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Industry roundup: 13 July

Report: international cooperation is essential for CBDCs to improve cross-border payments

Central bank digital currencies (CBDCs) have the potential to enhance the efficiency of cross-border payments, as long as countries work together. This is the main conclusion of a joint report released by the Committee on Payments and Market Infrastructures, the BIS Innovation Hub, the International Monetary Fund (IMF) and the World Bank.

The report analyses how CBDCs could facilitate enhanced cross-border payments, and how practical efforts are taking these considerations forward. Facilitating international payments with CBDCs can be achieved through different degrees of integration and cooperation, ranging from basic compatibility with common standards to the establishment of international payment infrastructures. The analysis highlights both the need for multilateral collaboration on macrofinancial consequences as well as the importance of interoperability between CBDCs.

To date, no major jurisdiction has launched a CBDC and many design and policy decisions are still unresolved. Also, most CBDC investigations by central banks focus on domestic issues. In this context, this report is exploratory and examines cross-border implications with the assumption that CBDCs will become widely used. To achieve the potential benefits for public welfare while preserving financial stability, further exploration of design choices and their macro-financial implications is essential.

"In the future, national arrangements could become interoperable by means of multiple CBDC arrangements between central banks," commented Benoît Coeuré, head of the BIS Innovation Hub. "These would mitigate cross-border and cross-currency risks and frictions, while reinforcing the role of central bank money as an anchor for the payment system. The BIS Innovation Hub is collaborating with a number of central banks to establish prototypes and proofs of concepts to explore different uses of wholesale CBDC in a cross-border context."

 

Climate Finance Partnership raises US$250m to invest in emerging market climate infrastructure

BlackRock has secured more than US$250m in commitments from a consortium of global institutional investors, governments and philanthropies for the Climate Finance Partnership (CFP), a blended finance vehicle focused on investing in climate infrastructure across emerging markets in order to accelerate the global transition to a low carbon economy. Conceived at the One Planet Summit in September 2018 under the leadership of French President Emmanuel Macron, CFP showcases the potential for the public, philanthropic and private sectors to work together to mobilise significant investment into climate infrastructure that can deliver positive environmental and social impact and allow for attractive risk-adjusted returns.

The Governments of France, through the French Development Agency (AFD); Germany, through KfW Development Bank (KfW); and Japan, through Japan Bank for International Cooperation (JBIC); together with the Grantham Environmental Trust, the Quadrivium Foundation, and another private foundation committed a combined US$112.5m in catalytic capital. This catalytic capital is being used to mobilise a broader institutional capital raise, starting with commitments from Dai-ichi Life Insurance, a European pension fund, and a strategic banking partner, Standard Chartered Bank, as well as MUFG Bank, which together are the first institutional investors in CFP.

With energy demand in emerging markets poised to double by 2050, there is significant capital required for climate infrastructure, such as renewable power, in these regions to help reduce carbon emissions. Approximately US$9 trillion is needed for emerging markets to derive two-thirds of their energy from renewable power by 20501. The global energy transition toward net zero by 2050 can only be achieved with more institutional capital flows into less developed regions, where there are acute challenges from population growth, rising energy demand and climate disruption. CFP’s structure is designed to invest in new solutions that can help communities in developing countries that are most vulnerable to the impacts of climate change.

It is the shared belief of all CFP parties that aggressive action is necessary in order to limit the global temperature increase to 1.5°C, in a manner that harnesses the economic opportunities embedded in the transition to a global low-carbon economy.

 

EU approves pan-Nordic real-time payments infrastructure merger

P27 Nordic Payments has secured merger approval from the EU Commission to establish its pan-Nordic payments platform. This is a milestone in creating one common payments infrastructure throughout the Nordics. The P27 platform will enable domestic and cross-border payments in real-time, in batches and in multiple currencies.

The merger approval from the EU Commission is crucial for P27 in many ways. It enables P27 to start preparing for onboarding customers in Denmark, Finland and Sweden. It enables P27 to complete the acquisition of Bankgirot in Sweden and proceed with the transformation of the Swedish payments infrastructure together with Bankgirot. The merger approval also means that P27 can proceed with the preparations for pan-Nordic payments services and products, such as the Nordic bill payments service (one pan-Nordic alternative to the current request to pay and direct debet solutions in the Nordics).

"This is a major milestone for P27," said Lars Sjögren, CEO of P27. "Over the past three years, we have been building a platform that will transform the payments infrastructures in the Nordics. Our platform will enable domestic and cross-border payments in real-time, in batches and in multiple currencies throughout the Nordic region."

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