Many governments across the world are already exploring and testing the use of Central Bank Digital Currencies in domestic applications or are planning to conduct international experiments
Trial of using Central Bank Digital Currencies (CBDC) in cross-border payments will be started by Central banks of Australia, Singapore, Malaysia and Republic of South Africa. To determine whether this can ease and make the transactions cheaper, the trial is being led by the Bank for International Settlements (BIS) Innovation Hub. CBDCs are digital forms of existing currencies that have block-chain at their core. A joint statement from the Reserve Bank of Australia, Bank Negara Malaysia, the Monetary Authority of Singapore, the South African Reserve Bank, and BIS Innovation Hub, said that the current project targets to develop shared platforms for cross-border transactions using multiple Central Bank Digital Currencies.
Eliminating the need for intermediaries and reducing the time and cost of transactions, these platforms would allow and facilitate institutions to transact directly with each other in Central Bank Digital Currencies. The project will explore various technical, governance, and operating designs and will publish its results in early 2022, in order to achieve the desired outcome. According to Fraziali Ismaili, Assistant Governor of Bank Negara Malaysia, the multi-CBDC shared platform can serve as a foundation for a more efficient international settlement platform. It has the potential to leapfrog the legacy payment arrangements.
However, many governments across the world are already exploring and testing the use of Central Bank Digital Currencies in domestic applications or are planning to conduct international experiments. In July, the World Bank, IMF and BIS recommended that countries work together to enhance cross-border payments. Some of these on-going projects in some countries are:
- A similar project being led by BIS Innovation Hub involves central banks of Hong Kong, China, UAE and Thailand.
- BIS Hub heads the CBDCs project in collaboration with the Bank of France and Swiss Bank to conduct the trial on the use of wholesale digital currencies for cross border transactions.
- In the earlier part of 2021, Hong Kong launched a second round of tests for national digital currency being issued by People’s Bank of China, said to be one of the most advanced CBDC projects.
- China is trying retail-focused Central Bank Digital Currencies to replicate cash in circulation. The Chinese special administrative region is even going to connect its domestic payments system to the mainland’s digital Yuan network to assess the currency’s usability in cross-border scenarios.
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