Solving for foreign exchange liquidity: do central banks need to step up?

Many central banks are eager to see if multi-currency central bank digital currency platforms can resolve cross-border payment problems. While improved plumbing is an important development for cross-border payments, many of the costs involved in the market stem from a lack of liquidity for trading pairs. Crucially, this issue cannot simply be addressed by improving the settlement architecture.

While central bank swap lines are an important component of ensuring foreign exchange corridors remain liquid, could central banks be doing more to improve the efficiency of cross-border payments markets? Ousmène Jacques Mandeng, senior adviser, Accenture and visiting fellow at the School of Public Policy at the London School of Economics, joined OMFIF to discuss the importance of effective liquidity provision and what central banks could do to ensure this amid the development of cross-border CBDC platforms.