BIS Joint Pilot: Institutions Can Use CBDC for International Settlement

The Bank for International Settlements (BIS) Innovation Center has completed a pilot of an experimental central bank digital currency (CBDC) platform for international settlements, in partnership with the central banks of Australia, Malaysia, Singapore and South Africa.

Dubbed Project Dunbar, the multinational experimental CBDC project aims to facilitate direct cross-border transactions between financial institutions using multiple currencies linked across central banks.

The joint CBDC pilot was announced in September 2021, and its final report was released on Tuesday. The success of the experimental joint CBDC pilot project demonstrated that financial institutions can utilize central bank-issued CBDC to transact directly on a shared platform.

The project considered several aspects before developing a prototype. Some of the key issues the project seeks to address include addressing cross-border remittances in compliance with regulatory requirements, and introducing critical cross-border payment infrastructure.

The project successfully developed working prototypes and demonstrated practical solutions, confirming that the concept of multiple CBDCs is technically achievable. These prototypes demonstrate the effectiveness of the design approach used to address three main issues: access, jurisdictional boundaries, and governance.

The project's developers claim that Project Dunbar illustrates how a governance structure enforced by powerful technical means can satisfy important issues of trust and shared control. Andrew McCormack, head of the BIS Innovation Center in Singapore, said:

"Project Dunbar demonstrates that the critical issues of trust and shared control can be addressed by implementing governance mechanisms with strong technical means, laying the groundwork for the development of future global and regional platforms."

Countries such as Switzerland and France have also experimented with digital euro cross-border remittances in a joint venture before the multi-CBDC platform at the BIS Innovation Centre. Now, findings from this experimental CBDC project may help G-20 countries adopt CBDCs for international settlements.

With more than 95 countries currently working to develop their own sovereign digital currencies, the use of CBDCs for international settlements could become a reality, especially as many governments are already seeking alternatives to centralized payment gateways such as SWIFT.

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