Bank of International Settlements’ (BIS) Partners With Multiple Central Banks to Test Cross-Border CBDC Infrastructure
The race to launch a central bank digital currency (CBDC) is still on as several developed countries are working tirelessly to look into the effects of currency digitization.
But, while some countries are taking the individual approach, there has also been a growth in collaborations towards this objective.
Participation Across Continents
In the latest move, several developed and emerging countries have come together to trial a possible CBDC pilot to enable international money transfers. Earlier this week, the Reserve Bank of Australia announced that it had entered into a partnership with several other agencies and regulators to launch a cross-border CBDC pilot program.
As the announcement explained, the initiative – titled Project Dubnar – will include participation from the Bank of International Settlements’ (BIS) Innovation Hub as well as the central banks of South Africa, Malaysia, and Singapore. The program’s objective will be to test shared platforms that will enable direct cross-border transfers between the institutions using different digital currencies that the central banks issue.
The partners will look into the pilot program’s findings and use them to work on additional regional and global remittance platforms. At the same time, the findings will be used to support the G20 and its roadmap for improving cross-border payments.
Under Project Dunbar, all participants will be able to engage several partners to build blockchain-based platforms and explore different iterations to help central banks share their CBDC infrastructure. Explaining in a joint statement, the partners explained:
“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 Growing Demand for Cross-Border CBDC Infrastructure
Cross-border CBDC transactions have become especially popular in recent times, with central banks looking into ways to improve the functionalities of their digital currencies. In July, the Bank of France and the Monetary Authority of Singapore announced that they had completed a cross-border payment pilot using blockchain technology and CBDCs.
The experiment had been carried out in collaboration with Onyx – the digital currency division of investment banking giant JPMorgan. All transactions were implemented on a permissioned, private blockchain based on JPMorgan’s Quorum blockchain infrastructure. As part of the experiment, both central banks simulated cross-border and cross-currency transactions for the euro and a Singapore dollar-based CBDC.
Besides payments, the pilot program also demonstrated interoperability across different types of cloud infrastructure in France and Singapore.
The announcement claimed that the experiment was limited to the two central banks. But, the multiple CBDCs networks can be scaled up to incorporate even more financial institutions and regulators from different jurisdictions.
As for the BIS, the agency has continued to champion the need for CBDCs as payment channels in the 21st century. In a report to the G20, the agency – as well as the International Monetary Fund (IMF) and the World Bank – explained that the global economy would benefit from a cross-border network of CBDCs, underpinned by better international cooperation and improved technology.
In the report, the bodies explained that CBDC tests will need to move beyond just the individual scope. If work on these projects is to be done smoothly, it will need to include regional or global participation, where countries can find common ground to reap the benefits of digital currencies.