The International Monetary Fund (IMF) has unveiled the blueprint for a new cross-border payment platform—called XC platform—that relies on central bank digital currencies (CBDCs) to revolutionize international remittances.
IMF’s Financial Counsellor Tobias Adrian disclosed in a roundtable discussion in Morocco that the offering will provide for the seamless exchange of value between multiple countries. To achieve this, Adrian pointed out that digital representations of CBDCs will be made on the platform to make them interchangeable.
“To make a payment, participating banks would deposit their domestic central bank reserves in an escrow account controlled by the platform operator, and in return obtain a digital version to trade on the platform,” Adrian said.
Aside from the settlement layer, the XC platform has a programming layer designed to allow participants to make customizations regarding synchronized or delayed payments and capital flow management issues. Adrian adds that the programming layer will make it possible for payments to be automated, clarifying that it is the transaction that is automated, “not the money itself.”
The third layer of IMF’s proposed platform is the information management layer for compliance checks services to align with local anti-money laundering rules. Adrian points out that user privacy will be guaranteed since checks may be conducted outside the XC platform.
The IMF’s Financial Counsellor remarked that for the XC platform to be efficient, it requires “solid, transparent and effective” governance marked by a strong legal framework. He stated that the participating nations should be allowed to resolve disputes, implement capital flow management measures and be willing to support a “global safety net.”
“To get global finance right, we must come together to get global payments right. Some of the 45 billion dollars paid to remittance providers every year may then go back in the pockets of the poor,” Adrian noted.
The IMF’s belief in CBDCs
After launching several crusades against digital currencies, the IMF is now throwing its weight behind CBDCs, noting a range of benefits they offer to global finance.
“As money, CBDCs provide safety,” the IMF said. “As infrastructure, CBDCs bring interoperability and efficiency among private networks for digital money and assets.”
The IMF is pushing for CBDCs to be designed in the same manner as its XC platform to ensure compatibility with other private ledgers. To ensure uniformity, the IMF has published a handbook to guide central banks seeking to float their CBDCs after three years of providing technical assistance.
To learn more about central bank digital currencies and some of the design decisions that need to be considered when creating and launching it, read nChain’s CBDC playbook.
Watch: Blockchain provides perfect foundation for CBDC
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