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Three Models for Cross-Border Payments Correspondent Banking, Stablecoin Sandwich, and the Tokenized Two-Tier System 1. Correspondent banking A European bank can make dollar payments through an account held at a US correspondent bank. The European bank refers to this as its nostro account; the US correspondent records that same account as a vostro. When the European bank initiates a dollar payment, the correspondent debits its account and either credits the beneficiary on its own books or pays the beneficiary's bank through a domestic payment system. Each bank processes the information and accounting entries relevant to its specific leg of the payment. Missing information, insufficient available funds, or a compliance query can halt this processing. If an investigation extends beyond a cutoff time, settlement may be delayed until the next operating window, and a compliance issue can result in outright rejection. Multiple intermediaries can process a payment quickly when these operations are automated, but complications arise when one institution cannot proceed after other participants have already executed their part. If the customer pays in euros and the beneficiary receives dollars, the bank providing foreign exchange (FX) services must also deliver the dollars on the required date. It can draw on existing balances, offset the transaction against other customer business, or source liquidity in the open market. In general, banks hedge their currency exposure on an aggregate basis rather than executing an individual hedge for every single payment. They can use instruments such as a forward contract, which hedges future exchange rate risk without supplying the dollars needed today, or an FX swap, which provides immediate dollars in exchange for euros but requires returning them later, creating a subsequent refinancing obligation. These hedging operations, combined with hop-by-hop individual screening systems and potential cutoff constraints, make the system expensive to maintain and frequently slow. Due diligence requirements, systems integration, and ongoing monitoring must be backed by sufficient business volume across each correspondent relationship. In low-volume corridors, these overhead costs are spread across relatively few payments. Furthermore, processing and investigation costs do not necessarily decline in proportion to smaller transaction sizes, making fees particularly heavy for retail customers. 2. The stablecoin sandwich By contrast, the stablecoin sandwich model functions very similarly to Money Transmitter Operators (MTOs), but uses a stablecoin as a bridge asset. This reduces fixed costs in proportion to how frequently value is transferred on-chain, where operations are fast and cheap. The payer deposits local fiat through a collection account, and an on-ramp delivers stablecoins (typically USD-denominated for liquidity reasons) for subsequent transfer to an off-ramp. Next, the off-ramp supplies the local currency that is credited to the beneficiary's bank account. The token can reach the off-ramp outside standard banking hours without waiting for sequential correspondent account updates. An off-ramp with adequate local liquidity can then pay the beneficiary through an available domestic payment system. This setup works especially well when local payment rails operate 24/7, as it eliminates settlement mismatches. Operational continuity requires both intermediaries to constantly replenish the assets they sell. Because of this, PSPs or entities acting as on- and off-rampers run internal hedging and netting systems to manage their working inventory. A faster intermediate leg can speed up the receipt of funds, but final credit to the bank account still depends on the off-ramp's liquidity and operational reliability. Token holders also carry risks related to the issuer and any custodians involved, while direct token redemption may be restricted exclusively to eligible counterparties. Consequently, a substantial share of the remaining costs lies in holding inventory and converting it into liquid fiat ready for domestic payout. 3. Tokenized Two-Tier System (Project Agorá) This model represents the initiative led by the BIS, central banks, and commercial banks to modernize bilateral correspondent banking infrastructure, alongside several other wholesale use cases. It is a wholesale project that preserves bilateral banking relationships within a shared platform. Participating institutions coordinate payment preparation and execution by representing both commercial bank deposits and central bank reserves as tokenized balances, commonly known as Tokenized Deposits and wCBDCs (wholesale Central Bank Digital Currencies), respectively. Unlike traditional correspondent banking, commercial banks run required compliance checks in parallel and share the verified outcomes with other authorized participants. A failed check can halt the workflow before any payment leg settles, avoiding subsequent investigations after previous institutions have already committed funds. Once validation is complete, the necessary balances are locked and moved under a unified execute-or-cancel decision, commonly referred to as atomic settlement. If payment preparation fails, the workflow simply unlocks the balances without proceeding to settlement. Final settlement occurs in tokenized central bank reserves (wCBDC) residing within the same unified ledger environment as deposits. This setup drives much higher liquidity efficiency, enables precise calculation of minimum required reserves to maintain smooth operations, and opens the door to systemic resilience mechanisms that would be impossible without a multilaterally state-shared network.