Multiple central banks have conducted experiments with blockchain for domestic settlement between commercial banks. While progress has been made on domestic interbank settlement, there is not a clear approach for cross-border settlement. Today, interbank payments between currency zones require correspondent banking relationships, Continuous Linked Settlement (CLS) accounts, or a combination of both. This paper discusses several options that involve distributed ledger technology (DLT). The first group of models would heavily involve central banks, the second group involve a trusted third party and a more passive role for central banks. The models are evaluated based on monetary supply implications, impact on liquidity management for commercial banks, settlement risk, credit risk, and complexity for central banks. This preliminary exploration intends to inform future work with international payments.
Xiaohang Zhao, Haici Zhang, Kevin Rutter, Clark Thompson, Clemens Wan