The Financial Institution of Worldwide Settlements (BIS) Innovation Hub released a study Tuesday searching at four projects that examined wholesale central bank digital currency (CBDC) transfers across borders. The projects shown the technical practicality from the transfers, the BIS found, but practical and policy issues remain outstanding.
The report considered the Jura project relating to the central banks of Europe and France. Project Inthanon- LionRock2 and also the ongoing mBridge project, involving currencies in Asia and also the Middle East, were also examined, as was Project Dunbar, some pot effort of Australian, Malaysian, Singaporean and South African banking government bodies.
The projects checked out both mix-border payment, in which the payer along with a payee are residents of various jurisdictions and payment is created within the currency from the payer’s jurisdiction or perhaps in another currency, and offshore payments, where payment happens occur between two institutions, neither being resident within the jurisdiction where the payment is created, even though the payment is usually produced in the currency of this jurisdiction.
All transfers used payment versus protection, where transfer in a single currency isn’t finalized until a transaction in another currency happens. Both intraday transfers and transfers that continued to be around the platform indefinitely were modeled. They used common platforms, although one project used a typical platform with individual subnetworks.
All of the projects effectively shown the practicality of CBDC transfers. They demonstrated that using smart contracts to automate rule enforcement lowers the expense active in the transfers. The possible lack of intermediaries decreased the price of transfers, with transaction being recorded in one ledger and real-time balances being fully visible. Simultaneously, the work platforms could maintain differing access policies.
Related: BIS: 90% of Central Banks are researching the utility of CBDCs
Outstanding questions include how distributed ledger technology platforms will communicate with existing systems, what challenges scalability presents and just how resilience and security could be guaranteed. Additionally, robust legal and governance frameworks must be implemented and also the economic implications of the multiple CBDC system need to be understood, the report states.
