Central banks in Australia, Singapore, Malaysia and South Africa are all set to test the efficacy of central bank digital currencies (CBDCs) for international settlements, according to media reports. The new project, titled Durbar is a part of a new initiative that will develop a prototype of shared platforms for cross-border transactions using multiple CBDCs.
The Bank of International Settlements (BIS) released a statement, saying that These multi-CBDC platforms will allow financial institutions to transact directly with each other in the digital currencies that will be solely issued by the central banks, and will help eliminate intermediaries and cutting the time and cost of transactions.
CBDCs are a form of digital currency denominated in the national unit of account and it is a direct liability of the central bank. CBDCs can be designed to be used either in financial intermediaries or by the wider economy.
Fraziali Ismail, assistant governor of Bank Negara Malaysia told the media, “The multi-CBDC shared platform explored under Project Dunbar has the potential to leapfrog the legacy payment arrangements and serve as a foundation for a more efficient international settlement platform. We hope the project will spur greater public-private collaboration to enable fast and frictionless cross-border payments, combining both the benefits of distributed ledger technology and the efficiency of a common platform.”
The BIS has supported CBDCs for a long time as they promote an open, safe and competitive monetary system supporting innovation and serving the public interest.