The central banks of Australia, Singapore, Malaysia and South Africa have announced a joint initiative to conduct a cross border payment trial for international settlements using central bank digital currencies (CBDCs) to assess if this will allow transactions to be settled more cheaply and easily, the banks said on Thursday
The initiative, dubbed Project Dunbar, will prototype shared platforms enabling direct transfers between institutions using digital currencies issued by multiple central banks. The pilot’s findings will be used to inform the “development of global and regional platforms” in addition to supporting the G20’s roadmap for improving cross-border payments.
Most projects are still in the early stages and are domestically focused, but developing global rules and frameworks for how CBDCs can be used internationally is complicated technically, and potentially politically.
This latest project aims to develop prototype shared platforms for cross-border transactions using multiple CBDCs, said the statement from the Reserve Bank of Australia, Bank Negara Malaysia, the Monetary Authority of Singapore, the South African Reserve Bank, and the Bank of International Settlement’s Innovation Hub, which is leading the scheme.
These platforms would enable financial institutions to transact directly with each other in CBDCs, which could eliminate the need for intermediaries and reduce the time and cost of transactions.
The statement said that the initiative, which will also explore different technical, governance and operating designs, should publish its results in early 2022
Assistant Governor, Bank Negara Malaysia, Fraziali Ismail said in a statement that “the multi-CBDC shared platform has the potential to leapfrog the legacy payment arrangements and serve as a foundation for a more efficient international settlement platform,”
A separate BIS-led project exploring using CBDCs for cross border payments is also underway involving central banks from China, Hong Kong, Thailand and the UAE.