The Bank for International Settlements’ (BIS) Innovation Hub collaborated with central banks in Australia, Malaysia, Singapore, and South Africa to develop two prototypes for an international settlement platform that would use different central bank digital currencies (CBDCs).
The executive summary of the project report notes, “This initial phase of the project successfully generated functional prototypes and proved workable solutions, accomplishing its goal of establishing that the notion of multi-CBDCs was technically possible.”
The Project Dunbar partnership focuses on how a common platform incorporating many CBDCs could assist make cross-border payments “cheaper, faster, and safer,” as outlined in the paper.
The BIS said in a March 22 announcement “Project Dunbar, led by the Innovation Hub’s Singapore Centre, demonstrated that financial institutions may use CBDCs issued by participating central banks to deal directly with each other on a shared platform.” “This has the potential to reduce reliance on intermediaries, as well as the associated costs and time required to process cross-border transactions.”
When it comes to settling transactions using a shared platform, the research identifies three major problems. The first concerns access to CBDCs on the platform, specifically whether banks should be able to access CBDCs from countries where they do not have a local presence. Another problem was figuring out how to make cross-border payments easier while yet adhering to each country’s restrictions. Finally, developing a governance system that allowed countries to share their payment infrastructures while considering concerns like national security was a third challenge.
“Allowing companies to directly hold and transact in CBDCs from various jurisdictions could eliminate the need for intermediaries in cross-border payments,” Michele Bullock, assistant governor at the Reserve Bank of Australia, said in a statement.