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The Financial Stability Board (FSB), the Bank of International Settlements (BIS) and the Committee on Payments and Market Infrastructure (CPMI) have all clearly stated that there are current issues concerning cross-border payments. Cross-border payments initially faced four particular challenges: high costs, low speed, limited access and insufficient transparency. It is becoming more apparent that faster, cheaper, more transparent and inclusive cross-border payments would have widespread benefits for supporting economic growth, international trade, global development and financial inclusion. This topic was initially brought to the industry’s attention and discussed within the G20 in 2020.
The G20 made enhancing cross-border payments a priority. The ability to make cross-border payments faster, cheaper, inclusive and more transparent while maintaining their safety and security would have widespread benefits for citizens, businesses, and economies worldwide.
The FSB, in coordination with the CPMI and other relevant international organisations and standard-setting bodies (SSBs), developed a Roadmap to address these challenges. The G20 Leaders endorsed the Roadmap at their November 2020 Summit. The Roadmap was designed to be a comprehensive, high-level plan that remains flexible and adaptable over time as the work progressed and the cross-border payments landscape evolved.
During the first two years, the work focused on establishing the foundational elements of the Roadmap. This work covered topics as diverse as existing international standards and guidance, existing national and regional data frameworks, operating hours and access to payment systems, common elements of service level agreements/schemes, the use of payment-versus-payment mechanisms, the interlinking of payment systems, and factoring an international dimension into central bank digital currency (CBDC) designs.
A key foundational element in the Roadmap was the publication of quantitative targets that define the Roadmap’s ambition for achieving cheaper, faster, more transparent, and more accessible cross-border payments and creating accountability. The targets are directly related to the four challenges faced by cross-border payments with a goal for achieving them in most cases by the end of 2027.
The plan discusses:
The market has aggressively reacted to this global requirement and numerous crypto assets have been created to meet global demand.
The vulnerabilities in crypto-asset markets relating to leverage, liquidity mismatch, operational or technological fragilities and interconnectedness are similar to those in traditional finance. These vulnerabilities might have implications for financial stability through different channels:
Crypto-assets also raise broader policy issues, such as the need for consumer and investor protection; strong market integrity protocols; AML/CFT regulation; tax compliance; capital control enforcement; and concerns relating to illegal securities offerings.
There is no universally agreed legal or regulatory definition of stablecoin. Stablecoins are generally created and distributed through trading platforms in exchange for fiat currency.
The FSB identifies three characteristics of global stablecoins (GSCs):
Stablecoins may improve payment efficiency and financial inclusion, but widely adopted GSCs could become systemically important across jurisdictions.
Although the market is commencing engagement within the crypto and GSC arena, there are still significant concerns from both governmental and corporate perspectives.
The G30 Seminar (2024) outlined the following requirements for cross-border payment innovation:
StableNote is a new digital asset being launched into the market in 2027 that is not based on crypto or blockchain. The foundation of a StableNote is built upon digital technology with banks providing a supporting role via safeguarded currency deposit accounts. This algorithmic model enables all the features of both crypto and GSCs but provides the supporting requirements of the FSB, BIS, CPMI, G20 and G30.
StableNote provides the following:
The crypto and GSC markets, although still in their infancy, require vast improvements before meeting global regulatory compliance requirements and the needs of corporate cross-border payment markets.
StableNotes, built on legacy banking systems with enhanced technology layers, provide a transparent, secure and robust method of cross-border payment for the foreseeable future.