The International Monetary Fund (IMF) has outlined the outlines of a “new class” cross-border payment system that uses a single ledger to record central bank digital currency (CBDC) transactions, programmability and improved information management.
IMF officials chose a CBDC policy roundtable to unveil their new platform concept on June 19. At the event, held in collaboration with the Central Bank of Morocco, IMF Director of Monetary and Capital Markets Tobias Adrian said the new type of platform could benefit individual and institutional users through lower fees and faster transaction times. He he said:
“Some of the $45 billion that is paid to remittance providers every year can then end up back in the pockets of the poor.”
In addition, the platform would help central banks intervene in foreign exchange markets, collect information on capital flows and resolve disputes, Adrian said. The platform could also be adapted for domestic wholesale and retail CBDCs, he said.
Details of the platform, called XC (Cross-Border Payments and Contracting), were provided in an IMF Fintech Note co-authored by Adrian and released the same day. He described the proposal:
“XC platforms offer a trusted single ledger – a document representing ownership rights – on which standardized digital representations of central bank reserves in any currency can be exchanged.”
The XC platform was designed according to the CBDC infrastructure model. There would be a settlement layer with a single ledger. Access to it would be expanded. Currently, an institution must have a reserve account with a central bank to conduct cross-border operations, but the XC platform would allow trading of tokenized domestic central bank reserves. Liquidity would still come from institutions with reserve accounts.
The programming layer would offer the opportunity to innovate and customize services. The information layer would contain the AML details necessary to meet the trust and privacy conditions.
Merci beaucoup cher gouverneur Jouahri for your warm hospitality and for co-hosting this CBDC conference with the IMF.
— Kristalina Georgieva (@KGeorgieva) June 19, 2023
The XC platform would not require the use of CBDC. The platform would provide interoperability between assets and money tokenized by the private sector, and would “helpfully instill standards and a secure environment for programming financial contracts,” as settlements would be made in central bank money.
The publication reported that Bank for International Settlements CEO Agustín Carstens proposed a similar concept in a speech he gave in February.