Digital currencies, the launch of which have been thought by central banks for almost fifty countries of the world, can significantly reduce the costs of cross-border payments, the fees for which remain high due to the complexity of the system of interbank transactions. This is stated in a report prepared by the Bank for International Settlements, the International Monetary Fund and the World Bank. So far, however, regulators are mainly focusing on domestic markets, fearing risks associated with an increase in capital outflow and inflow, as well as with the replacement of national currencies with reserve currencies.
The use of digital currencies not only in domestic markets, but also for cross-border payments can dramatically reduce the cost of such transactions, according to the review (.pdf) of the Bank for International Settlements in Basel, the International Monetary Fund and the World Bank, prepared for the G20.
The most active efforts are now being made by China (the possibility of using the electronic yuan in bilateral payments is being discussed with Hong Kong), the Bahamas and the East Caribbean Central Bank.
The report describes two scenarios: in the first, each central bank issues its own digital currency and makes it available to both citizens of the country and foreign holders – without any coordination between banks. If such currencies are anonymous, this scenario will become the most likely – by analogy with the circulation of cash (the decline in their popularity is one of the arguments for central banks to issue digital currencies, including as a tool to influence the money supply).
So far, however, most regulators are considering the non-anonymous use of digital currencies. This means that technologically it will be possible to impose restrictions on cross-border payments (this is the second and much more likely scenario). Such a system will require additional agreements between central banks. Therefore, how much the volume of transactions between countries will grow will depend on the terms of interstate agreements.
But for regulators, such openness will raise concerns about sharp capital inflows and outflows. In addition, there is a risk that “hard” currencies, for which there is already an increased demand, will become even more popular, especially in countries with high inflation and unstable exchange rates, which will undermine the ability of the national central bank to influence monetary policy.
Nowadays, the high cost of remittances is associated with the presence of a complex chain of intermediaries, as well as with differences in the operation of systems in individual countries. As Oleg Tsyvinsky, professor of economics at Yale University named after Arthur Okun, noted in an interview with Kommersant (see Kommersant-Online, May 12), the commission for a money transfer from a Bangladesh migrant working in Saudi Arabia can eat up to 20% of the amount. It is also quite expensive to withdraw money from a foreign card in Russia or from a Russian card abroad, so the development of financial technologies, including cryptocurrencies, will one way or another help to reduce the costs of transfers.