The Bank for International Settlements published a report on experiments with digital currencies of several Central Banks and concluded that the future of cross-border payments lies with government stablecoins.
The Innovation Center of the Bank for International Settlements (BIS) has published the results of studies on central bank digital currencies that have participated in several pilot projects.
One of them was the Inthanon-LionRock2 project, which involved the BIS Innovation Center in Hong Kong, the Hong Kong Monetary Authority and the Bank of Thailand. They explored the potential of distributed ledger technology (DLT) for real-time international money transfers, as well as the payment-versus-payment (Payment-versus-Payment, PvP) mechanism for foreign currency transactions between two jurisdictions.
The second project – Jura – was implemented by the Swiss innovation center BIS together with the Bank of France and the Swiss National Bank. They focused on the transfer of digital euro and Swiss franc, as well as tokenized securities through special blockchain platforms. These platforms are operated by third-party intermediaries and use both delivery versus payment (DvP) and PvP mechanisms.
The report also mentions the Dunbar project, which included the BIS Innovation Center of Singapore, the Reserve Bank of Australia, the Central Bank of Malaysia, the Monetary Authority of Singapore and the South African Reserve Bank. Testing of the platform for international settlements was completed in March. The researchers also noted the mBridge project, which involved the People’s Bank of China and the UAE Central Bank. As part of the testing, participants made peer-to-peer payments using government stablecoins.
All of these pilot projects were successfully completed, so BIS experts concluded that central bank digital currencies can indeed increase the efficiency and speed of international settlements, while reducing transaction costs. However, for this, central banks must clearly understand the structure of digital currencies, and how DLT and blockchain can complement existing payment systems.
According to another recent BIS report, over 90% of central banks are already exploring and testing their own digital currencies.