In a bid to improve cross-border payments amongst countries, Project Dunbar has announced its successful completion of prototypes for a shared platform to host multiple central bank digital currencies (CBDCs). The project focuses on enabling cheaper, faster, and safer means for wholesale payment between International banks without the need for intermediaries.
The Monetary Authority of Singapore, Bank of International Settlements, Innovation Hub Singapore Centre, Reserve bank of Australia, Bank of Negara Malaysia, and the South African Reserve Bank have collaboratively completed the preliminary phase of the project by developing a working prototype with practical solutions that prove that a platform for multiple CBDCs is feasible.
Payment Solution for International Settlements
The report highlighted that there is no single International platform that facilitates payments and settlements between institutions nor any leveraging CBDCs. Current International payments solutions are dependent on banks that use the foreign reserves held with them, resulting in slow and costly payment systems.
The project adopts the G20 vision to establish faster and cheaper cross-border payments using CBDCs and has therefore launched two prototypes for a shared platform that could enable international settlements using digital currencies issued by multiple central banks. The aim is to cut out transaction costs and increase speed.
The technical prototypes are built on two different distributed ledger technology (DLT) platforms – Corda and Quorum. The different platforms have unique features and capabilities which support the specific needs of a multi-CBDC platform.
The project is said to identify 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? What governance arrangements could give countries sufficient comfort to share critical national infrastructure such as a payments system?
The development of the prototypes has addressed these issues and proven technical reliability for a platform suitable for hosting multi-CBDCs for international settlements.
Andrew McCormack, Head of the BIS Innovation Hub Centre in Singapore Says:
“A common platform is the most efficient model for payments connectivity but is also the most challenging to achieve. Project Dunbar demonstrated that key concerns of trust and shared control can be addressed through governance mechanisms enforced by robust technological means, laying the foundation for the development of future global and regional platforms.”
The press release concluded that all arrangements should be subject to governance considered appropriate to the participating central banks including allowing them to retain control of the application of rules on a jurisdictional and currency level.
