Bank for International Settlements publishes central bank digital currencies report

The Bank for International Settlements (BIS) Innovation Hub has announced the completion of prototypes for a common platform enabling international settlements using multiple central bank digital currencies (mCBDCs).

The BIS is comprised of the South African Reserve Bank (SARB), Reserve Bank of Australia, Bank Negara Malaysia, and the Monetary Authority of Singapore.

In a statement, the Hub said: “Led by the Innovation Hub’s Singapore Centre, Project Dunbar proved that financial institutions could use CBDCs issued by participating central banks to transact directly with each other on a shared platform. This has the potential to reduce reliance on intermediaries and, correspondingly, the costs and time taken to process cross-border transactions.”

The project was organised along three work streams: one focusing on high-level functional requirements and design, and two concurrent technical streams that developed prototypes on different technological platforms (Corda and Partior).

The BIS said the project identified three critical questions. These included the question of whether entities should be allowed to hold and transact with CBDCs issued on the platform. Among the other questions was how could the flow of cross-border payments be simplified while respecting regulatory differences across jurisdictions and what governance arrangements could give countries sufficient comfort to share critical national infrastructure such as a payments system.

The project proposed practical solutions for addressing these issues, which were validated through the development of prototypes that demonstrated the technical viability of shared multi-CBDC platforms for international settlements.

“A common platform is the most efficient model for payments connectivity but is also the most challenging to achieve. 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.

The project’s findings also affirmed that any such arrangement should be subject to the governance deemed appropriate by central bank participants, including allowing them to retain control of the application of rules on a jurisdictional and currency level.

The details and conclusions of the project were published on Tuesday in a report that supports the efforts of the G20 roadmap for enhancing cross-border payments, particularly in exploring an international dimension of CBDC design.

“Even though multi-CBDC exploration is at its infancy, Project Dunbar highlights the possibilities of using multiple CBDCs issued on a shared platform for international settlement.

“While many unknowns remain, and a number of areas still require further investigation, it is only through our collective understanding and journeying together that we can meaningfully contribute to the G20 roadmap for enhancing cross-border payments. We are privileged to be part of this pioneering piece of work,” said Rashad Cassim, Deputy Governor of the South African Reserve Bank.