I’ve been tracking central bank digital currencies (CBDCs) for several years now, and one theme keeps coming back: they’re not just about digitizing cash at home. Increasingly, central banks see CBDCs as a strategic tool to rewire how money moves across borders. That’s a big deal. Cross-border payments remain slow, opaque, and expensive — but CBDCs could change the plumbing of the international monetary system in ways that affect businesses, remittances, sanctions enforcement, and even monetary sovereignty.
In this piece I want to walk you through how central banks are approaching CBDCs with cross-border payments in mind, what technical and policy choices matter, and what we should expect in the next few years. I’ll keep it practical: what does this mean for a small exporter in Lagos, a bank in Frankfurt, or a migrant worker sending money home from Madrid?
Why current cross-border payments are broken
Before we talk about solutions, it’s worth stating the problem. Today’s cross-border payments typically rely on correspondent banking networks. That system is:
I’ve talked to businesses frustrated by stuck invoices and migrants surprised by big fees deducted from their transfers. Even big banks sometimes rely on intermediary banks in multiple time zones to settle payments. The inefficiency is structural.
How CBDCs change the game — three core mechanisms
Central banks aren’t building CBDCs as a single monolithic product. They’re experimenting with three distinct approaches that could reshape cross-border flows:
Each approach has trade-offs. Direct interoperability maximizes speed but requires high trust and harmonized rules. Hub-and-spoke can be more practical at first but introduces central points of control. Atomic settlement requires robust legal frameworks and technical standards.
Real-world experiments to watch
Several central banks and consortia are already running pilots that reveal how cross-border CBDC use might look in practice:
These experiments matter because they move CBDCs beyond theoretical policy papers into interoperable systems. The technical choices made in these pilots — consensus mechanisms, privacy models, identity linkages — will shape future deployments.
Key technical and policy design choices
Not all CBDCs are created equal. The choices central banks make will determine whether CBDCs improve cross-border payments or simply replicate existing frictions in digital form.
Who benefits — and who might be sidelined?
There are clear winners if CBDCs are well-designed:
But there are risks and losers, too. Payment service providers that charge high remittance fees could lose revenue. Countries that fail to adopt interoperable standards might be sidelined in regional payment corridors. And there are geopolitical implications: CBDC linkages could shift financial influence if large economies create de facto regional hubs.
Practical example: an instant cross-border invoice
| Step | Traditional system | CBDC-enabled system |
|---|---|---|
| Initiation | Exporter sends invoice; buyer initiates wire | Buyer initiates CBDC transfer using a bank or e-wallet |
| Conversion | Multiple correspondent banks perform FX — takes hours/days | Atomic swap between buyer CBDC and exporter CBDC executes instantly |
| Settlement | Final settlement after Nostro/Vostro reconciliations | Immediate finality; funds available to exporter |
| Costs | High, opaque fees | Lower fees, transparent FX rate |
What central banks need to get right next
From my perspective, three priorities stand out if CBDCs are to genuinely improve cross-border payments:
Ultimately, the promise of CBDCs for cross-border payments isn’t just technical. It’s political and institutional. Central banks need to collaborate with other regulators, payment providers, and international organizations like the BIS and IMF. If they do, we could see a future where sending money across borders is as fast and cheap as sending an email — and where developing economies get a fairer place in global payment networks.
I’ll be watching how pilots scale and which design patterns become dominant. For readers who send money internationally, run a business, or work in finance — prepare for change. The rails that have defined international payments for decades are being redesigned, and CBDCs are a central plank in that transformation.
