Central bank digital currencies (CBDCs) could facilitate cross-border transactions to transform the global economy, Moody’s Investor Service said in a report.
In the document, it said that cross-border CBDC transactions would require new infrastructure, limiting the role of banking institutions significantly.
However, banks could also sharply reduce or remove settlement risks with the emerging technology.
The report said: “Banks would be able to make, clear, and settle cross-border payments at low cost and in seconds without needing to sign up to multiple payment systems or rely on correspondent banks in other countries.”
The technologies could also reduce banking profits from “payments, correspondent services and likely also from foreign-exchange transactions.”
It added: “In a CBDC-driven economy, banks may well need to redesign their operations. They may be obliged to join new networks and create the infrastructure necessary to support CBDC interoperability at scale, which will impose a burden on resources in the short term.”
Continuing, the report explained that CBDCs could resolve interoperability concerns over time with help from the Bank for International Settlements.
The report concluded: “Central banks may need to compromise on some of the decision-making to make their CBDCs interoperable.”
It also added that “digital islands” could surface, where some countries could conduct transactions while excluding or failing to facilitate transactions with others.
Moody’s Downgrades US, Florida’s DeSantis Doubles Down
The news comes after Moody’s downgraded US banks to “negative” last week. Numerous countries have debated creating a framework for CBDCs, including the United Kingdom, Japan, South Korea, the United States, and European Union, among others. China has rolled out numerous CBDC payment pilots, with customers successfully purchasing goods and services with the ‘red packet’ system.
Despite this, Florida Governor Ron DeSantis has opposed a federal CBDC for the United States and has vowed to block its use in the Sunshine State.
A group of states have backed DeSantis’ efforts to block the rollout of a federally-supported digital stablecoin, citing alleged ‘woke ideology’ and curtailed freedoms.
