Last month the Bank for International Settlements (BIS) Innovation Hub unveiled Project Agorá, its ambitious project with seven central banks to transform cross border payments with tokenization. It proposes using a Unified Ledger involving wholesale central bank digital currencies (wCBDC) and tokenized deposits on a shared infrastructure to execute payments. Today the BIS released a short paper on “Next generation correspondent banking“, which outlines the vision for Agorá. A large part of that relates to how compliance is dealt with.
Active correspondent banks have declined over the years, particularly in emerging markets. Often that’s the result of ever more stringent compliance requirements, which involve added expense. Hence, the withdrawals are often from regions where the cost and benefit trade offs don’t make sense for banks.
If the compliance process can be revisited and streamlined, perhaps that can arrest the decline in the number of correspondent banks.
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