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Central Bank Digital Currencies (CBDCs) are the latest financial buzz. Governments want to build them, and many have started. Currently, more governments have started working on CBDCs. Also, the Bank of International Settlements (BIS) is supporting their activities.
Less Time, Fewer Costs
Earlier this week, the BIS published a report. In the statement, the bank said that CBDCs can help to reduce the delays in international transactions.
The report’s title was “Inthanon-LionRock to mBridge: Building a multi CBDC platform for international payments.” The BIS published it on Tuesday, and it praised CBDCs a lot. For instance, the BIS said that CBDCs can reduce the completion time for international transactions from up to five days to just a few minutes.
The report gave an account of a current multi-CBDC pilot test. The BIS works with central banks in Hong Kong, China, and the United Arab Emirates (UAE). Prototypes for the system have already shown the potential to speed up cross-border transfers. The BIS said that the prototypes can also make these transfers cheaper.
In its report, the BIS cited a report from PricewaterhouseCoopers (PwC). The bank said that the second phase of its project prototype reduced the cost of cross-border payments by 50 percent. It also noted that some countries with robust banking systems can see more significant reductions.
The BIS will be moving into the third phase of its project. Also, this stage will involve additional pilot tests for the product.
Lastly, the BIS will continue research for large-scale testing infrastructure. Several other countries are testing their CBDCs. So, growth is coming indeed.
Multi CBDC Platforms on the Rise
The BIS report shows a rising trend among countries. Many nations now want to collaborate on CBDC projects. Countries that represent about 90 percent of the world’s GDP will launch CBDCs within the next decade. However, some of the early ones also want to work together. They are building the systems to ensure quick money transfers with CBDCs.
Early in September, four central banks joined forced to build a joint CBDC platform. These are the central banks of Malaysia, Singapore, South Africa, and Australia. They announced that they would launch a program for an international payment system using CBDCs.
The partners dubbed this initiative “Project Dunbar.” They explained that it will build shared platforms to facilitate quick and direct transfers between themselves. Companies that use their CBDCs will also be able to use the platform to benefit.
These multi-CBDC platforms will allow financial institutions to transact directly with each other in the digital currencies issued by participating central banks, eliminating the need for intermediaries and cutting the time and cost of transactions, the report added.
For now, the program is in the pilot testing phase. However, findings from this phase could help inform the development of regional and global CBDC transfer platforms. Project Dunbar will involve all central banks listed above and the BIS, with the project will run from the agency’s Innovation Hub in Singapore.