The International Monetary Fund has introduced the framework for a novel type of global payment system that utilizes a unified ledger to document transactions involving central bank digital currencies (CBDCs). This system incorporates programmability and enhanced information management features.
During a round-table discussion on CBDC policy held in June 2023, officials from the International Monetary Fund (IMF) unveiled their innovative platform concept. The event, which took place in collaboration with the central bank of Morocco, featured Tobias Adrian, the IMF’s director of the monetary and capital markets department.
Adrian highlighted that this novel platform has the potential to offer advantages to both individual and institutional users such as reduced fees and faster transaction processing times.
“Some of the 45 billion dollars paid to remittance providers every year may then go back in the pockets of the poor,” he said.
Furthermore, according to Adrian, the platform would also facilitate central banks’ intervention in foreign exchange markets, enable the consolidation of information related to capital flows, and aid in dispute resolution. Adrian mentioned that the platform could be modified to accommodate domestic wholesale and retail central bank digital currencies (CBDCs) as well.
The specifics of the platform, known as the XC (cross-border payment and contracting) platform, were outlined in an IMF Fintech Note published on the same day. This note was co-authored by Tobias Adrian and provided comprehensive details about the platform’s functionality and features.
“XC platforms offer a trusted single ledger – a document representing property rights – on which standardized digital representations of central bank reserves in any currency can be exchanged.”
The XC platform was developed based on the CBDC infrastructure model. It incorporates a settlement layer that utilizes a unified ledger, and efforts are being made to broaden access to this layer.
Presently, institutions are required to maintain a reserve account with a central bank in order to conduct cross-border operations. However, with the XC platform, it would be possible to trade tokenized domestic central bank reserves. It’s important to note that liquidity would still originate from institutions holding reserve accounts.
The XC platform includes a programming layer that provides the flexibility to innovate and customize services according to specific requirements. Additionally, an information layer would be established to house anti-money laundering (AML) details that are crucial for meeting trust conditions and ensuring privacy protections.
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