- RBI has proposed a plug-and-play system to improve transnational payments
- This should allow interoperability between different national payment systems
- And also make them more efficient in the context of possible CBDC implementing
The Reserve Bank of India (RBI) has proposed the concept of a plug-and-play system that should make payments between different countries and their national payment systems more efficient.
According to them, this becomes particularly relevant in the context of the obsolescence of legacy payment systems and also aims to prepare for possible experiments with CBDC implementation.
Why Is the RBI So Concerned About Cross-border Payments Interoperability?
Experiments with CBDC may lead to the implementation of proprietary digital currencies as the main ones in many countries, but the infrastructure in each case may be different, and lack of interoperability creates delays and overheads in cross-border payments.
Recognizing this vector, RBI Governor Shaktikanta Das emphasized the importance of creating a system that addresses the potential challenges of compatibility and efficiency.
“We can overcome this challenge by developing a plug-and-play system that allows replicability while also maintaining the sovereignty of respective countries.”
Strategic Importance of the CBDC Interoperability System
India has already made some progress in developing relevant concepts and separate solutions, but the challenge of overall globally unified design and implementation remains.
“While much efficiency has been achieved in the case of wholesale markets, the retail cross-border space is still fraught with multiple layers that add to the cost and delays in cross-border remittances.”
According to Shaktikanta Das, it is important not only to achieve efficiency and compatibility of new systems but also to ensure backward compatibility with older solutions so that no one is left behind.
For this, RBI is pushing for the creation of common standards for these solutions to make its development harmonized and speed up its implementation.
Conclusions
It looks like India is gearing up for a fundamental shift in the financial system, which is now largely influenced by US policy, the trend towards de-dollarization, and the adaptation of cryptocurrency.
We wrote about how close this is to CBDC, even with loud claims that all of this should be opposed to it.
Are we on the cusp of a fundamental shift in the financial system, and are the major economies preparing for it openly already?
We have to watch it very closely because developments go rapidly as never before.
