Central banks to test prototypes for cross-border CBDC settlements

By Raffaele Redi

The experiment is in line with the G20 roadmap for enhancing cross-border payments.

The main building of the Bank for International Settlements (BIS) in Basel, Switzerland.                                 
The findings of the experiment will be published early in 2022 – Photo: Shutterstock
                                

The Bank for International Settlements (BIS) has recruited four central banks to test the use of wholesale central bank digital currencies (CBDCs) for international settlements.

Technical prototypes of the shared platforms will be displayed at the Singapore Fintech Festival in November, while the experiment's findings will be published early in 2022 in line with the G20 roadmap for enhancing cross-border payments.

The BIS Innovation Hub's Singapore Centre enlisted the Reserve Bank of Australia, Bank Negara Malaysia, Monetary Authority of Singapore and South African Reserve Bank to test the use of CBDCs.

BIS explained that Project Dunbar will develop prototype shared platforms for cross-border transactions using multiple CBDCs and will eliminate the need for intermediaries, cutting the time and cost of transactions.

“Project Dunbar brings together central banks with years of experience and unique perspectives in CBDC projects and ecosystem partners at advanced stages of technical development on digital currencies,” said Andrew McCormack, Centre Head of the BIS Innovation Hub Singapore Centre.

“With this group of capable and passionate partners, we are confident that our work on multi-CBDCs for international settlements will break new ground in this next stage of CBDC experimentation and lay the foundation for global payment connectivity,” he added.

The project's aims

Project Dunbar's prototype shared platforms are designed to allow financial institutions to transact directly with each other in any of the digital currencies issued by participating central banks.

According to the BIS press release, “The project will work with multiple partners to develop technical prototypes on different distributed ledger technology platforms. It will also explore different governance and operating designs that would enable central banks to share CBDC infrastructures, benefitting from the collaboration between public and private sector experts in different jurisdictions and areas of operation.”

“Enhancing cross-border payments has become a priority for the international regulatory community and something that we are very focused on in our domestic policy work,” said Michele Bullock, Assistant Governor (Financial System), Reserve Bank of Australia.

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