Apex banks team up on CBDC for cross-border payments

The central banks of multiple Asian and an African country have come together to work on using Central Bank Digital Currencies (CBDC) for cross-boarder payment transactions. Bank for International Settlements (BIS) Innovation Hub is leading this trial to decide is CBDCs can make transactions cheaper and more seamless. CBDCs are digital forms of existing currencies made possible with the use of blockchain technology.

A joint statement issued by the Reserve Bank of Australia, Bank Negara Malaysia, the Monetary Authority of Singapore, the South African Reserve Bank, and BIS Innovation Hub, revealed that the current project is aimed at developing shared platforms for cross-border transactions using multiple CBDCs.

These platforms will be used by participating institutions to facilitate direct transactions with each other in CBDCs. This will eliminate the need for intermediaries, as well as cut down transaction time and charges. In order to reach its goal, the project will try out different technical, governance, and operating designs, with outcomes scheduled for publishing in the early months of 2022.

In a statement issued by Assistant Governor of Bank Negara Malaysia, Fraziali Ismaili, the multi-CBDC shared platform will be used as a driving force towards the creation of a more efficient international settlement platform. If successful, this platform has the potential to leapfrog legacy payment arrangements.

Several governments and central banks around the globe are currenctly trying and experimenting the use of CBDCs, both locally and for international transactions. In July, the World Bank, International Monetary Fund and BIS made different recommendations, encouraging countries to cooperate towards the enhancement of  cross-border payments. Another example of this is a project, also led by BIS Innovation Hub, involving central banks of Hong Kong, China, UAE and Thailand.