The Financial Stability Board (FSB), a G20-backed think tank, has cited the duo of government-issued Central Bank Digital Currencies (CBDCs) and stablecoins as key drivers in pursuing a better cross-border payment system.
A recent report published by the FSB highlights the projected roadmap in the buildup to facilitate a switch to sustainable payment models. The body said it is recommending that relevant authorities should “make any revisions to standards and principles or provide further guidance supplementing existing standards and principles in light of the FSB Report and following their review of their existing frameworks,” including on cooperation, coordination, and information sharing amongst authorities.
Several countries have different regulatory frameworks that guide their embrace and permit stablecoins and digital currencies as a whole. Despite these frameworks, most of which are unfriendly, there has been a significant switch from traditional financial payment models with their inherently high cost and slow speed. More consumers are beginning to rely solely on privately issued stablecoins for the transfer of value.
With the uptight effort, the FSB and its partner organizations are working hard to stump the dominant role of these privately issued digital assets in global payments. The proposed recommendation to revise local standards is billed to run till the end of 2021.
The FSB also posits that CBDCs can be a very viable competitor to digital currencies and recommends that global monetary watchdogs, including the IMF, World Bank, and the Bank for International Settlements (BIS), will need to capitalize on its already concluded stock-take of provisional domestic CBDC designs and central bank experimentation to determine the extent they could be used for cross-border payments.
At present, as many as 110 Central Banks are noted to be at various stages of their CBDC development. The overall target is to provide sustainable solutions to the pervasive challenges in local and international payments. For these, a recommendation for CBDC interoperability is also a development offering that CBDC issuers will need to consider in the near future.
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