A group of four central banks have teamed up with the Bank for International Settlements to create a prototype platform to support international settlements using multiple central bank digital currencies.
The BIS Innovation Hub, the Reserve Bank of Australia, Bank Negara Malaysia, the Monetary Authority of Singapore and the South African Reserve Bank announced Tuesday the completion of the platform, which they say demonstrates that financial institutions can use digital currencies issued by participating central banks to transact directly with each other.
Dubbed Project Dunbar, the platform has the potential to reduce reliance on intermediaries and cut down on costs and time taken to process cross-border transactions, the group said in a statement.
In the process of developing the platform, the central banks said they tackled issues around which entities should be allowed to transact in central bank-issued digital currencies, or CBDCs, and how payment regulation differences in varying countries can be resolved.
“Project Dunbar demonstrated that key concerns of trust and shared control can be addressed through governance mechanisms enforced by robust technological means, laying the foundation for the development of future global and regional platforms,” said Andrew McCormack, head of the BIS Innovation Hub Centre in Singapore.
Allowing entities to directly hold and transact in CBDCs from different jurisdictions could reduce the need for intermediaries in cross-border payments, but that would need to be done in a way that preserves the security and resilience of these payments, Mr. McCormack added.