The central bank digital currency (CBDC) field is crowded, global in scope, and yet fragmented in many respects.

Broadly speaking, in concept, CBDCs provide a way for a central bank to combat the proliferation of cryptocurrencies, which are still mired in a fierce regulatory debate no matter where you look.

As proof positive of fragmentation, consider these statistics From the Atlantic Council: 11 countries have introduced CBDCs, 18 are in pilot programs, and dozens more are in various stages of research and/or development.

What is lacking is a CBDC to govern them, to borrow a phrase from author JRR Tolkien. Call it a token Tolkien? (We’ll stop with the puns).

The problem with CBDCs is one of global reach, of interoperability. Every central bank could conceivably — if it has the will and digital infrastructure and business and consumer acceptance — launch a CBDC that works well for domestic commerce and government aid distribution.

However, for CBDCs to truly gain ground, they will need to be interoperable across borders, as well as interact with existing and far-flung payment systems, to facilitate trade and commercial payments in the global era.

To that endAs reported on Monday (April 10), The Digital Currency Currency Authority Has unveiled what has been dubbed an international version of a CBDC.

The digital offering was launched at the spring meeting of the International Monetary Fund.

Called the Universal Monetary Unit (UMU), the CBDC is designed to act as “legally a money product” and “can be transacted in any legal tender settlement currency, and similar to a CBDC to enforce banking regulations and protect financial integrity.” works. international banking system,” according to the announcement on Monday. In view of the CBDC’s work, banks can link SWIFT codes and bank accounts to the UMU digital currency wallet and conduct “SWIFT-like cross-border payments via digital currency rails.”

Designed with international objectives

In an IMF funding paper discussing CBDCs for use in cross-border payments, the IMF wrote, “If CBDCs are not designed with international dimensions in mind, it is possible for CBDC systems to become fragmented, similar to the existing fragmentation of payment systems. Therefore, benefiting from the prospect of a clean slate is possible.” Therefore, it is imperative that central banks take interoperability issues into account when designing their domestic CBDCs. Central banks are considering both retail and wholesale CBDC systems. The motivations for each are as different as their objectives.”

The announcement does not appear to be designed to sideline the CBDC’s other efforts. But coexisting with countless CBDCs that could take root in the coming months and years, there appears to be a seemingly universal option that could unify a fragmented landscape.

For now, pan-global efforts seem to show that global interoperability can make the leap from concept to reality. As noted in this space in recent months, there are other global initiatives. In January this year, The Universal Digital Payment Network was launched at the World Economic Forum.

A widespread CBDC could also have the effect of firmly sidelining alternative cryptos – namely, Bitcoin and its brethren – in international transactions, especially commercial transactions. The regulatory landscape is anything but specificAnd as relay here, Augustin Carstens, General Manager of the Bank for International Settlements (BIS), commented in February that “A few years ago, crypto assets and cryptocurrencies were held up as an alternative to fiat money. That battle has been won,” he told PYMNTS. Technology, he said, does not pave the way for “trusted money” – and it is central banks and their infrastructure that give money “credibility”.

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