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The payments landscape for community banks is changing rapidly as traditional payments converge with new instant payment systems and emerging cryptocurrencies. It is critical for Community Banks to maintain awareness of developments in the payments space to assess new opportunities, mitigate risks, and ensure that their payment strategy aligns with overall business plans.
May 22, 2023
A wholesale central bank digital currency could enable faster, simultaneous, and safer cross-border payments, according to a new report from the Federal Reserve Bank of New York and the Monetary Authority of Singapore.
Details: Part of the New York Fed’s Project Cedar research on a potential wholesale CBDC, the report:
Is not intended to advance any specific policy outcome or signal any imminent decisions about the appropriateness of issuing a CBDC.
Instead explores the possibility of using digital ledger technology for cross-border payments using multiple currencies to promote interoperability among financial networks with different designs.
Finds that the technology supports interoperability, “atomic” or simultaneous settlement, and near-real-time settlement.
G7 Statements: The Project Cedar report followed the release of a statement from the Group of Seven finance ministers and central bank governors that said CBDCs could have a substantial role in promoting a reliable, stable, and transparent global payment system. In a separate statement, G7 leaders pledged to “continue policy deliberation on digital money.”
ICBA View: ICBA opposes the formation of a U.S. CBDC. In a recent American Banker op-ed, ICBA President and CEO Rebeca Romero Rainey said FedNow will negate the need for a U.S. CBDC by achieving the same policy goals of immediate funds availability without the risks to the banking system.
Customer FAQs: As community bankers field questions about FedNow and CBDCs from consumers confused by misinformation circulating online, ICBA offers frequently asked questions community bankers can use to answer customer queries.