SWFT and Accenture release report: China has the environment to use central bank digital currency

SWIFT and Accenture jointly released “Exploring Central Bank Digital Currencies: The use of CBDC for international payments” on 11 May, which looks at the opportunities for central bank digital currencies for international payments, advancing mainly around the impact of CBDC on payments, setting out the implementation details of how digital currencies can be used on a large scale, and thus illustrating the financial support they can provide in future developments.

SWFT and Accenture release report: China has the environment to use central bank digital currency

SWIFT and Accenture jointly released “Exploring Central Bank Digital Currencies: The Use of CBDC for International Payments” on May 11, which looks at the opportunities for central bank digital currencies for international payments, advancing mainly around the impact of CBDC on payments, developing implementation details on how digital currencies can be used on a large scale, thus illustrating the financial development it can provide in the future support in its future development.

The following are highlights of the report.

The report opens by noting that central bank digital currencies (CBDCs) are accelerating, with more than half of the world’s existing central banks considering their introduction, and could have a profound impact on the global financial system.

It then points out the difference between central bank money and legal tender and commercial bank money, and argues that CBDC is a new type of digital currency issued by central banks in addition to bills and reserves that can be used for instant settlement between traditional legal tender and commercial bank money, and argues that China already has the environment for such use.

The report also argues that CBDCs have the following characteristics: they are issued by central banks; they are issued in relatively small numbers; they are distributed by license or wallet; and commercial banks continue to play an intermediary role in them. Its development is driven by a number of factors, and it plays a significant role in reducing the use of money and promoting financial inclusion, as well as reducing the risk of using “private money” for transactions, promoting innovation in the e-tailing market and improving payment efficiency.

The report also summarizes the basic features of CBDC-based payment solutions.

1 The required infrastructure and technology requires some form of cryptographic ledger and network access.

2 Having a rich set of data and standards, with ISO 20022 (a global standard for payment messaging) being essential.

3 Digital identities to comply with security principles.

4 core payment system requirements to equally apply Know Your Customer (KYC)/Anti-Money Laundering (AML) principles, etc..

5 Reasonable allocation mechanisms.

6 Different standards of privacy and access in different situations.

SWIFT said it will provide comprehensive transaction management services based on the use of gpi in cross-border payments globally, and will use APIs and cloud technologies to build the next generation of digital platforms to support the scale of CBDC. In November 2020, SWIFT partnered with Accenture to establish the CBDC and Digital Asset Innovation Project to split the existing CBDC origination program into 3 different payment paths, including Retail Payments (- Generic CBDC for retail applications that can instantly settle person-to-person (online and offline) transfers) / Cross-border Payments (CBDC Network Direct cross-border monetary relationships can be facilitated under the supervision of a central bank. There are different approaches, such as multiple networks, e.g. cross-network, settlement corridor and/or foreign network deployments) and wholesale payments (CBDCs can be used as settlement media in high-value payment systems as well as on digital financial market infrastructures).

In addition, SWIFT has designed a series of experiments around the DLT network to demonstrate the dependency of existing cross-border transactions on its own platform.

The report concludes with a direct point that new technologies, new players and evolving business models are driving a structural shift in the payments space, and that this disruptive potential growth is actually based on a new form of traditional money that will work to build infrastructure, develop innovative CBDC-based solutions through partnerships with financial institutions, and provide end-to-end payments services for consumers and businesses.

Link to original article: https://www.swift.com/news-events/news/exploring-central-bank-digital-currencies-swift-and-accenture-publish-joint-paper

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