BIS launches CBDC settlement project with four central banks

The Bank for International Settlements announced that its Innovation Hub will test central bank digital currencies (CBDC) for international settlements with the central banks of Australia, Malaysia, Singapore and South Africa. Called Project Dunbar, it will develop prototypes for shared platforms that will enable international settlements with digital currencies issued by multiple central banks.

The system aims to allow direct transactions between institutions, which is expected to reduce costs and increase speed. The project’s results, expected to be published in early 2022, will inform development of global and regional platforms and support G20 roadmap for improving cross-border payments.

The plan is to develop prototype shared platforms for cross-border transactions using multiple CBDCs. These multi-CBDC platforms will allow financial institutions to transact directly with each other in the digital currencies issued by participating central banks, eliminating the need for intermediaries and cutting the time and cost of transactions.

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.

“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. 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 payments connectivity,” said Andrew McCormack, head of the BIS Innovation Hub Centre in Singapore, in a statement.

“We are pleased to collaborate with the BIS Innovation Hub and the central bank partners on this important initiative to explore how a shared platform for multiple CBDCs could be used to improve the speed, cost and transparency of wholesale cross-border transactions. Enhancing cross-border payments has become a priority for the international regulatory community and something that we are also very focused on in our domestic policy work,” said Michele Bullock, assistant governor (Financial System) at the Reserve Bank of Australia, in a statement.

“The multi-CBDC shared platform explored under Project Dunbar has the potential to leapfrog the legacy payment arrangements and serve as a foundation for a more efficient international settlement platform. We hope the project will spur greater public-private collaboration to enable fast and frictionless cross-border payments, combining both the benefits of distributed ledger technology and the efficiency of a common platform,” said assistant governor Fraziali Ismail at the Bank Negara Malaysia, in a statement.

“The findings on how a common platform can be governed effectively and managed efficiently will shape the blueprint of the next generation payment systems,” said Sopnendu Mohanty, chief fintech officer at the Monetary Authority of Singapore, in a statement.

“After years of mostly domestic research and exploration, we are very pleased to see that these common insights about the need to explore cross-border CBDC payments and interoperability are coming together internationally. We are particularly excited to be part of Project Dunbar given the SARB’s role in operating the regional wholesale settlement system in the Southern African Development Community,” said deputy governor Rashad Cassim at the South African Reserve Bank in a statement.

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