"Project Dunbar"?
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>Project Dunbar
Project Dunbar: international settlements using multi-CBDCs
Projectled by the BISInnovation Hub in partnership with theReserve Bank of Australia, Central Bank of Malaysia, Monetary Authority of Singapore, and South African Reserve Bank
♦ Project Dunbar developed two prototypes for a shared platform that could enable international settlements using digital currencies issued by multiple central banks.
♦ The platform was designed to facilitate direct cross-border transactions between financial institutions in different currencies, with the potential to cut costs and increase speed.
♦ The project identified challenges of implementing a multi-CBDC platform shared across central banks and proposes practical design solutions to address them.
♦ The details and conclusions of the project were published in a report that supports the efforts of the G20 roadmap for enhancing cross-border payments, particularly in exploring an international dimension of CBDC design.
Project Dunbar: International settlements using multi-CBDCs (00:03:43)
8 Nov 2021
Project Dunbar brings together the Reserve Bank of Australia, Bank Negara Malaysia, Monetary Authority of Singapore, and South African Reserve Bank with the BIS Innovation Hub to test the use of central bank digital currencies (CBDCs) for international settlements. Learn about the expected benefits of multi-CBDCs and how it could make cross-border payments cheaper, faster, and safer. See how we faced and solved critical challenges in designing a multi-CBDC shared settlement platform.
Improving cross-border payments with multi-CBDCs
Cross-border payments today can be slow and expensive. Unlike domestic payments, where banks can pay each other directly on a single national payments platform, there is no single international platform today for cross-border payments and settlements.
Instead, the correspondent banking model is used, where banks hold foreign currency accounts with each other. A single cross-border payment could pass through multiple correspondent banks, using the foreign currencies held with them. Each leg of the overall transaction takes time and effort to process, with fees levied that add up quickly and are passed on to customers, resulting in slow and costly cross-border payments.
A multi-currency common settlement platform would enable transacting parties to pay each other in different currencies directly, without the need for intermediaries such as correspondent banks.
Transacting on a multi-CBDC shared platform
A multi-CBDC shared platform will enable international settlements on a common platform, streamlining the flow of cross-border payments and making payments faster, cheaper and safer.
Designing and developing a multi-CBDC platform
Project Dunbar brings together the collective knowledge of central banks, commercial banks and technology partners from earlier research and development work on digital currencies, to design and develop a multi-CBDC platform. The primary work took place over nine weeks, with three concurrent workstreams.
Design & Technical Workstreams
Challenges in implementing a multi-CBDC platform
A multi-CBDC platform for international settlements could significantly improve cross-border payments, but there are challenges and questions regarding implementation that need to be addressed.
Governance
Access
Regulations and jurisdictional boundaries
These critical challenges may have impeded the development of shared international settlement infrastructures previously, but can now be resolved with modern technologies.
Addressing critical challenges
Distributed ledger technologies' decentralisation capabilities and the programmable nature of smart contracts and CBDCs, tied together in a sophisticated platform design, have produced an elegant solution for central banks to share a common settlement infrastructure for cross-border payments
pt 1
Governance: enabling universality and guaranteeing autonomy
Access: 'hybrid CBDC' for access by non-local banks
Regulations: separating settlement and non-settlement processes
Successful development of prototypes
Project Dunbar worked with R3 and Partior to successfully develop prototypes on the distributed ledger technologies of Corda and Quorum, respectively. The prototypes proved the technical feasibility of implementing a shared multi-CBDC platform. While there are still further questions to be explored and challenges to be resolved, the successful development is a first step towards the vision of a shared platform for international settlements using multi-CBDCs.
Demo: R3 Corda CBDC Sandbox
Demo: Partior CBDC Sandbox
The details and conclusions of the project were published in a report that supports the efforts of the G20 roadmap for enhancing cross-border payments, particularly in exploring an international dimension of CBDC design.
Related information
Press release: BIS Innovation Hub and central banks of Australia, Malaysia, Singapore and South Africa develop experimental multi-CBDC platform for international settlements
Press release: BIS Innovation Hub and central banks of Australia, Malaysia, Singapore and South Africa will test CBDCs for international settlements (2 September 2021)
Multi-CBDCs: Designing a digital currency stack for governability", by Monetary Authority of Singapore
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>>Project Dunbar
https://tokenist.com/multi-cbdc-platform-could-be-the-new-international-settlement-standard/
Multi-CBDC Platform Could be the New International Settlement Standard
An multi-CBDC platform could offer faster, cheaper, and more secure international settlements according to the Bank of International Settlements (BIS).
Project Dunbar, an international settlement scheme led by the BIS Innovation Hub, has successfully developed working prototypes to prove the viability of the multi-CBDCs concept. It is still early to speculate what this could mean for international settlements. However, if launched successfully, it could significantly challenge the current international transaction providers like SWIFT.
Experiment Proves Multi-CBDCs Could Enable International Settlements
Project Dunbar, a technical experiment that involved the Reserve Bank of Australia, Central Bank of Malaysia, Monetary Authority of Singapore, and South African Reserve Bank, has turned out to be a success, proving that financial institutions can use CBDCs to transact on a shared platform.
The joint effort initially started in 2021. According to a report by the Bank of International Settlements (BIS), the project developed two prototypes for a shared platform that could enable international settlements using CBDCs issued by different central banks, which was the project’s first phase. The BIS said:
“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 BIS argued that the need for such a system arises since cross-border payments are currently very inefficient. For instance, to complete a single cross-border transfer, a number of banks may be involved. Each of these banks would need to record transactions on multiple ledgers on multiple systems built using different technologies, all of which contribute to making transactions slower and more expensive.
Moreover, the bank claimed that cross-border payments currently fail to meet user expectations of cheaper, faster, and more transparent cross-border payments. This describes why the G20, an intergovernmental forum comprising 19 countries and the European Union, pledged in 2020 to enhance cross-border payments around the world.
Project Dunbar Developed Using DLT Platforms Corda and Quorum
In terms of design, the project faced challenges related to governance, process, and technology.
For a multi-CBDC platform shared by different central banks, governance is a key consideration to properly assign each participant the right amount of privileges and modes of access. In the first place, participants will gain access to the platform through the nodes they host or the nodes hosted by others. Also, each participant would have a different level of access.
Technologically, the project’s technical prototypes were developed on two different DLT platforms—Corda and Quorum. The Corda platform development was led by the technology provider R3 while the Quorum platform development was led by Partior, an open industry platform.
Moreover, R3’s prototype deployed on the Azure cloud infrastructure while Partior has deployed its prototype on Amazon Web Services (AWS).
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Multi-CBDC Payments to Challenge Traditional Settlement Methods like SWIFT
Unlike traditional payment settlement methods, which rely on intermediaries and correspondent banks, a multi-CBDC platform would enable participants to transact directly with each other using different CBDCs. This would significantly decrease the time required for a settlement, thus increasing speed.
Moreover, currently, a single cross-border transfer requires multiple ledgers to be updated on different systems, making the process time-consuming. However, since transfers are recorded on a single ledger on a multi-CBDC platform, the settlement process is simplified and costs are reduced.
It is also worth noting that a multi-CBDC platform would reduce duplicative processes and automate operations through smart contracts. Furthermore, using smart contracts, banks can also offer conditional payments, enabling customers to receive payment upon the fulfillment of predefined conditions.
In a nutshell, a multi-CBDC platform could be a game-changer for international settlements considering that it could significantly cut costs and increase speed. Therefore, it can significantly challenge traditional financial transaction providers like SWIFT.