• The International Monetary Fund (IMF) is exploring launching a platform to unify CBDC interoperability.
• The platform is proactive move to harmonize global transactions in the future.

The International Monetary Fund (IMF) is working on a global platform that would encourage Central Bank Digital Currency (CBDC) interoperability across borders. 

The XC platform, as it has been tagged, would utilise a single ledger to report CBDC transactions, programmability and improved information management. This new platform is compatible with tokens like Ripple (XRP) and Stellar (XLM). Notably, a fintech note has been released by the IMF detailing its design and governance.

During a recently held conference in Morocco, IMF’s Director of the Monetary and Capital Markets Department, Tobias Adrian announced that the platform would be beneficial for both individual and institutional use. Before now, institutions were required to own a reserve account with a central bank before they could participate in cross-border transactions but with the new platform, trading of tokenized domestic central bank reserves is allowed.

Lower fees and faster transaction speed are some perks of the platform. The current average cost of money transfer is sitting at 6.3% and this amounts to around $44 billion annually. Adrian says that some of this money which is paid to remittance providers can now go to the poor. 

The IMF envisages that the platform would assist central banks in intervening in foreign exchange markets, aggregating information on capital flows as well as resolving disputes.

IMF Targets Unified Regulations for CBDCs

According to IMF Managing Director Kristalina Georgieva, CBDCs should not be fragmented national propositions especially if they are to efficiently facilitate fair transactions. As a solution, the IMF CBDC Platform is coming to connect nations by offering interoperability. More so, the platform would be designed to accommodate both wholesale and retail CBDCs. 

Already, a large volume of countries have entered different stages of their CBDC implementation. A significant percentage are still researching the potential use cases of a CBDC while others are currently in their pilot testing phase. About 10% of them are crossing the finishing line according to Georgieva. 

The Bank of England and the BIS Innovation Hub have completed a CBDC trial period. Brazil Central Bank, Banco Central do Brasil (BCB), has outlined action plans for developing its digital Real.

The IMF is looking forward to a time when over 50% of nations globally will have their CBDCs in circulation. When this finally happens, the CBDC platform will be efficiently utilized. Markedly, the agency is putting so much effort into convincing countries to adopt a unified regulatory framework for CBDC as this would promote interoperability. Georgieva attested that the full potential that a CBDC possesses will not be maximized if it is limited to domestic use. 

Ultimately, the IMF has concerns about how to tackle certain financial stability impediments that may show up including data privacy, legal challenges, and cyber threats, especially if the CBDCs are not well designed or regulated. Georgieva has advised that they are backed by real assets so as not to fall under the same category as “speculative assets.”

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