BIS, Four Central Banks, to Test International CBDC Settlement

The Bank for International Settlements’ Innovation Hub, along with the Reserve Bank of Australia, Bank Negara Malaysia, Monetary Authority of Singapore (MAS) and the South African Reserve Bank are collaborating on Project Dunbar, aimed at developing prototypes for shared platforms that will to enable multi-lateral, cross border settlements of multiple central bank digital currencies (CBDCs).

The project will be led by the BIS Innovation Hub’s Singapore Centre, and aims to develop platforms that 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 project will work with multiple partners to develop technical prototypes on different distributed ledger technology platforms. It will also explore different governance and operating designs that would enable central banks to share CBDC infrastructures, benefitting from the collaboration between public and private sector experts in different jurisdictions and areas of operation.

Project Dunbar’s work will explore the international dimension of CBDC design and support the efforts of the G20 roadmap for enhancing cross-border payments, the banks say. Its results, expected to be published in early 2022, will inform the development of future platforms for global and regional settlements.

“Project Dunbar brings together central banks with years of experience and unique perspectives in CBDC projects and ecosystem partners at advanced stages of technical development on digital currencies,” says Andrew McCormack, head of the BIS Innovation Hub Centre in Singapore. “With this group of capable and passionate partners, we are confident that our work on multi-CBDCs for international settlements will break new ground in this next stage of CBDC experimentation and lay the foundation for global payments connectivity.”

Michele Bullock, assistant governor (financial system), at the Reserve Bank of Australia, adds, “[This is] an important initiative to explore how a shared platform for multiple CBDCs could be used to improve the speed, cost and transparency of wholesale cross-border transactions. Enhancing cross-border payments has become a priority for the international regulatory community and something that we are also very focused on in our domestic policy work.”

Last month the MAS and Banque de France, announced a successful wholesale cross-border payment and settlement experiment using multi-CBDCs. “Project Dunbar’s work on using multi-CBDC platforms to facilitate seamless multi-currency fund transfers is a significant contribution to the global vision to make payments cheaper and faster,” says Sopnendu Mohanty, chief fintech officer, MAS. “The findings on how a common platform can be governed effectively and managed efficiently will shape the blueprint of the next generation payment systems.”

Fraziali Ismail, assistant governor, Bank Negara Malaysia, adds, “The multi-CBDC shared platform explored under Project Dunbar has the potential to leapfrog the legacy payment arrangements and serve as a foundation for a more efficient international settlement platform. We hope the project will spur greater public-private collaboration to enable fast and frictionless cross-border payments, combining both the benefits of distributed ledger technology and the efficiency of a common platform.”

SARB deputy governor Rashad Cassim, says, “After years of mostly domestic research and exploration, we are very pleased to see that these common insights about the need to explore cross-border CBDC payments and interoperability are coming together internationally. We are particularly excited to be part of Project Dunbar given the SARB’s role in operating the regional wholesale settlement system in the Southern African Development Community.”