The Economist reports on “The race to redefine cross-border finance:”

• SWIFT recently launched SWIFT Go for retail payments.
• FinTech firms often partly bypass SWIFT by aggregating payments first.
• Ripple evades SWIFT, using a cryptocurrency for international transactions.
• Credit card companies build infrastructure independent of SWIFT for retail (push) payments initiated by the sender.
• JPMorgan Chase and a Singaporean bank and Temasek launched Partior for wholesale payments. This network records transfers on a permissioned blockchain.
• CBDCs could enable banks to make overseas payments on a shared ledger.
• SWIFT tries to collaborate with central banks.
• Partior aims to expand, recruiting core settlement banks for both central-bank and commercial-bank digital payments in euro, renminbi and yen.

On VoxEU, Massimo Ferrari, Arnaud Mehl, Fabio Panetta, and Ine Van Robays discuss “The international dimension of central bank digital currencies: Open research questions.” They argue that research has identified three main implications of retail CBDC (with broad access):

• ‘Dollarization’ in other countries.
• Stronger cross-border transmission of shocks, increased exchange rate volatility and altered capital flow dynamics. “Research finds that introducing a CBDC available to non-residents ‘super charges’ uncovered interest rate parity … leads to a stronger rebalancing of global portfolios in response to shocks, and to higher exchange rate volatility.”
• Impact on the international role of currencies.

The authors write that most models to date are unclear about what makes CBDC really different in this context. And they argue that another open question is how intensively central banks should and would cooperate. They write, somewhat optimistically, that “according to the (unwritten) code of central banking, the introduction of a CDBC in one jurisdiction must do no harm. In particular, it must not put the financial system of other jurisdictions at risk.” Let’s see.