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Navigating the multi-money future of FX
Digital money is creating a future where CBDCs, tokenised deposits, stablecoins and traditional currencies may coexist. For FX, the challenge is capturing the benefits without introducing new risks. Trusted financial market infrastructures will play a key role.
From September, banks using tokenised asset platforms can settle transactions in central bank money via the Eurosystem’s payments infrastructure. During tests of the concept, dubbed Pontes, participants completed 50 transactions worth €1.6 billion.
Pontes is one of several initiatives advancing digital finance across cross-border payments and securities settlement. Project Agorá explores tokenised commercial bank deposits and central bank digital currencies (CBDC), while CBDC platform mBridge continues to move towards commercial adoption. The synchronisation operator model, which can link traditional payment infrastructure with digital asset infrastructure, is also moving from experimentation to live operation.
Together, these initiatives suggest a future where different forms of money and assets coexist across multiple infrastructures. For FX, the challenge is ensuring that greater choice and innovation do not undermine liquidity efficiency, settlement certainty or interoperability.
The digital assets multiverse
The digital asset landscape is evolving as CBDCs, tokenised deposits and regulated stablecoins emerge alongside traditional fiat currencies.
This points to a multi-asset world of coexisting money forms: multi-rail, with different infrastructures connecting them; and multi-chain, with assets recorded across different distributed ledger and blockchain networks.
For wholesale FX, the benefits may be less immediate than in retail payments or securities. With average daily turnover exceeding USD9 trillion, the wholesale FX market is already highly liquid and interconnected. Digital assets may offer opportunities to increase the speed of payment processing, but speed alone is not the goal. Any evolution must also enable value to move safely between currencies in a way that minimises settlement risk and optimises liquidity efficiency.
“As digital assets become more widely used across payments and securities markets, FX market participants will increasingly need to consider transactions spanning different assets, networks and infrastructures.”
Multiverse in a multipolar world
The digital money multiverse is developing alongside renewed debate about whether the global currency landscape is becoming more multipolar. The dollar remains dominant: it is on one side of 89.2% of FX trades,1 features in all ten most traded currency pairs and is still the world’s primary vehicle currency. The question, therefore, is how FX market infrastructure will adapt as other currencies increase in relevance.
Emerging market and developing economy (EMDE) currencies are gaining traction, with the Chinese renminbi (CNH) the most prevalent example. CNH has more than doubled its share of global FX turnover since 2019, and its usage is increasing across payments, trade finance and settlement experimentation. However, traditional settlement-risk mitigation has not fully kept pace. Existing payment-versus-payment (PvP) solutions remain highly effective for covered currencies, but support for fast-growing EMDE currencies is still niche. This is where digital rails become relevant to FX: not as a replacement for today’s infrastructure, but as a potential way to extend safe, interoperable settlement beyond today’s perimeter.
When worlds collide
As digital assets become more widely used across payments and securities markets, FX market participants will increasingly need to consider transactions spanning different assets, networks and infrastructures:
• Settlement risk: FX market participants and authorities have spent decades refining ways to mitigate settlement risk – the risk that one leg of a transaction settles while the other does not. As transactions span different ledgers, how can participants ensure both legs of a transaction settle simultaneously (i.e., PvP) and with certainty across different ledgers?
• Governance and coordination: Whose rules apply across platforms, and how are governance, accountability and dispute resolution handled?
• Liquidity: As activity spreads across different forms of money, networks and platforms, liquidity could become more fragmented, reducing the benefits of today’s deep liquidity pools and established netting arrangements.
These are not just technology challenges but operational, legal and market structure challenges.
Why infrastructure matters
A multi-money, multi-rail future will depend on interoperability, common standards, effective governance and harmonised market practice. Trusted financial market infrastructures will remain essential to managing risk, upholding standards, supporting liquidity efficiency and bringing the public and private sectors together. And, while technologies may change in a multi-asset, multi-rail and multi-chain future, the market’s fundamental requirements will not: certainty, liquidity, interoperability and effective risk mitigation.