Cross-border CBDCs could trigger forex controls

During the first quarter of 2021, the Bank for International Settlements (BIS) surveyed 50 central banks about the potential use of central bank digital currencies (CBDC) for cross-border payments. The results are indecisive, however, one area where there was slightly more clarity was whether countries would allow incoming foreign visitors to use the local retail CBDC while visiting, as they would with physical cash. 

Only 29% of respondents had a clear view, made up of 25% saying visitors can use the CBDC, and 4% saying no. This is a relatively simple decision because it maps to current habits. There was far greater concern about allowing retail CBDC usage outside of the country because of a lack of control. 

And even greater consternation about the potential for a foreign CBDC or global stablecoin to be used domestically. Currently, 26% of respondent countries already have restrictions on the use of a foreign currency within their borders. Of the 66% that said they don’t have any restrictions, 39% of respondents said they’d contemplate imposing restrictions if CBDCs were introduced.

Meanwhile, several trials are exploring the use of a wholesale CBDC (banks only) for cross payments, referred to as a multi-CBDC (mCBDC). The survey asked whether the central bank was considering making its CBDC interoperable with foreign CBDCs for this purpose. The vast majority (70%) were either undecided or said maybe later. Another 28% said they were interested in interoperability and 2% said no.