š°CBDC and Faster Payment Systems Interoperabilityš°
Central banks around the world are actively researching and investigating the benefits, challenges, and design options of wholesale and retail CBDCs.
šSince CBDCs are one of the most critical components of a national hashtag#paymentsystem (NPS), it is important that their hashtag#interoperability with other payment systems is one of the key considerations in the design process.
šThe ITS Technology and Innovation ITSI team, in collaboration with the World Banksās Finance Competitiveness and Innovation FCI Global Practice, has conducted technology design experiments on two specific scenarios regarding CBDC system interoperability with fast payment systems (FPS).
šIn the first scenario, the experiment investigated the option of settling FPS obligations in a wholesale CBDC system, including the option to reserve funds to guarantee the settlement of FPS net obligations.
šIn the second scenario, the team investigated the interoperability between users within the FPS and retail CBDC users, including the transfer of funds among both types of users, using common services such as address resolution services.
šThis experiment illustrated how CBDC systems can interoperate with retail payment systems through an interlinking bridge that was used to route messages and application programming interface API calls among different systems.
šThe hashtag#programmability features of distributed ledge technology DLT were used to link the settlement in CBDC to the transfer of funds in the FPS.
šThe technical applicability for this type of interoperability was demonstrated through the experiments, with the caveat that these experiments do not take into account complexities that may be involved with live systems.
šLooking forward, CBDCs, if and when they are introduced, will become a critical component not just in the context of national payment systems but may also have significant importance in the context of cross-border payment infrastructures.
šThe jury is still out with regard to what form and shape the CBDC systems will have; however, it is fair to state that CBDC interoperability with legacy and new hashtag#paymentsystems will be essential in order to avoid furthering payment system fragmentation.
šThrough this note, the authors hope to share the knowledge they have acquired from their practical experiments on FPS interoperability with CBDC systems, and to foster further research into and investigation on this topic.
šEngaging with the relevant stakeholders, such as the operators of payment market infrastructures, central banks, financial institutions, technology providers, and researchers will be crucial in order to build further on this work concerning domestic and cross-border interoperability of CBDC systems with other payment systems.