Template-Type: ReDIF-Paper 1.0
Author-Name: Tobias Adrian
Author-X-Name-First: Tobias 
Author-X-Name-Last: Adrian
Author-Name: Rodney Garratt
Author-X-Name-First: Rodney 
Author-X-Name-Last: Garratt
Author-Name: Dong He
Author-X-Name-First: Dong 
Author-X-Name-Last: He
Author-Name: Tommaso Mancini-Griffoli
Author-X-Name-First: Tommaso
Author-X-Name-Last: Mancini-Griffoli
Title: Trust bridges and money flows
Abstract: Cross-border payments are expensive, slow, and opaque. These problems reflect multiple frictions, many of which boil down to limited trust among counterparties. Trust plays a central role in exchanging credit-based money. End users need to trust the issuers of money, and issuers must trust users to satisfy financial integrity requirements. Transactions are possible only where trust links exist. Interoperability between different forms of money can thus be conceptualised as the network of trusted links necessary for transactions. Traditionally, across borders, trust links involve exclusive bilateral credit relationships among correspondent banks. However, the fixed costs required to build these links foster an expensive and concentrated system. This paper interprets different payment arrangements in terms of the implied trust structures. It discusses how the tokenisation of money alters trust links and allows for a potentially more efficient market structure to exchange money. The paper ends with a suggested global marketplace to trade tokenised money directly across borders.
Creation-Date: 2023-07
File-URL: https://www.bis.org/publ/work1112.pdf
File-Format: Application/pdf
File-Function: Full PDF document
File-URL: https://www.bis.org/publ/work1112.htm
File-Format: text/html
Number: 1112
Keywords: cross-border payments
Classification-JEL: E42, E51, E58, F31, G28, O32
Handle: RePEc:bis:biswps:1112