Wholesale CBDC: Examining the Business Case

Srichander Ramaswamy ()
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Srichander Ramaswamy: The South East Asian Central Banks (SEACEN) Research and Training Centre

Working Papers from South East Asian Central Banks (SEACEN) Research and Training Centre

Abstract: Many central banks are assessing the benefits that a wholesale central bank digital currency (wCBDC) could bring to the financial system. This assessment is being driven by the rise of tokenised assets and the need for efficient and safe settlement assets in these markets. While wCBDCs can facilitate settlements on distributed ledger technology platforms for such assets, some central banks are of the view that existing systems (like the RTGS) can achieve similar outcomes through application programming interfaces without the need to introduce a new central bank liability. Beyond settlement of tokenised assets, wCBDC is also being seen having the potential in offering many benefits to cross-border payments by reducing settlement times and transaction costs. That is because existing arrangements employing correspondent banking models introduce frictions by having multiple intermediaries that introduce counterparty risk and longer settlement times. They are also costly as they need pre-funded nostro accounts. In theory, wCBDCs can eliminate the need for correspondent banks by allowing direct settlements between central banks, but this raises questions about central banks' willingness to assume correspondent roles. Alternative arrangements using automated market makers can also facilitate foreign exchange trading using wCBDCs, but their effectiveness and cost efficiency in less liquid currency pairs remain uncertain. The exploration of wCBDCs should, therefore, consider the existing capabilities of the financial system and the potential for private sector solutions to meet market needs effectively.

Keywords: Central banks; digital currency; cross-border payment; correspondent bank; tokenisation; large value payments. (search for similar items in EconPapers)
JEL-codes: E42 E58 G21 G28 (search for similar items in EconPapers)
Date: 2025-11
New Economics Papers: this item is included in nep-cba, nep-fmk, nep-mon and nep-pay
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