The central banks of Australia, Singapore, Malaysia, and the Republic of South Africa have set out to take a look at the use of state-issued digital currencies in cross-border payments. The trial, led by the Bank for International Settlements, goals to determine whether they can simplify transactions and make them cheaper.
Reserve Bank of Australia Teams Up With Counterparts in Asia-Pacific, Africa on CBDC Project
While a number of nations are still testing their central bank digital currencies (CBDCs) in domestic applications, some are getting ready to conduct worldwide experiments. The Reserve Bank of Australia, Bank Negara Malaysia, the Financial Authority of Singapore, and the South African Reserve Bank have joined forces to carry out cross-border trials.
The cooperation aims to develop shared platforms for cross-border transactions using different CBDCs, the institutions said in a statement quoted by Reuters. The scheme is led by the Bank for International Settlements (BIS) Innovation Hub. Fraziali Ismail, assistant governor at Bank Negara Malaysia, has been quoted as saying:
The multi-CBDC shared platform… has the potential to leapfrog the legacy payment arrangements and serve as a foundation for a more efficient international settlement platform.
The prototype platforms should allow monetary establishments to transact directly with each other using the sovereign digital currencies, the report elaborates. This strategy would enable them to eradicate the need for intermediaries. Transaction instances and prices are additionally anticipated to lower. The participants will discover varied designs in terms of technology, governance, and operation.
This isn’t the first experiment of this kind. BIS Innovation Hub heads another project involving central banks from China, Hong Kong, Thailand, and the United Arab Emirates. In June, the Bank of France and the Swiss National Bank announced a collaboration with the hub to trial the use of wholesale digital currencies in cross-border settlements. In July, the IMF, the World Bank, and BIS recommended that countries work collectively on CBDCs to boost cross-border funds.
Earlier this year, financial authorities in Hong Kong launched the second round of tests for the national digital currency issued by the People’s Bank of China, which has arguably the most advanced CBDC project. The Chinese special administrative region revealed it’s going to connect its home funds system to the mainland’s digital yuan network to assess the currency’s usability in cross-border scenarios.