The RBA is working on a central bank digital currency with Malaysia, Singapore and South Africa

- September 3, 2021 2 MIN READ
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  • Project Dunbar will develop prototypes for shared platforms that will enable international settlements with digital currencies issued by multiple central banks.
  • A blockchain-based system will hopefully cut transaction costs and times.
  • The results will feed into plans for global and regional platforms and the G20 roadmap on better cross-border payments.
The Reserve Bank of Australia (RBA) has joined forces with central banks in Malaysia, Singapore and South Africa on a plan to develop a digital payment pilot for cross-border transactions.

Dubbed Project Dunbar, the concept, developed through Singapore-based Bank for International Settlements Innovation Hub will test the use of central bank digital currencies (CBDCs) for international settlements.

Project Dunbar aims to develop prototype shared platforms for cross-border transactions using multiple CBDCs. The hope is that the pilot will cut the time and cost of transactions by removing the intermediaries and allow financial institutions to transact directly with each other in the digital currencies using multi-CBDC platforms issued by participating central banks.

The project follows in the footsteps of China’s plan to develop a digital yuan, with the US Fed, European Central Bank and the Bank of England also looking at how to create a digital version of their respective currencies.

Andrew McCormack, Centre Head of the BIS Innovation Hub Singapore Centre said technical prototypes of the shared platforms, developed in collaboration with different technology partners, will be demonstrated at the Singapore FinTech Festival in November 2021.

‘Project Dunbar brings together central banks with years of experience and unique perspectives in CBDC projects and ecosystem partners at advanced stages of technical development on digital currencies,” he said.

“With this group of capable and passionate partners, we are confident that our work on multi-CBDCs for international settlements will break new ground in this next stage of CBDC experimentation and lay the foundation for global payments connectivity.”

Multiple partners will develop technical prototypes on different distributed ledger technology platforms. Project Dunbar is also looking to explore different governance and operating designs for enable central banks to share CBDC infrastructures in a collaboration between public and private sector experts.

The project’s broader ambition is to investigate the international dimension of CBDC design and support the efforts of the G20 roadmap for enhancing cross-border payments. Those  results, expected to be published in early 2022, will inform the development of future platforms for global and regional settlements.

RBA assistant governor (financial system) Michele Bullock said exploring how a shared platform for multiple CBDCs could be used to improve the speed, cost and transparency of wholesale cross-border transactions was an important initiative.

“Enhancing cross-border payments has become a priority for the international regulatory community and something that we are very focused on in our domestic policy work,” she said

Dr Dimitrios Salampas, director of Master of Financial Technologies at Swinburne University, said it was a major step forward for the RBA.

“This development is really positive since it will enable further experimentation in the area of Central Bank Digital Currencies (CBDC) mostly focusing on wholesale CBDCs and cross-border transactions,” he said.

“RBA is finally departing from the ‘wait-and-see’ narrative to explore and test how these can co-exist in an interoperable, efficient, effective and innovative way. This comes after the digitalisation of universally accessible retail payments and the meteoric rise of cryptocurrencies. CBDCs are designed to serve both as a monetary tool and a payments instrument – paving the way towards an era of a large-scale innovation in the history of banking and money.”