U.S.

International Trade Commission Executive Briefings on Trade, April 2023

Digital Currencies and Cross-Border Payments: An Overview
Junie Joseph, Office of Industry and Competitiveness Analysis

Digital currencies are one of the latest innovations to payment systems being explored by governments, institutions,
firms, and households. Digital currencies promise faster, cheaper, and more transparent transactions, especially
across borders, but there are concerns about effective implementation and the need for regulatory oversight. This
brief contrasts two main types, Central Bank Digital Currencies (CBDCs) and cryptocurrencies (which are not backed
by government central banks), and their cross-border usage.
Digital currencies, or currency available only in digital form such as Central Bank Digital Currencies (CBDCs) and
decentralized cryptocurrencies, have begun to transform payment services over the past decade. Used by central
banks, private corporations, and increasingly individual consumers, digital currencies may enhance efficiency in
payments transactions, accelerate settlement flows, and reduce costs by shortening payment chains. Digital
currencies may also expand financial inclusion through reduced costs and barriers. As a result, digital currencies
have the potential to reshape the global payments industry, particularly cross-border payments, especially if
concerns such as cybersecurity and regulatory issues are addressed. Table 1 compares the two major types of digital
currencies for cross-border payments.
Table 1. Comparison of the two major digital currency categories
Elements Central Bank Digital Currencies (CBDCs) Cryptocurrencies
Authority Centralized Decentralized
Accessibility Determined by governments Unrestricted
Technology Distributed ledger or central database Distributed ledger
Cross-border use Wholesale or retail Retail
Examples Bahama’s Sand Dollar, China's DCEP Bitcoin, Ethereum, Tether
Central bank digital currencies (CBDC): Central bank digital currencies (CBDCs) are a digital form of a country’s
currency issued by its central bank. These digital currencies function much like fiat money—government-issued
tenders backed by the nation’s sovereign credit—except that because they operate by using distributed ledger
technology (such as blockchain) or a central database, they are generally not anonymous by design: users and
transactions are recorded. 1 As of April 2023, 100 countries have launched or are researching, developing, or piloting
CBDCs (figure 1). Led by the Bahamas, ten Caribbean nations and Nigeria have fully launched a CBDC, and 14 other
countries are piloting CBDCs, including China which has extended its pilot to foreign visitors and the United States,
where the Federal Reserve Bank of New York launched a proof-of-concept pilot to be completed in 2023.
Figure 1. Central Bank Digital Currency Status, April 2023
Facilitating improved cross-border transactions is a
common component for CBDC development. Though
each nation’s CBDC may be implemented differently
depending on domestic policy needs and goals, the
majority of CBDC projects include cross-border
payments, particularly for “wholesale settlement,”
i.e., settlement of cross-border interbank
transactions. Retail CBDCs—CBDCs for the general
public’s use—are largely under consideration, which
may improve consumer cross-border transactions
and financial inclusion in their respective
Source: Atlantic Council, Atlantic Council CBDC Tracker (accessed 4/18/2023).

1
There are ways to develop CBDCs that are anonymous for lower value transactions. See ECB, Exploring anonymity in central
bank digital currencies, December 2019.
The views expressed solely represent the opinions and professional research of the author. The content of the
EBOT is not meant to represent the views of the U.S. International Trade Commission, any of its individual
Commissioners, or the United States government.
U.S. International Trade Commission Executive Briefings on Trade, April 2023
economies through reduced barriers to financial services and reduced consumer costs.
On the other hand, there are concerns regarding CBDCs, including their potential to drastically change the roles of
various institutions in the financial sector by removing the middlemen in financial transactions and thus cause
negative impacts on the sector’s stability, privacy, and security. In addition to countries and currency unions,
numerous multilateral organizations, including the Bank for International Settlements, Financial Stability Board,
International Monetary Fund, and World Bank, have committed to doing research on how CBDCs can address these
concerns in addition to improving financial inclusion and other sustainable development goals.
Cryptocurrencies: Cryptocurrencies rely on cryptography and distributed ledger technology, such as blockchain, to
provide a secure, auditable record of transactions without a centralized authority. 2 Consequently, since
cryptocurrencies’ first major inception with Bitcoin in 2009, they have become widely accessible to the general
public globally. An estimated 13.7 percent of the U.S. population owned cryptocurrency in 2022. Globally, industry
observers estimate there are over 420 million global cryptocurrency users as of April 5, 2023. According to the same
source, nations with the most estimated cryptocurrency users are the United States (46 million), India (27 million),
Pakistan (26 million), Nigeria (22 million) and Vietnam (20 million). By continent, Asia (260 million) has the most
estimated cryptocurrency users, followed by North America (54 million) and Africa (38 million). Furthermore, major
financial firms and payment providers such as Square, PayPal, and Mastercard have facilitated purchases with
Bitcoin and other cryptocurrencies, with PayPal holding $604 million in cryptocurrency for its customers in 2022.
Because of their anonymous global user base and decentralized framework, cryptocurrency transactions are freely
conducted across borders. Especially in economies with weakening national currencies or depressed interest rates,
cryptocurrencies are an attractive alternative for consumers seeking to invest as traditional investment assets (i.e.,
bonds, securities) in foreign markets typically have higher barriers to investing. Cryptocurrencies may also provide
relative stability in economies with rapid inflation and reduce cross-border transaction risks. Nevertheless,
cryptocurrencies are susceptible to large value fluctuations, security issues, regulatory barriers, and transactional
delays, particularly when finding market participants to exchange large transaction values. For example,
cryptocurrencies have recently declined to an estimated global market capitalization of $1.3 trillion in April 2023,
declining by 33 percent compared to the same time last year. Being largely unregulated, firms operating in the
crypto exchange industry are susceptible to mismanagement and drawdowns. These limitations undermine their
broad application in commercial cross-border payments which account for roughly 80 percent of total international
payments. 3 Increased use as a cross-border payments system may require increased adoption, regulation, ensuring
the security of assets, and transaction management.
Looking forward, many retailers and financial firms believe that digital currencies will be ubiquitous in the next five
to ten years. As a result, governments are increasingly investigating efforts to regulate the industry, while not
hindering innovation.
Sources: Allison, “Remember JPM Coin? Next Step Is Programmable Money,” CoinDesk, 6/7/2021; Atlantic Council, “Central Bank Digital
Currency Tracker,” accessed 9/7/2022 ; CBDC Tracker accessed 10/31/2022 ; CPI, “Central bank digital currencies for cross-border
payments,” BIS, 7/2021; CPI, “Cross-border Retail Payments,” BIS, 2/2018; Crypto.com, “Crypto Market Sizing Report 2021 and 2022
Forecast,” 1/19/2022; Deloitte, “Deloitte’s 2021 Global Blockchain Survey,” 2021; Federal Reserve Board of Governors, “Money and
Payments,” 1/2022; Financial Stability Board, “Enhancing Cross-border Payments,” 10/13/2020; Gura, “Fears of Crypto Contagion,” NPR,
11/22/2022; McKinsey, “2022 Global Payments Report,” 10/2022; Moretti and Narain, “Regulating Crypto,” IMF, 9/2022; Ossinger, “The
World’s Cryptocurrency Is Now Worth,” Time, 11/8/2021; Salzman, “Bitcoin Was Supposed to Be a Way Around,” Barron’s, 4/9/2021;
Tobias and Mancini Griffoli, “The Rise of Digital Money”, IMF, 7/15/2019; Triple A, “Global Crypto Adoption,” accessed 4/5/2023 ; Triple
A, “Crypto Ownership United States,” accessed 4/13/2023 ; Tzanetos, “Cryptocurrency statistics 2022,” Bankrate, 7/8/2022; Wolff, “The
competing priorities facing U.S. crypto regulations,” Brookings, 10/17/2022; Deloitte, “Merchants getting ready for crypto,” 2022;
Campbell, “Bowman says Fed's crypto oversight,” American Banker, 1/10/2023; ECB, “Crypto-assets,” 2/15/2023.

2
Centralized and cryptocurrencies with concentrated control may occur if some investors own a large share of its market.
3
Consumer cross-border payments include remittance services and consumer-to-business payment services while
commercial cross-border payments services include all other business transactions and documentary trade finance.
The views expressed solely represent the opinions and professional research of the author. The content of the
EBOT is not meant to represent the views of the U.S. International Trade Commission, any of its individual
Commissioners, or the United States government.