Central Banks & Distributed Ledger Tech Whitepaper

Can Distributed Ledger Technologies (DLT) be the basis for a revolution in cross-border payments?

Cross-border payments and the correspondent banking model have not kept pace with advances in domestic payments such as the move to real-time or instant payment processing. Many factors have contributed to this, including the lack of standardisation between jurisdictions in terms of regulatory requirements, data standards and operating hours, liquidity and FX costs.

This report is the first in a series exploring the use of Distributed Ledger Technology (DLT) to settle cross-border payments, starting with the approach by Central Banks. It sheds light on the complexities of cross-border payments, and the importance of ecosystem collaboration to come to a better solution. The report provides:

• An overview of the current correspondent banking model, existing payment methods and their limitations.
• An assessment of the benefits of the SWIFT gpi initiative.
• An introduction to DLT and the principles of Wholesale Central Bank Digital Currency (W-CBDC).
• An assessment of two proposed future state W-CBDC models for cross-border payments.
• Considerations for using DLT going forward.