The International Monetary Fund (IMF) has unveiled a new concept for a class of cross-border payment platforms that leverages a single ledger to record transactions involving central bank digital currencies (CBDCs). The proposed platform, known as the XC (cross-border payment and contracting) platform, aims to enhance “programmability, information management, and overall efficiency” in cross-border payments.
During a roundtable on CBDC policy held in collaboration with the central bank of Morocco, Tobias Adrian, the IMF's director of the monetary and capital markets department, outlined the potential benefits of the new platform. Adrian highlighted that the XC platform could lead to reduced fees and faster transaction times, which would particularly benefit both individual and institutional users. He further emphasised that a significant portion of the $45 billion paid annually to remittance providers could be retained by the underprivileged if such a platform were implemented.
The XC platform offers a trusted single ledger, a document representing property rights and standardised digital representations of central bank reserves in any currency that can be exchanged. It's inspired by CBDC infrastructure and consists of three key layers. Firstly, a settlement layer allows for expanded access, enabling the trading of tokenised domestic central bank reserves without institutions needing to hold reserve accounts for cross-border operations. Liquidity would still be sourced from institutions with reserve accounts.
Secondly, a programming layer provides opportunities for innovation and customisation of services, allowing for the development of advanced financial contracts. Finally, an information layer contains necessary details for anti-money laundering (AML) compliance, meeting trust conditions, and ensuring privacy protections.
Importantly, the XC platform is not reliant on the use of CBDCs. It offers interoperability between assets and money tokenised by the private sector and facilitates settlements in central bank money. By providing standards and a secure environment for programming financial contracts, the platform aims to foster a safe and efficient ecosystem.
The IMF's proposal aligns with a similar concept put forth by Agustín Carstens, the general manager of the Bank for International Settlements, in a speech delivered earlier in the year. Carstens suggested a comparable system enabling central banks to intervene in foreign exchange markets, aggregate information on capital flows, and address disputes.
The writer is the founder at yMedia. He ventured into crypto in 2013 and is an ETH maximalist. Twitter: @bhardwajshash