4 central banks join forces to launch digital currency program
The central banks of Australia, Singapore, Malaysia and South Africa will conduct a trial of cross-border payments using different central bank digital currencies (CBDCs) to assess whether it makes settling transactions cheaper and easier. , the banks announced Thursday.
Many governments and central banks around the world are exploring the use of CBDCs, which are digital forms of existing currencies. Some, like China, are testing retail-oriented CBDCs designed to replicate cash in circulation, while others are considering using wholesale CBDCs to improve the inner workings of their financial systems.
Most projects are still in their early stages and are country focused, but developing global rules and frameworks on how CBDCs can be used internationally is technically and potentially politically complicated.
The latter project aims to develop prototypes of shared platforms for cross-border transactions using multiple CBDCs, said the statement from the Reserve Bank of Australia, Bank Negara of Malaysia, Monetary Authority of Singapore, United Kingdom. South African Reserve Bank and Bank for International Settlements. Innovation Hub, which manages the device.
These platforms would allow financial institutions to deal directly with each other in CBDCs, which could eliminate the need for intermediaries and reduce the time and cost of transactions.
The initiative, which will also explore different technical, governance and operational designs, is expected to release its results in early 2022, the statement said.
“The multi-CBDC shared platform (…) has the potential to go beyond old payment agreements and serve as the basis for a more efficient international settlement platform,” said Deputy Governor of Bank Negara Malaysia, Fraziali Ismail, in the press release.
A separate BIS-led project exploring the use of CBDCs for cross-border payments is also underway, involving central banks from China, Hong Kong, Thailand and the United Arab Emirates (UAE).