A Path To Inclusive And Resilient Global Financial Architecture: Exploring The Potential Of Central Bank Digital Currencies

The hierarchical architecture of the current International Monetary System (IMS) revolves around the supremacy of the U.S. dollar and its associated financial infrastructure. In times of crisis, this framework incorporates models of monetary cooperation that depend on lenders of last resort to provide access to currency, ensuring monetary stability. Yet, policy initiatives involving Central Bank Digital Currencies (CBDCs) and Distributed Ledger Technology (DLT) may present an alternative institutional design to this structure. Monetary innovations like multi-CBDC platforms can enable direct currency exchange among central banks without relying on the U.S. dollar and its correspondent global banking networks. The Bank for International Settlements (BIS) is spearheading central bank cooperation through initiatives establishing an interoperable multi-CBDC platform. By facilitating direct settlements in local currencies, such platforms could reduce reliance on U.S. dollar liquidity during crises and expand monetary autonomy of nations. However, robust governance frameworks and international collaboration are required to address emerging risks and challenges. Access to this collaborative network should also be expanded under G20 leadership to foster a more inclusive IMS. Through open dialogue and exchange of expertise facilitated by the BIS and guided by the G20, this process should aim to contribute to a more equitable and future-proof IMS serving all nations while navigating the complexities of DLT-based monetary innovation.