The World Bank Group’s ITS Technology and Innovation lab (ITSTI) recently published a report exploring interoperability between central bank digital currency (CBDC) systems and faster payment systems. While the most obvious application would be the sender using a retail CBDC and the recipient using a bank account (or vice versa), that was only one scenario considered.
It also explored a wholesale CBDC (wCBDC) for interbank settlement of a faster payment system. Remember that faster payment systems involve two steps – payment by the end user and settlement between banks. With a wCBDC, the core functioning of the faster payment system is unchanged. It describes the primary benefit of a wCBDC for interbank settlement as 24/7 availability. However, it still assumes net settlement.
We’d observe this would reduce counterparty risk overnight and on weekends. However, in order for the wCBDC system to function outside of RTGS operating hours, banks would have to set aside an extra balance in the wCBDC. If the wCBDC earns interest in exactly the same manner as a reserve account, then banks might be comfortable sweeping a chunk of money into wCBDC just before the end of the RTGS business day. Otherwise, banks might prefer the current settlement method.
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