Piloting Public Tech Platform for Frictionless Credit, CBDCs Can Make Cross-Border Payments Easier: RBI Governor

The Reserve Bank of India’s “public tech platform for frictionless credit” pilot will enable lenders to use information stored in multiple places for credit assessment, RBI Governor Shaktikanta Das announced while delivering the keynote address at the G20 TechSprint yesterday. Developed in association with the Reserve Bank Innovation Hub, the platform aims to do away with the bilateral integrations needed between lenders and information providers. The end-to-end digital platform may also offer lending products in a “frictionless and speedy” manner, and could reduce costs, and improve turnaround times and scalability.

Tech Policy Planks To Keep An Eye On During India’s G20 Presidency

The TechSprint is a “global long-form hackathon” series co-hosted by the sitting G20 President (India, in this case) and the Bank for International Settlements’ Innovation Hub. The hackathon aims to identify new tech that can help address central banks’ objectives and priorities. 

Among other things, India’s G20 Presidency has seen it bat in favour of Central Bank Digital Currencies (CBDC), over private cryptocurrencies. The latter have been repeatedly accused of enabling illicit finance, like money laundering and terror financing. The country has also positioned itself as a voice for the Global South, arguing that its various policy planks can aid the interests of emerging markets. These priorities were visible in the TechSprint’s mandate as well.

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93 proposals from across the world were submitted across the following problem areas outlined by the G20 TechSprint, of which three were awarded by the jury: 

• Reducing the risks of illicit finance: The Governor noted that only a small percentage of the world’s laundered money is successfully intercepted—around $3 billion USD of anywhere between $800 billion to $ 3 trillion of illicit funds. Achieving full compliance with “Anti-money Laundering/Combating the Financing of Terror” measures is slow and often partial. This requires innovative technological solutions to combat these risks to international finance that can be integrated by platforms. 
  • The United Kingdom’s Secretarium Limited won in this category, by developing a solution that monitors transactions, while using “secure privacy technology” to protect the anonymity and privacy of the user. 

• Technology solutions for multilateral cross-border CBDC platforms: Das pledged his “strong” belief in cross-border payment being made more efficient through Central Bank Digital Currencies, particularly those that are interoperable. The plank centred around tech solutions for “multilateral cross-border CBDC platforms which can contribute to interoperability across multi-CBDC platforms or domestic payment systems”. 
  • The United States’ Knox Networks won, by developing a multilateral CBDC solution using File-Based Digital Assets.

• Forex and technology solutions for ‘currency settlement’: Technology solutions in forex and liquidity are needed to enable settlements in emerging markets’ currencies, Das said. Using local currencies in cross-border payments can help shield these markets from global financial shocks (like exchange rate fluctuations), while also encouraging the development of local forex and capital markets. But, currently, the forex and liquidity risks linked to emerging market currencies makes operating multilateral platforms with them challenging. So, tech-powered payment platforms that support multiple currencies can promote local currency payments. 
  • The United Kingdom’s Millicent labs won here. The team developed a “hybrid decentralised exchange for CBDCs” whose features help optimise liquidity and reduce volatility risks.

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