Enable FX transactions to facilitate cross-border payments

Use Cases

About

Use Case Category	Use Case Description
wCBDC	This use case involves two banks (a domestic and an international one) conducting a cross-border payment from one currency to another using blockchain-based wholesale CBDCs.

Description

Key Stakeholders:

Banks

Story:

1. The Euro bank requests issuance of EUR wCBDC from its central bank.

2. It transfers the EUR wCBDC to a public blockchain network.

3. On the network, the Euro bank exchanges EUR to SGD wCBDC via an automated market maker (AMM).

4. The SGD wCBDC is transferred to the Singaporean bank.

5. The Singaporean bank transfers the SGD wCBDC to its domestic CBDC platform.

6. It redeems the SGD wCBDC with its central bank.

Postconditions:

Cross-border payment is completed using wholesale CBDCs exchanged via an international blockchain network and AMM. Settlement finality is achieved.

Example of Solution Provider:

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Commercial banks acting on behalf of corporates or end-users making cross-border payments, and to facilitate global liquidity management. Primary goal is to facilitate cross-border payments using wCBDC. Use case focuses on executing a cross-border payment, where the originating bank uses wCBDC to facilitate the FX transaction and pay a recipient bank in another country. i.e. the bank acts on behalf of clients to facilitate a payment.

It is illustrated using the euro area commercial bank and the Singaporean commercial bank executing a cross-border payment from the euro area to Singapore. In a first step, the euro area commercial bank requests issuance of EUR wCBDC (process I). It then transfers the EUR wCBDC to the international network using the bridge (process II). On the international network, the euro area commercial bank (i) executes the FX transaction, paying EUR wCBDC to receive SGD wCBDC using the AMM (process IV); and (ii) pays SGD wCBDC to the Singaporean bank (process V). The Singaporean bank transfers the newly received SGD wCBDC to the Singaporean platform (process II). Finally, it redeems the wCBDC (process VI).

Source: BIS