The Digital Money Institute (DMI), part of the Official Monetary and Financial Institutions Forum think tank, released its third annual Future of Payments report in metaverse.
It has been reported that was sponsored by several payments companies and the crypto exchange Binance, and those companies penned sections that supplemented DMI's findings. This was the first time it included a survey of central banks.
However, the DMI staff found in its survey that CBDC development was “gaining momentum,” with two-thirds of central banks expecting to have CBDCs within a decade. Another 12% of central bank respondents said they did not expect to issue a CBDC at all. When asked about their objectives, more than a quarter of central banks mentioned preserving their roles in money provision and more than 10% mentioned financial inclusion. “Other” was indicated more often.
The report said that none of the banks chose “aid cross-border payments” as one of their objectives. Nonetheless, almost 35% of the banks saw interlinking CBDCs as the most promising way to improve those payments. When asked about stablecoins, nearly 90% of banks identified them as “an opportunity to make cross-border payments more efficient.”
Likewise, fiat-based cross-border payment systems are developing rapidly. There are significant hurdles to achieving global reach, especially data exchange, as only around 70 countries have adopted the financial messaging standard known as ISO20022. The DMI report assures that “regionally integrated payment networks offer an exciting prospect.” Still, 80% of African cross-border transactions are processed off the continent.
Cryptocurrency and stablecoins are making their greatest strides in emerging economies, as they offer the advantages of disintermediation (which enables faster settlement across time zones), cost savings and accessibility, but have the potential downsides of volatility and unreliability.
The authors stated:
“Vulnerable nations should invest in bringing down the cost of remittances and broadening access to financial services to reduce the exposure of vulnerable economic groups to volatile and unsafe cryptocurrency products.”
Thus, the report looks at the metaverse from a payments perspective, calling it “first and foremost, a model for a digital economy.” In the metaverse, cross-platform interoperability is key and will likely require “major changes to business models.”