The South African Reserve Bank and the Bank for International Settlements (BIS) Innovation Hub have announced the completion of prototypes for a common platform (Project Dunbar) which enables international settlements using multiple central bank digital currencies (CBDCs).
BIS said the platform was designed to facilitate direct cross-border transactions between financial institutions in different currencies, with the potential to cut costs and increase speed.
The project is the result of a partnership between the SARB, BIS, the Reserve Bank of Australia, Bank Negara Malaysia, and the Monetary Authority of Singapore.
Project Dunbar is led by the Innovation Hub's Singapore Centre.
“This has the potential to reduce reliance on intermediaries and, correspondingly, the costs and time taken to process cross-border transactions,” said BIS.
The project focused on three key levels, one dealing with high-level functional requirements and design, along with two concurrent technical streams that developed prototypes on different technological platforms (Corda and Partior).
Project Dunbar identified three critical questions: which entities should be allowed to hold and transact with CBDCs issued on the platform? How could the flow of cross-border payments be simplified while respecting regulatory differences across jurisdictions?
Lastly, what governance arrangements could give countries sufficient comfort to share critical national infrastructure such as a payments system?
According to BIS, 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.
The Deputy Governor of SARB, Rashad Cassim, said 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 several 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 Cassim.
The head of the BIS Innovation Hub Centre in Singapore, Andrew McCormack, said Project Dunbar provided valuable insights into the opportunities and challenges associated with developing a shared platform for multiple CBDCs to enhance cross-border payments.
“Allowing entities to directly hold and transact in CBDCs from different jurisdictions could reduce the need for intermediaries in cross-border payments, but it would need to be done in a way that preserves the security and resilience of these payments,” said McCormack.
BUSINESS REPORT ONLINE