A Multi-Currency Exchange and Contracting Platform

IMF Working Papers, November 4, 2022

Source details

Authors: Tobias Adrian, Federico Grinberg, Tommaso Mancini-Griffoli, Robert M. Townsend, Nicolas Zhang
Published: November 4, 2022
Series: IMF Working Papers
DOI: https://doi.org/10.5089/9798400224188.001

Authors: Tobias Adrian, Federico Grinberg, Tommaso Mancini-Griffoli, Robert M. Townsend, Nicolas Zhang
Date: November 4, 2022
Core thesis: Present a vision for a multilateral platform to improve cross-border payments, related foreign exchange transactions, risk sharing, and broader financial contracting by leveraging technological innovations for public policy objectives.
Purpose: A first step to stimulate further work in this space; IMF Working Papers describe research in progress.

Cross-border payments currently suffer from being slow, expensive, and risky due to dependence on intermediaries across jurisdictions and the lack of a common settlement asset and common rules and governance.
A multilateral platform that uses a common ledger, smart contracts, and encryption could yield substantial improvements in:
- market efficiency
- market completeness
- access
- transparency
- transaction and compliance costs
- safety
The proposed platform would support not only payments but also foreign exchange transactions, risk sharing, and general financial contracting.

Reduce reliance on costly trusted relationships between counterparties in different jurisdictions.
Provide a common settlement asset and common governance rules to lower frictions.
Expand the set of feasible contracts and risk-sharing arrangements across borders.
Improve transparency, lower transaction and compliance costs, and enhance safety of cross-border financial activity.