The Bank for International Settlements (BIS) Innovation Center has completed a central bank digital currency (CBDC) platform pilot project for international settlements with the central banks of Australia, Malaysia, Singapore and South Africa.
The multinational CBDC pilot project, called the Dunbar Project, has been developed to facilitate direct cross-border transactions between financial institutions that use multiple currencies connected through various central banks.
The joint CBDC pilot project was announced in September 2021 and a final report on it was published on Tuesday. The joint CBDC pilot program proved successful and demonstrated that financial institutions can use central bank-issued CBDCs to transact directly with each other on a shared platform.
The project took several aspects into account before developing the prototypes. Some of the key issues that the project tries to solve are the resolution of cross-border remittances problems in accordance with regulatory requirements and the incorporation of key payments infrastructure across national borders.
The project succeeded in developing functional prototypes and demonstrating practical solutions, establishing that the notion of multi-CBDC was technically realistic. The prototypes demonstrated that the design approaches used to address the three main issues of access, jurisdictional boundaries, and governance were effective.
The project’s promoters claimed that the Dunbar Project illustrated how governance structures reinforced by robust technological means can address important concerns of trust and shared control.. Andrew McCormack, Director of the BIS Innovation Center in Singapore, said:
“The Dunbar project demonstrated that key concerns of trust and shared control can be addressed through technologically sound enforced governance mechanisms, laying the groundwork for the development of future global and regional platforms.”
Prior to the BIS innovation center’s multi-CBDC platform, countries such as Switzerland and France experimented with cross-border remittances in a joint venture for a digital euro. Now, the results of the pilot CBDC program could help the adoption of international settlements with CBDCs for the G-20 nations.
With over 95 nations currently working on creating their sovereign digital currency, the use of CBDCs for international settlements could become a reality, especially at a time when many governments are already trying to create alternatives to centralized payment gateways like SWIFT.
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