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Abstract

When you bought your coffee this morning, you probably didn’t notice that many cross-border payments were hidden in the process of shipping beans in Ethiopia to the barista in your neighborhood. Comprising more than ten percent of what U.S. consumers spend, cross-border payments are an essential part of U.S. dollar dominance and commercial competitiveness. Yet, the outdated cross-border payment system—shrinking constantly in reach and struggling with structural changes—is demanding a complete upgrade.

What is the best path forward? Cryptocurrencies? E-money? Stablecoins? Central bank digital currencies (CBDCs)? In this article, I answer the question by uncovering the core needs of the upgrade to create a novel monetary-payment framework and then uniformly assess the immediate and long-term impacts of various proposals. I conclude that the combination of stablecoins and CBDCs will offer the most efficient improvement. Additionally, this combination will balance private and public banking activities against the backdrop of expanding central bank activism to prevent financial destabilization and anti-competitive concentration. Ultimately, this combination could also leverage existing international organizations, such as the Bank for International Settlements and the International Institute for the Unification of Private Law (UNIDROIT), to expedite the revolution in the cross-border payment system by accelerating the achievement of an international consensus on prudential and private law.

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