Wholesale CBDCs

Interest in wholesale CBDCs (wCBDCs) has grown considerably over recent years, with numerous projects now looking at FX use cases and PvP transactions.

Between 2017 and 2023, at least 40 wCBDC project reports were published. A number of these projects have increasingly explored creative and thought-provoking designs for cross-border and cross-currency payments, including PvP solutions. Projects have primarily considered technological feasibility rather than legal, regulatory, governance and political challenges.

Though wCBDC experiments vary in technical approaches, most have aimed to provide ‘instant’ settlement on a 24/7 basis, which would not be easy in the current FX market.

The jury is still out on the role wCBDCs could play in cross-border payments, wholesale PvP settlement and the FX ecosystem generally, and further analysis should consider legal, regulatory, governance, political and other non-technical issues.

We will continue to monitor this exciting area of development and innovation through collaboration with key industry participants. Our involvement in the Swift CBDC sandbox has provided valuable insights into how netting and settlement of cross-currency payments could be designed in a CBDC world, while our contribution to the World Economic Forum’s report has enhanced our knowledge of the role wCBDCs may play in the digital payments space. 

Wholesale CBDC projects globally (proof of concept (POCs), prototypes and pilots)

Wholesale CBDC projects globally (proof of concept (POCs), prototypes and pilots)

What are retail CBDCs?

Retail CBDCs (rCBDCs) are essentially digital banknotes that would be issued to the general public, e.g., as a response to the declining use of cash in an increasingly digital world. Individuals and businesses would use rCBDCs to make payments for everyday transactions.

What are wholesale CBDCs?

Wholesale CBDCs (wCBDCs) are intended for use exclusively by regulated financial institutions, e.g., to settle financial transactions. They are therefore very similar to existing central bank reserves held on central bank accounts to facilitate payments between financial intermediaries.

How will CBDC affect forex trading?

wCBDC experimentation is increasingly exploring cross-border and cross-currency payments, including PvP solutions, with a focus on technical aspects rather than legal, regulatory, governance and other non-technical issues.

wCBDC will likely impact the FX market in the future. However, the form and scale of impact remains unclear as non-technical challenges still need to be addressed.