CBDCs and the dollar — the IMF interoperability paper read carefully

The Atlantic Council's GeoEconomics Center maintains the most comprehensive public tracker of central bank digital currency projects worldwide. As of mid-2024, the tracker counts 134 jurisdictions exploring CBDCs in some form, with four — the Bahamas, Jamaica, Nigeria, and the Eastern Caribbean Central Bank — having launched retail CBDCs. Thirty-six jurisdictions, including China's e-CNY, India's Digital Rupee, and the ECB's digital euro project, are in active pilot. The remaining ninety-four are in research only.

The IMF's 2023 staff working paper on CBDC interoperability, led by Tobias Adrian and the Monetary and Capital Markets Department, sharpened the policy frame. The paper distinguishes two CBDC-related questions that are usually merged in the popular debate: whether domestic CBDCs displace cash and bank deposits within a country, and whether cross-border CBDC settlement rails displace the existing correspondent-banking dollar system internationally.

The domestic question is mostly about monetary plumbing — payment efficiency, financial inclusion, the regulatory perimeter of bank versus non-bank money. The international question is geoeconomic. The IMF paper identifies three interoperability models for cross-border CBDC: compatible standalone systems (each CBDC operates separately, with bridges); interlinked systems (CBDCs connect through shared standards or APIs); and single-platform systems (multiple CBDCs share a single settlement infrastructure).

The BIS Innovation Hub's mBridge project — built by the central banks of China, Hong Kong, Thailand, and the UAE, with Saudi Arabia joining in 2024 — is the most operationally advanced single-platform multi-CBDC experiment. The 2022 pilot processed $22 million in real cross-border trade settlement among the participants. The BIS's 2024 decision to step back from mBridge amid sanctions-policy concerns was read by Atlantic Council analysts as the geoeconomic significance becoming too large to host neutrally.

The analytical point that gets lost in the popular framing is that a Chinese e-CNY by itself does not threaten the dollar's international role. The e-CNY in 2024 is mostly a domestic retail payment instrument. The threat scenario, if there is one, runs through cross-border CBDC settlement rails that let trade partners avoid US-correspondent dollar clearing. Those rails are years from operational scale, but the design choices being locked in now will shape what is possible later.

­The International Monetary Fund's 2023 staff discussion note 'A Framework for Central Bank Digital Currency Interoperability' and the subsequent 2024 working paper on cross-border CBDC arrangements represent the most extensive open-source treatment of the question by an institution with standing across the membership. The work, authored principally by Tobias Adrian and colleagues in the IMF's Monetary and Capital Markets Department, sets out a framework for thinking about how a multi-CBDC future would interact with existing settlement architecture and what the implications for international monetary roles would be.

The starting analytical move is to distinguish wholesale CBDCs (issued to commercial banks and other regulated intermediaries, used for interbank settlement) from retail CBDCs (issued to households and non-financial firms, used for payments). The wholesale variant is closer to existing central-bank settlement infrastructure and has been the subject of multiple multi-central-bank pilots (Project mBridge with the Hong Kong Monetary Authority, the Bank of Thailand, the Central Bank of the UAE, and the People's Bank of China; Project Jura with the Banque de France and the Swiss National Bank). The retail variant raises substantially different policy issues — financial-inclusion design choices, privacy considerations, banking-disintermediation risks — and is at an earlier stage in most jurisdictions.

The interoperability framework distinguishes three potential architectures for cross-border CBDC arrangements. The first is compatible CBDCs, where each jurisdiction's CBDC remains domestic but uses sufficiently compatible technical and legal standards that intermediaries can convert between them with limited friction. The second is interlinked CBDCs, where the central banks operate cross-jurisdictional bridges (typically with shared protocols and pre-agreed conversion rules) that allow CBDC-denominated transactions to settle across borders. The third is integrated CBDCs, a hypothetical architecture in which a multi-currency CBDC platform is jointly operated by participating central banks and used for both domestic and cross-border settlement. The BIS's Project mBridge sits closest to the second category; the third remains hypothetical at policy-paper stage.

The dollar-implication question that the IMF paper addresses with greatest care is whether widespread CBDC adoption would erode the dollar's structural position. The paper's conclusion is that the operational architecture for cross-border payments — settlement networks, correspondent banking, liquidity management — could be substantially transformed by mature CBDC interoperability, but that the underlying determinants of a reserve currency's position (market depth, rule of law, network effects, fiscal credibility) are not directly addressed by CBDC architecture. A CBDC-enabled future could, in principle, reduce the transactional friction that currently favours dollar use, but would not by itself produce a renminbi or euro position competitive with the dollar's.

The mBridge project — the most operationally advanced multi-CBDC pilot — is the empirical test case the IMF paper references most extensively. mBridge has progressed from the initial conceptual phase to operational live transactions settling renminbi-yuan, Hong Kong dollar, Thai baht, and UAE dirham cross-border between the participating central banks and their commercial-bank constituencies. The volumes are modest but real; the technical architecture has demonstrated that the interlinked-CBDC concept is feasible at production scale. Whether mBridge expands to additional central-bank participants and to substantially larger volumes is the open question that determines whether the cross-border-CBDC concept reaches scale.

The strategic-implication reading that the policy community has drawn from the IMF work is that the CBDC interoperability discussion is consequential for the operational architecture of cross-border payments and for the specific transactional share that runs through dollar correspondent banking versus alternative routings. It is less consequential for the reserve-currency-position question per se. The reserve currency competition runs on different metrics — market depth, fiscal-credibility, rule-of-law — that CBDC architecture does not by itself affect. The interoperability framework therefore matters most for the payments-flow share of dollar use, somewhat less for the reserve-asset share, and very little for the invoicing-currency share — a calibration the IMF paper makes explicit and that subsequent policy work has largely accepted.

The forward-looking implication of this analysis is that the structural drivers identified above will continue to shape policy trajectories across the second half of the 2020s. The doctrinal frameworks, institutional arrangements, and bilateral relationships described in the preceding sections are durable across multiple electoral cycles in the participating capitals, and any disruption of them would require shifts in underlying interests rather than rhetorical adjustment. The analytical reading developed here is not a prediction of a specific outcome at a specific date. It is a framework for reading the next round of developments — the summits, the policy announcements, the data releases, the bilateral and multilateral diplomatic moves — against the structural constraints the framework identifies. Each subsequent development can be read as confirming or refining the framework's predictions, and the cumulative pattern across multiple developments is what produces the analytical clarity that policy work most often needs. The headline-driven coverage of any specific event will continue to misread the broader trajectory; the data-driven, frame-anchored reading developed here is the antidote to that misreading and is the analytical discipline the policy community most needs across the remainder of the decade. The arithmetic of the underlying interests does not change quickly. The political and rhetorical surface above the arithmetic does change, sometimes quickly, and reading the two together is what produces analytical durability and policy-relevant insight that survives the news cycle.

The institutional research that underwrites this reading — the policy papers, the journal articles, the open-source datasets, and the running track records of the named scholars — represents a body of work substantially larger than any single explainer can summarise. Readers seeking deeper engagement should consult the primary sources cited in the preceding sections directly. The reading developed here aims to be a useful entry point rather than a substitute for that primary literature, and the framing has been chosen to surface the analytical moves that carry the most explanatory weight across the largest set of subsequent developments. A reader returning to this material in a year, in three years, or in five years should still find the framework usable, because the structural relationships it describes change more slowly than the headline developments they organise. The decade ahead will produce many specific events that this analysis cannot anticipate. The framework, if it is the right one, will help organise those events as they arrive.