Central Banks of Singapore, Australia, South Africa and Malaysia in Multi-CBDC Trials for Cross-Border Payments – Ledger Insights
The Monetary Authority of Singapore (MAS) previously unveiled Project Dunbar, a central bank digital currency (CBDC) platform where multiple countries issue digital currencies on a shared blockchain, a so-called Multi-CBDC (M -CBDC). Working with the Bank for International Settlements (BIS) Innovation Hub, it was announced today that the Reserve Bank of Australia, Bank Negara Malaysia and South African Reserve Bank will also participate in cross-border settlement trials. .
These M-CBDC platforms are intended for wholesale CBDCs which can only be used by regulated institutions. A previous trial between MAS and the Banque de France used JP Morgan’s Onyx solution based on Quorum, the Ethereum corporate blockchain. However, today’s announcement indicates that several blockchain technologies and partners will be involved in the trials. Since it offers a shared platform, different governance structures will be explored as well as designs.
Sopnendu Mohanty, Chief FinTech Officer, MAS explained how Dunbar will help make âpayments cheaper and faster. Findings on how a common platform can be governed and managed effectively will shape the model for next generation payments systems. “
The results will be shared in November this year at the Singapore FinTech Festival.
The G20 has put in place a plan to address friction in cross-border payments which are costly, slow and lack transparency. Banks in different countries do not share the same hours of operation, which means that existing systems often do not perform instant payments around the clock.
A key friction is the use of intermediary correspondent banks where the issuing bank does not have an account at the destination, which adds to the know your customer (KYC) burden. The objective of these multi-CBDC systems is to have a 24/7 platform for direct payments in real time without intermediaries.
âAfter years of mostly domestic research and exploration, we are very pleased to see that these common ideas on the need to explore cross-border payments and interoperability of CBDCs are coming together internationally,â said the Deputy Governor Rashad Cassim, South African Reserve Bank.
âWe are particularly excited to be a part of the Dunbar project given the role of SARB in operating the regional wholesale settlement system in the Southern African Development Community. ”
There is not only the issue of payments for international transactions, but also the need for foreign currency. The French essay – MAS borrowed from the world of decentralized finance (DeFi) using automated market making (AMM) and liquidity management for the EUR / SGD currency pair. This is one of the ways to enable a 24 hour solution.
The BRI is testing two completely different solutions for cross-border CBDCs. In the case of the Dunbar Project, this is a shared infrastructure for the M-CBDC. Meanwhile, another approach is being explored in the mCBDC Bridge project, which attempts to make four separate CBDCs interoperable. Thailand, Hong Kong, China and the United Arab Emirates are participating in this trial.