Singapore’s Central Bank is testing cross-border payments using multiple CBDCs. So what is a cross-border payments system? We may find some insights here.
Why do we need a cross-border payments system?
When CBDC crosses from one country to another, its exchange rate may differ. We need a solution to settle payment instantly that competes with cryptocurrencies.
Why do cryptocurrencies work better internationally?
Cryptocurrencies’ value is uniformly cross international. Sending crypto from one corner of the world to another is seamless as long as both parties are on the Internet.
What makes CBDC’s cross-border payments system different from crypto?
It is a centralized digital currency that requires verification of identification during the transaction. There will have a third party to facilitate from the beginning to the end of the payment process.
6 steps of the payment process to send CBDC cross border
There are listed as follow:
- Sender identify receiver’s CBDC
- Select the correct exchange rate from both CBDCs
- Verify both parties identification
- Identify receiver CBDC from the bank
- Central banks verify both parties’ banking
- Process the payment
Why is it so complicated?
The central bank will have to monitor in each step to make sure the transaction is verified and each party has been identified.
Can CBDC implement Automated Market Maker?
Yes, but it will not make the process easier. The identification verification process will be needed even if the exchange can carry out transactions automatically.
How long will it take to process the CBDC across the border?
It may take longer if different counties require to verify parties’ identification and one country does not have kept database to verify their users.
One potential solution to speed up the process
The central bank may store your identification on their database in order to verify it automatically.
Your identity will be linked with your CBDC
It is likely that you will have your identification linked to your CBDC and the wallet.
Likely government may share identification cross the border
To facilitate a faster payment process, you may need to share data to both banks in order to speed up your verification process.
Cryptocurrency seems a better choice
Why go through this process to potentially leak your privacy to governments with a slower payment process.
Cryptocurrencies are a better choice to exchange internationally. However, CBDC is catching up but the privacy concerns may slow down their development.
Photo by Christine Roy on Unsplash
Stablecoin is Not So Stable
CBDC: Stablecoin 2.0 or Stablecoin Killer
Chinese CBDC: the Ultimate Financial Weapon or Just another Copycat
DeFi Swap: Great Returns come with Great Cost
CBDC vs Cryptocurrency: the War of Privacy
Inflation vs. Bitcoin: How Speculation to Hedge Inflation has Failed in Short Term but may Create Opportunity in Long Term
Game of Three Kingdoms: CBDC vs. Cryptocurrency vs. TechCoin
Gold vs. Bitcoin: Digital Twin or Enemy
Volatility of Bitcoin: Threat or Opportunity
Lesson Learn from Robinhood IPO: Era of Crypto Exchange Comes to an End or a New Beginning?
Hypothetically, What if the Fed Fails to Control Inflation, Will Crypto Save Us?!
Stablecoin: We Ever Need Them More Than CBDCs
China FUD: Are We Done Yet?
SEC vs. Ripple: the Endless Game of War
SEC vs. Defi: What is the goal of the Defi?
City Coins: Are they the Era of New Coins?
Ethereum London Hardfork: How Hard does It Actually Fork?
Did the U.S. government just thumbs up on Bitcoin and down on Ethereum after the London Hardfork?
The End of Era for Crypto Exchange Platform?!
NFT: Digital Solution or Delusion?
NFT: The Future of Gamers' Assets
Is Bitcoin Untraceable Anymore?! It Depends!
Why Crypto Got So Political Suddenly: The Beginning Tale of Government Crypto Surveillance Program
Where are We Position Crypto at : the Problem with Money and Wealth
Crypto Hacking: How Did it Really Happen?
Bitcoin Mining Recover?! The Chinese vs. The U.S Strategy of Blockchain
The Legendary of Shitcoin: Meme to the 🌓 or Unique of 💎 or Simply just 💩
Defi: A Rainbow 5-Layers Cake
Crypto Economy: the Untold Speculative Financial System We will Live?
Red Alert: Lesson Learns from the Nearly Cashless Nation
Jack Dorsey’s Ambitious: Twitter wants to Become a Place of Freedom of Speech
What Categories Does Bitcoin Belong to or Does it Really Matter?
Quantum Financial System: The System Lost Itself in Quantum World
Doge 2.0: Who Let The Dog Out?!
Legendary Hacker: the White Hat into the Rescue
Crypto Hot Hub: The Best Place to become Crypto Incubator
EIP-1559: The Future of Ethereum Economy
Break the Fourth Wall?!
Robot Sucks: How Lousy Jobs AMMs Did to Ruin the DeFi
The Future of Cardano: as Clear or as Uncleared?
We Are Short for the Dollars: The Dollar's Liquidity Issue
Currency Comparison: Bitcoin vs Dollar
Patent the Blockchain: the Nonsense Action Shows a Worry from Big Tech Companies
Forget about Trade War: New Era of the International Trade
Ethereum Got Update Bug: A Blockchain Synchronization Problem
Disclosure: I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose cryptocurrencies are mentioned in this article. This information is only for educational