BIS to Look at CBDC to Speed up FX Payments

The Bank for International Settlements (BIS) has announced the launch of Project Rialto, that will explore how instant cross-border payments could be improved through the use of a modular FX component, combined with settlement in whole central bank digital currencies (CBDC).

With the world’s authorities continuing their push to improve FX settlement and cross-border payments more generally, the BIS observes that the FX services offered by correspondent banks can be “costly, slow and complex”, adding that they also exacerbate liquidity, credit and settlement risks among market participants.

“Decentralised solutions, CBDC and interlinked payment infrastructures are considered promising avenues to improve cross-border payments,” the BIS states. “How they interact has not yet been explored and could yield answers that advance cross-border payments globally.”

Project Rialto is a collaboration of the BIS Innovation Hub Eurosystem and Singapore Centres in partnership with several central banks. It will explore a new automatic FX settlement layer solution using CBDC as a safe settlement asset that could be deployed for interlinked instant payment systems or digital asset systems.