The Reserve Bank of India (RBI) has started discussions with the Hong Kong Monetary Authority (HKMA), the U.S. Federal Reserve, and the international payment platform SWIFT to explore cross-border payments for central bank digital currencies (CBDCs).
The RBI has since formed a working group to spearhead discussions with its global counterparts as its CBDC pilots charge ahead, per an Economic Times report. India is currently exploring the prospects of a digital rupee for retail and wholesale uses of cross-border payment functionality, which appears to be a common theme underlying the RBI’s pilots.
The new working group has been tasked to establish a roadmap for settling international remittances using CBDCs, leveraging SWIFT’s expertise in global payments.
A partnership with the U.S. Federal Reserve and the HKMA is considered a step in the right direction for India, given the extent of the international remittances between the countries. Currently, inbound remittances from the U.S. make up 23% of the inflow into India, with Hong Kong contributing its fair share, ranking ninth place.
India’s working group will not be starting from scratch to explore cross-border functionality. The U.S. Federal Reserve has already conducted a successful cross-border CBDC trial with the Monetary Authority of Singapore (MAS). Still, the slow pace of developing a digital dollar has dampened the enthusiasm of industry players.
On the other hand, Hong Kong has significant experience with cross-border functionalities, given its collaboration with the People’s Bank of China (PBoC) and the digital yuan. Previously, the HKMA actively participated in a joint CBDC study by the Bank for International Settlements (BIS), collaborating with central banks from China, Singapore, and the United Arab Emirates (UAE).
SWIFT’s experiments with CBDCs for cross-border payment scenarios have shown “clear potential and value,” partnering with several global central banks and commercial banks, including HSBC (NASDAQ: HSBC), BNP Paribas, and Standard Chartered.
India has an existing arrangement with the UAE to explore cross-border payments and another with Singapore. Still, the proposed collaboration with the U.S. and Hong Kong could be its most ambitious move yet.
Cross-border payments receive high-level support
Despite recording impressive milestones with its CBDC pilot, RBI authorities are focusing on cross-border functionalities for the digital rupee. RBI Governor Shaktikanta Das expressed confidence in CBDCs as the “most effective and efficient mode for cross-border payments,” a claim shared by an Indian Treasury official.
“Cross-border payments will also become much quicker, more seamless, and very cost-effective,” said Das. “That is another area where a lot of attention needs to be given. We are constantly in dialogue with other central banks that have introduced or are introducing CBDCs.”
Apart from cross-border payment, the RBI is dabbling with offline payment functionality, programmable payments, and use cases in securities.
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: How CBDCs on Bitcoin should work
New to blockchain? Check out CoinGeek’s Blockchain for Beginners section, the ultimate resource guide to learn more about blockchain technology.
