The International Monetary Fund (IMF) has presented the outlines of a “new class” of 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 roundtable on CBDC policy to reveal their new platform concept on June 19. At the event, held in conjunction with the central bank of Morocco, IMF director of the monetary and capital markets department Tobias Adrian said the new type of platform could benefit individual and institutional users through lower fees and faster transaction times. He said:
“Some of the 45 billion dollars paid to remittance providers every year may then go back in the pockets of the poor.”
In addition, the platform would help central banks intervene in FX markets, aggregate information on capital flows and resolve disputes, Adrian said. The platform could be adapted for domestic wholesale and retail CBDC as well, he said.
The details of platform, dubbed the XC (cross-border payment and contracting) platform, were laid out in an IMF Fintech Note coauthored by Adrian and released the same day. It described the proposal:
“XC platforms offer a trusted single ledger – a document representing property rights — on which standardized digital representations of central bank reserves in any currency can be exchanged.”
The XC platform was designed on the model of CBDC infrastructure. There would be a settlement layer with a single ledger. Access to it would be expanded. Currently, institutions have to have a reserve account with a central bank to carry out cross-border operations, but the XC platform would allow the trading of tokenized domestic central bank reserves. Liquidity would still come from institutions with reserve accounts.
A programming layer would offer the opportunity to innovate and customize services. An information layer would contain AML details necessary to meet trust conditions and privacy protections.
Merci beaucoup cher gouverneur Jouahri for your warm hospitality & for co-hosting this CBDC conference w/ the IMF.
— Kristalina Georgieva (@KGeorgieva) June 19, 2023
The XC platform would not require the use of CBDCs. The platform would provide interoperability among assets and money tokenized by the private sector, and “usefully instill standards and a safe environment with which to program financial contracts,” as settlement would be carried out in central bank money.
The publication noted that Bank for International Settlements general manager Agustín Carstens proposed a similar concept in a speech he delivered in February.