The Bank for International Settlements’ (BIS) innovation hub has just announced it has joined forces with the central banks of Australia, Malaysia, Singapore and South Africa to develop two prototypes of a cross-border settlement platform with multiple central bank digital currencies (CBDCs).
The project, known as Dunbar, was announced by the partners in September 2021 and has been led by the Singapore division of the BIS hub.
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Pilot tests have reportedly shown financial institutions can use digital currencies issued by participating banks for direct transactions with each other on a single platform.
Apparently, the solution can reduce reliance on intermediaries and transaction processing costs.
Importantly, the pilot programs has identified three critical issues: which entities should be able to transact on the platform; how can the flow of cross-border payments be simplified while respecting regulatory differences between jurisdictions; and what governance arrangements do countries need to share national payment infrastructures?
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The pilot has proposed practical solutions to these problems, which have been tested through the development of viable prototypes.