Episode 7: Digital Currencies beyond Borders

oday, cross-border payment systems are far from being frictionless and efficient. According to data by the World Bank, for cross-border payments, on average, more than 7% transaction fees are charged. Central bank digital currencies (CBDCs) have the potential to improve these international payment processes in various ways. At this point, standardization, harmonization and interoperability between domestic payment systems with possible different payment arrangements become strikingly important. A committed cooperation to build a bridge between multi-currency cross-border payments through an enhanced financial infrastructure with the design principles supporting privacy, security, fairness, efficiency, inclusivity, and legal compliance would bring about a promising solution. Additionally, international implications of CBDCs need to be further studied as CBDCs could impact exchange rates, international capital flows, and, in general, also the supremacy of specific currencies.