- BIS joint venture will allow Institutions to use CBDCs for International Settlements.
- Project Dunbar, led by the Innovation Hub’s Singapore Centre, demonstrated that financial institutions could use CBDCs issued by participating central banks to transact directly with one another on a common platform.
- The project was divided into three work streams.
- Three critical questions were identified during the project.
The Bank for International Settlements (BIS) Innovation Hub, the Reserve Bank of Australia, Bank Negara Malaysia, the Singapore Monetary Authority, and the South African Reserve Bank announced today the completion of prototypes for a common platform enabling international settlements using multiple central bank digital currencies.
Project Dunbar, led by the Innovation Hub’s Singapore Centre, demonstrated that financial institutions could use CBDCs issued by participating central banks to transact directly with one another on a common platform. This has the potential to reduce the need for intermediaries and, correspondingly, the costs and time taken to process cross-border transactions.
The project was divided into three work streams: one focused on high-level functional requirements and design, and two concurrent technical streams that created prototypes on various technological platforms (Corda and Partior).
Three critical questions were identified during the project: which entities should be permitted to hold and transact with CBDCs issued on the platform? How can the flow of cross-border payments be made easier while still respecting regulatory differences between jurisdictions? What governance arrangements could provide countries with the confidence they need to share critical national infrastructure, such as a payment system?
The project proposed practical solutions to these issues, which were validated through the creation of prototypes demonstrating the technical viability of shared multi-CBDC platforms for international settlements.
Andrew McCormack, Head of the BIS Innovation Hub Centre in Singapore said that “The most efficient model for payments connectivity is a common platform, but it is also the most difficult to implement. ‘Project Dunbar demonstrated that key trust and shared control concerns can be addressed through governance mechanisms enforced by robust technological means, laying the groundwork for the development of future global and regional platforms”.
The findings of the project also confirmed that any such arrangement should be subject to the governance deemed appropriate by central bank participants, including allowing them to retain control over the application of rules at the jurisdictional and currency levels.
The project’s details and conclusions were published today in a report that supports the G20 roadmap’s efforts to improve cross-border payments, particularly in exploring an international dimension of CBDC design.
According to Michele Bullock, Assistant Governor (Financial System) at the Reserve Bank of Australia “Project Dunbar has provided valuable insights into the opportunities and challenges of developing a shared platform for multiple CBDCs to improve 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 this would have to be done in a way that maintains the security and resilience of these payments. While there is clearly more work to be done in terms of considering the feasibility and design of multi-CBDC platforms, Project Dunbar’s findings provide a good foundation for future work in this area.”