<p><span style="font-weight: 400;">The Bank for International Settlements (BIS) Innovation Hub partnered with central banks in Australia, Malaysia, Singapore and South Africa to create two prototypes for an international settlement platform using multiple central bank digital currencies (CBDCs). </span></p> <p><span style="font-weight: 400;">"This initial phase of the project successfully developed working prototypes and demonstrated practicable solutions, achieving its aim of proving that the concept of multi-CBDCs was technically viable," the <a href="https://www.bis.org/publ/othp47.pdf">executive summary</a> of the project report states.</span></p> <p><span style="font-weight: 400;">The collaboration, called </span><a href="https://www.bis.org/publ/othp47.pdf"><span style="font-weight: 400;">Project Dunbar</span></a><span style="font-weight: 400;">, focuses on how a shared platform incorporating several CBDCs could help make cross-border payments "cheaper, faster and safer" as described in that report.</span></p> <p><span style="font-weight: 400;">“Led by the Innovation Hub's Singapore Centre, Project Dunbar proved that financial institutions could use CBDCs issued by participating central banks to transact directly with each other on a shared platform,” BIS said in a March 22 announcement about the project. “This has the potential to reduce reliance on intermediaries and, correspondingly, the costs and time taken to process cross-border transactions.”</span></p> <p><span style="font-weight: 400;">The report highlighted three key challenges when it comes to settling transactions through a common platform. The first has to do with questions of access to the </span><span style="font-weight: 400;">CBDCs on the platform, such as whether banks should be able to access CBDCs from countries where they do not have a local presence. Another challenge was how to simplify cross-border payments while still respecting each country’s regulations. And finally, a third challenge was coming up with a governance structure that allowed countries to share their payment infrastructures while taking factors like national security into account. </span></p> <p><span style="font-weight: 400;">“Allowing entities to directly hold and transact in CBDCs from different jurisdictions could reduce the need for intermediaries in cross-border payments, but it would need to be done in a way that preserves the security and resilience of these payments,” Michele Bullock, assistant governor at the Reserve Bank of Australia, said in a statement. “While there is clearly more work to be done in thinking about the feasibility and design of multi-CBDC platforms, the findings from Project Dunbar provide a good platform for future work in this area.”</span></p>