Core Focus: The three primary models for achieving cross-border CBDC interoperability, the technical and institutional characteristics of each model, and the trade-offs they present.

In-Depth Notes:
Cross-border interoperability of central bank digital currencies (CBDCs) is a critical challenge facing the international community. As more jurisdictions develop CBDCs, ensuring they can interact seamlessly across borders is essential to prevent fragmentation of the international monetary system. The literature identifies three primary models for CBDC interoperability: bilateral links, bridge arrangements, and shared platforms.

Bilateral Links – The “Direct Connect” Model:
Bilateral links involve a direct connection between two CBDC systems, enabling payments between those two jurisdictions. This model is the most straightforward technically but scales poorly: each new connection requires a separate bilateral agreement. Bilateral links can be implemented through several technical approaches: direct connection between RTGS and DLT-based CBDC systems, interoperability gateways, or common messaging standards. The technical challenge lies in ensuring atomic settlement—where both sides of a cross-border payment settle simultaneously or not at all. As one framework for atomic interoperability between RTGS and DLT systems notes, the proliferation of domestically issued CBDCs on heterogeneous DLT platforms creates fragmentation risk and cross-border settlement risk . A Cross-Rail Atomic Settlement Model (CRASM) has been proposed combining an interoperability gateway, an atomic commit protocol, and a compliance-preserving ISO 20022 data envelope .

Bridge Arrangements – The “Hub and Spoke” Model:
Bridge arrangements involve a multilateral platform that connects multiple CBDC systems through a central hub. The mBridge project is the most prominent example of this model, creating a shared platform where participating central banks and commercial banks can conduct real-time, peer-to-peer cross-border payments and foreign exchange transactions on a DLT-based ledger . In a bridge arrangement, each participating central bank deploys a validating node on the platform, while commercial banks connect to the platform to execute transactions. The bridge model scales better than bilateral links because each jurisdiction needs only one connection to the hub to reach all other participants.

Shared Platforms – The “Single System” Model:
Shared platforms involve a single, unified infrastructure where multiple jurisdictions operate on the same platform. This is the deepest form of integration, with participants sharing a common ledger, common rules, and common governance. Project mBridge’s mBridge Ledger, built on a new blockchain compatible with the Ethereum Virtual Machine, represents a shared platform approach . Shared platforms offer the greatest efficiency gains but also the greatest governance challenges, as jurisdictions must agree on common rules, legal frameworks, and dispute resolution mechanisms.

The Interconnection of Instant Payment Systems:
Beyond CBDC-specific interoperability, the interconnection of instant payment systems (IPS) represents another pathway to cross-border payment integration. IPS are now operating in most economies and are increasingly being linked across borders, following three families of models: bilateral links between national IPS; multilateral hubs (e.g., Nexus in Southeast Asia); and shared regional IPS (e.g., TIPS in Europe, PAPSS in Africa) . The expected benefits stem from simplifying the correspondent banking chain and reducing transaction costs, though the settlement of cross-border transactions still depends largely on existing correspondent banking mechanisms .