>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
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