Das flags slow cross-border payments, bats for CBDC use

MUMBAI: RBI governor Shaktikanta Das has flagged concerns over high-cost & slow cross-border payments, and said that central bank digital currencies (CBDCs) can make such payments cheaper, faster and more secure. He added that using local currency for cross-border payments can shield emerging economies from global shocks.

"Cross-border payments can be made more efficient through adoption of CBDCs, and this area should receive close attention as all of us are starting on a clean slate on the CBDC front. The adoption of the right technology platform, which is inter-operable, would be of great benefit to the future of the cross-border payments ecosystem," said Das. He added that the issue of cross-border payments is a G20 priority area.

"The use of local currencies in cross-border payments can help shield emerging market and developing economies from global shocks, protect against exchange rate fluctuations and encourage the development of local forex and capital markets," said Das. He added that multilateral payment platforms that support multiple currencies would offer a way to promote such local-currency payments.

Das was speaking at the G20 TechSprint 2023 - a global hackathon which is a joint initiative between G20 and the Bank for International Settlements (BIS). Agustin Carstens, general manager, BIS, echoed Das's view on the inadequacies of the present cross-border payments systems. "It is fitting that this work (cross-border payments) has been at the core of India's G20 presidency... after all, India has been a pioneer in delivering fast, secure, affordable and inclusive domestic payments, most notably through the UPI platform," said Carstens.

India is the largest recipient of remittances in the world, with total remittance during FY23 at $110 billion. At the same time, remittances from India are also hitting a new high.

"India is one of the few countries that have launched CBDC pilots in wholesale and retail segments. We are slowly and steadily expanding the pilot to more banks, cities, people and use cases," Das said.

He added, "The empirical data we generate would go a long way in shaping the policies and future course of action. With its instant settlement feature, I believe CBDCs can play an important role in making cross-border payments cheaper, faster and more secure."

The challenges in the TechSprint hackathon this year pertained to cross-border payments. Team Secretarium from the UK won the category for the problem statement on fighting money laundering, combating the financing of terrorism, tax and sanctions evasion, with their solution on transaction monitoring and protecting anonymity & privacy using secure privacy technology.