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As several central banks worldwide work on their central bank digital currencies (CBDCs), the Bank for International Settlements (BIS) has been working on a platform that brings them all together. BIS has now announced that it has completed its multi-CBDC pilot with four central banks.

Known as Project Dunbar, it explored how a common platform for multiple CBDCs could enable cheaper, faster, and safer cross-border payments. In its initial phase, the project successfully developed working prototypes and demonstrated practical solutions, proving that the concept of multi-CBDCs is technically viable.

BIS partnered on the project with the Monetary Authority of Singapore (MAS), the Reserve Bank of Australia, the South African Reserve Bank, and the Bank Negara Malaysia.

Under this concept, each participating central bank issues its own CBDC in its own domestic currency. The other central banks can then hold these CBDCs directly without the need to open accounts with correspondent banks. This would allow all the participating banks to transact directly with each other and gain access to foreign currencies.

From the pilot, the BIS concluded that the benefits of a multi-CBDC platform include reduced reliance on intermediaries, simplification of settlement processes, efficiency gains with common platform processes, and process automation with smart contracts

This approach also has its drawbacks, including the risk of giving direct access to a local currency to banks that are not authorized to operate within a certain jurisdiction. Regulations between different jurisdictions also vary, and harmonizing them could prove challenging. It would also reduce the ability of central banks to protect their nation’s financial system resilience.

BIS described the multi-CBDC platform as “the most efficient model for payments connectivity but is also the most challenging to achieve.”

“The successful completion of Project Dunbar has produced meaningful insights on how a multi-CBDC platform may potentially solve complex issues in the cross-border payment space. The project is a testament to the importance of central bank collaboration in supporting the development of next-generation payment infrastructures,” Bank Negara Malaysia Assistant Governor Fraziali Ismail stated, commenting on the project. 

BIS has continued to partner with various central banks to conduct CBDC pilots. In December 2021, it completed one such pilot with the French and Swiss central banks, focused on the use of a wholesale CBDC in cross-border funds transfers.

To learn more about central bank digital currencies and some of the design decisions that need to be considered when creating and launching it, read nChain’s CBDC playbook.

Watch: CoinGeek New York panel, Future of Digital Asset Trading & Financial Services

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