BoE, BoT and MAS Latest to Test Synchronised FX Settlement Mechanisms

In a joint announcement, the Bank of England, Bank of Thailand and Monetary Authority of Singapore say they are collaborating to explore the technical and policy implications of settling FX transactions using synchronised settlement mechanisms.

The new project builds on insights from Project Meridian, which was run by the Bank for International Settlements and concluded in 2023, and will test synchronised FX settlement across a diverse technical and institutional landscape. In the first instance, the experiments will leverage simulated versions of participating central banks’ Real Time Gross Settlement systems and Distributed Ledger Technology-based settlement environments to test interoperability between the systems of the participating central banks, as well as complex, multilateral use cases involving different types of settlement infrastructure.    

Participating central banks will conduct experiments that can potentially enable atomic, real-time FX transactions that are fast, secure, and interoperable across diverse systems. Specifically, they say the collaboration will explore synchronisation’s potential to support payment-versus-payment (PvP) FX settlement across jurisdictions with different infrastructures, time zones, and regulatory frameworks. 

“This project explores, in more realistic conditions, how synchronisation solutions might support an open and effective global financial system by providing a new, innovative FX settlement channel,” explains Tom Mutton, director of fintech at the Bank of England. “This, together with our RT2 Synchronisation Lab, forms part of our wider roadmap to support innovation and new functionality in money and payments.”

Kenneth Gay, chief fintech officer at the MAS, adds, “To realise the potential of tokenised financial systems, international cooperation is needed to foster the development of open and interoperable networks. We look forward to exploring how synchronised settlement can enhance interoperability across different jurisdictions and infrastructures through this collaboration.”

Finally, Thammarak Moenjak, senior director, digital currency policy and development unit at the Bank of Thailand, says, “This joint initiative, linking different settlement infrastructures through an interoperable and synchronized mechanism, will potentially enhance the efficiency of conducting FX PvP transactions and support cross-border delivery-versus-payment (DvP) use cases. In achieving that, this collaboration will inform our development of wholesale settlement infrastructure by gaining insights from different technical systems, operating models, and regulatory frameworks.”