Central bank currencies could reduce transaction costs, countries hope.
The Bank for International Settlements (BIS), central banks in Australia, Malaysia, South Africa and Singapore will test central bank digital currencies (CBDCs) for international transactions between financial institutions, ie wholesale. The so-called Dubar project will develop a prototype of shared platforms using different CBDCs. Test results are expected to come out in early 2022.
One of the greatest benefits of these currencies may be to provide efficiency – lower costs and terms – for cross-border operations. According to the IDB, the platforms will allow financial institutions to make transactions directly between themselves on CBDCs. So they’re going to eliminate middlemen. Countries will demonstrate the platform at Singapore’s Fintech Festival next November.
The Central Bank of Brazil (BC) he has already stated that the digital real would have the benefit of improving cross-border operations. Complaints come from all sides about the costs and time required today for these transactions.
To build the prototype, the group will work with different types of distributed registration platforms. In addition, different forms of governance and operational designs that allow the sharing of infrastructures will be tested. The group will invite specialists from the public and private sectors to participate in the project.
Central bank currencies can replace current payment system
“This platform could override current payment arrangements and form the basis of a more efficient international clearing platform,” said BC Malaysia Vice President Fraziali Ismail, Bank Negara Malaysia.
“Improving international payments has become a priority for the international regulatory community,” said Michele Bullock, vice president of Australia’s central bank.
The project “will break new ground in the next stage of CBDC experiments and lay the groundwork for global payments connectivity,” said Andrew McCormack, leader of the BIS Innovation Center in Singapore. It is this center that participates in the project by BIS.