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Towards the holy grail of cross-border payments

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  • Bindseil, Ulrich
  • Pantelopoulos, George

Abstract

The holy grail of cross-border payments is a solution allowing cross-border payments to be immediate, cheap, universal, and settled in a secure settlement medium. The search for such a solution is as old as international commerce and the implied need to pay. This paper describes current visions how to eventually find this holy grail within the next decade, namely through (i) modernized correspondent banking; (ii) emerging cross-border FinTech solutions; (iii) Bitcoin; (iv) global stablecoins; (v) interlinked instant payment systems with FX conversion layer; (vi) interlinked CBDC with FX conversion layer. For each, settlement mechanics are explained, and an assessment is provided on its potential to be the holy grail of cross-border payments. Several solutions are suitable for improving cross-border payments significantly, and some could even be the holy grail. JEL Classification: E42, E58, F31

Suggested Citation

  • Bindseil, Ulrich & Pantelopoulos, George, 2022. "Towards the holy grail of cross-border payments," Working Paper Series 2693, European Central Bank.
    • Handle: RePEc:ecb:ecbwps:20222693
    Note: 327704
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    File URL: https://www.ecb.europa.eu//pub/pdf/scpwps/ecb.wp2693~8d4e580438.en.pdf
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    References listed on IDEAS

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    2. Gai, Prasanna & Kapadia, Sujit, 2010. "Contagion in financial networks," Bank of England working papers 383, Bank of England.
    3. Bindseil, Ulrich, 2020. "Tiered CBDC and the financial system," Working Paper Series 2351, European Central Bank.
    4. Jim Bolton & Francesco Guidi‐Bruscoli, 2021. "‘Your flexible friend’: the bill of exchange in theory and practice in the fifteenth century," Economic History Review, Economic History Society, vol. 74(4), pages 873-891, November.
    5. Tara Rice & Goetz von Peter & Codruta Boar, 2020. "On the global retreat of correspondent banks," BIS Quarterly Review, Bank for International Settlements, March.
    6. Adachi, Mitsutoshi & Cominetta, Matteo & Kaufmann, Christoph & van der Kraaij, Anton, 2020. "A regulatory and financial stability perspective on global stablecoins," Macroprudential Bulletin, European Central Bank, vol. 10.
    7. Massimiliano Renzetti & Serena Bernardini & Giuseppe Marino & Luca Mibelli & Laura Ricciardi & Giovanni Maria Sabelli, 2021. "TIPS - TARGET Instant Payment Settlement The Pan-European Infrastructure for the Settlement of Instant Payments," Mercati, infrastrutture, sistemi di pagamento (Markets, Infrastructures, Payment Systems) 1, Bank of Italy, Directorate General for Markets and Payment System.
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    Cited by:

    1. Bindseil, Ulrich & Pantelopoulos, George, 2022. "A brief history of payment netting and settlement," IBF Paper Series 02-22, IBF – Institut für Bank- und Finanzgeschichte / Institute for Banking and Financial History, Frankfurt am Main.
    2. Luzie Thiel & Jochen Michaelis, 2023. "Digitales Zentralbankgeld: Warum wagt niemand den ersten Schritt?," MAGKS Papers on Economics 202315, Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung).
    3. George Pantelopoulos, 2024. "Can external sustainability be decoupled from the NIIP?," International Economics and Economic Policy, Springer, vol. 21(1), pages 89-116, February.

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    More about this item

    Keywords

    bitcoin; CBDC; correspondent banking; cross-currency payments; interlinking; stablecoins;
    All these keywords.

    JEL classification:

    • E42 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Monetary Sytsems; Standards; Regimes; Government and the Monetary System
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • F31 - International Economics - - International Finance - - - Foreign Exchange

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