latest report from EY, which noted that the global payments market is expected to increase to $290 trillion by 2030. The report provides valuable insights into the factors driving this growth and the innovations in digital assets and currencies reshaping this space. Interoperability plays a crucial role in ensuring seamless cross-border transactions.
According to Kerigan, interoperability is crucial for seamlessly integrating central bank digital currencies and other digital assets into the global financial system. Kerigan’s insights are featured prominently in the report, which provides a comprehensive analysis of the innovations reshaping the cross-border payments industry.
Banks’ stress levels have increased as they are expected to respond to the growing volume of cross-border payments. The EY report shows that banks must embrace change and disruption in their space because other technological avenues, such as CBDCs and stablecoins, are changing the game. At the same time, almost 50% of the surveyed central bankers would rather utilize instant payment systems such as the U.S. FedNow service than central bank digital currencies.
Tokenization Gains Traction Amid CBDC Decline
As CBDCs decline, tokenization is emerging as one of the transformational innovations. In advanced regions, over 40% of central banks have confidence that tokenization has potential and plans to undertake projects within the next three to five years. By eliminating the need for manual compliance reviews, tokenized systems can revolutionize international payments.
The Bank for International Settlements (BIS) has recently withdrawn from mBridge, increasing rifts associated with adopting CBDC. However, BIS refuted any political reasons, emphasizing instead the global strategic construct that affects CBDC efforts. Project Agora, involving the central Banks of France, Japan, and the U.S., among others, seeks to achieve tokenized transfers using wholesale CBDCs.
Reports indicate that the US supremacy establishment through the Eurozone dominated the BIS to back out from a mBridge with a multi-CBDC initiative geared by China and other non-Western countries, indicating fierce ongoing discussions around CBDC adoption. Including processes that affect the correspondent banking system under the bill is becoming increasingly normative.
The agreement against the cost and efficiency of correspondent banking is strongly pressured by the pitfalls of KYC and AML containment, which are omnipresent now. Other more complex scenarios than this turmoil are ways to cover until ISO 20022-based standards are developed and in formats. Central banks are now considering other alternatives, such as tokenization, to avoid such complexities.
Read Also: RBA Drops Retail CBDC, Prioritizes Wholesale Digital Currency: Report
