In a groundbreaking initiative, Project Dunbar, led by the Bank for International Settlements (BIS) Innovation Hub Singapore Centre and in collaboration with central banks from Australia, Malaysia, Singapore, and South Africa, is spearheading the exploration of multiple central bank digital currencies (multi-CBDCs) for international settlements.
About Project Dunbar
- Multi-CBDC platform: Aims to connect central bank digital currencies (CBDCs) of different countries for smoother international payments.
- Technical success: Proven viable through working prototypes, showcasing potential for faster, cheaper transactions.
- Reduced costs & intermediaries: Direct bank-to-bank transactions could bypass intermediaries, lowering fees and settlement times.
- Challenges remain: Aligning regulations, finding a secure governance model, and assessing broader impact require further exploration.
- Revolutionizing payments: Holds promise for transforming international settlements, but careful consideration of challenges is crucial.
The primary objective of Project Dunbar is to assess the feasibility and potential of utilizing a shared platform for multi-CBDCs that will revolutionize cross-border payments, making them cheaper, faster, and more secure. The project has reached significant milestones, including the development of two working prototypes that demonstrate the technical viability of the concept.
One of the critical challenges addressed by Project Dunbar is determining who can hold and transact with multi-CBDCs on the platform. This raises important considerations regarding user access and eligibility for participation.
Additionally, the project has focused on simplifying cross-border payment flows while ensuring compliance with diverse regulations, a crucial factor in international transactions. Moreover, establishing appropriate governance structures for countries to collaboratively manage a national infrastructure like a unified payments system has been a key focus.
Also Read: Central Bank Digital Currency (CBDC) Pilot to Enable Programmable Transactions and Offline Payments
The potential benefits of implementing multi-CBDCs are substantial. By reducing reliance on intermediaries, transactions can be executed at lower costs and with faster processing times. This increased efficiency and transparency in cross-border payments can contribute to enhanced economic productivity and financial inclusion. The Project Dunbar team aims to capitalize on these advancements to foster a broader inclusion of individuals and businesses in the financial ecosystem.
Having successfully completed the initial phase, which validated the technical feasibility, Project Dunbar is now moving forward to explore wider implications and policy considerations. The ongoing research and development phases will delve deeper into the potential impacts of multi-CBDCs on global financial systems and the necessary regulatory frameworks.
Sources:
- BIS Innovation Hub: https://www.bis.org/about/bisih/topics/cbdc.htm
- Monetary Authority of Singapore: https://www.mas.gov.sg/publications/monographs-or-information-paper/2022/project-dunbar
- BIS Paper: https://www.bis.org/about/bisih/topics/cbdc/dunbar.htm
Last Updated on 8 months
