By 
Despite advancements in blockchain technology, traditional financial infrastructure appears poised to dominate the international payments market for the foreseeable future. Central banks are increasingly favoring legacy instant payment systems over central bank digital currencies (CBDCs), according to the Official Monetary and Financial Institutions Forum (OMFIF) in its latest Future of Payments survey.
Legacy Systems Dominate Cross-Border Payment Solutions
Interlinking instant payment systems—such as the recently launched US FedNow—emerged as the top choice for improving cross-border payments, with 47% of central banks supporting this option. Stablecoins, meanwhile, garnered 0% support, continuing their lack of appeal from last year.
CBDCs have seen a notable decline in interest, with support dropping from 31% in 2023 to 13% in 2024. This waning enthusiasm likely stems from growing caution among central banks, despite increased research activity into CBDCs.
Challenges for CBDC Adoption
The retreat from CBDCs may also reflect geopolitical concerns. In October 2024, the Bank for International Settlements (BIS) withdrew from Project mBridge, a multi-CBDC initiative dominated by China and other non-Western countries. While the BIS denied political motives, the move was widely viewed as a reaction to concerns over international sanctions and geopolitical tensions.
The US dollar continues to hold its position as the preferred global settlement currency, with only 11% of central banksreporting plans to reduce its usage. The report suggests that geopolitical uncertainty has reinforced the dollar’s dominance as a safe haven.
Emerging Interest in Tokenization
The survey reveals growing interest in tokenization as a potential solution to streamline compliance and enhance payment efficiency. Over 40% of central banks in developed markets see tokenization as promising, with plans to explore it in the next three to five years.
Initiatives like the BIS’s Project Agora, involving central banks from countries such as France, Japan, and the UK, are exploring tokenized transfers and the use of wholesale CBDCs. However, these projects coexist with a preference for traditional systems, signaling that blockchain-based solutions may remain limited in scope for cross-border payments.
Future of Cross-Border Payments
Given the challenges facing blockchain-based systems, the BIS is advancing alternative options. Project Nexus, which leverages the ISO 20022 messaging standard, aims to establish a common platform for interconnecting legacy instant payment systems globally.
While tokenization and blockchain solutions offer long-term promise, central banks’ reliance on proven instant payment systems suggests that traditional financial infrastructure will continue to underpin cross-border payments in the near term.
Comments