MAS to work with BIS, central banks to test CBDCs for international settlements

THE Monetary Authority of Singapore (MAS) is joining forces with the Bank for International Settlements (BIS) Innovation Hub, the Reserve Bank of Australia, Bank Negara Malaysia, and the South African Reserve Bank to test the use of central bank digital currencies (CBDCs) for international settlements.

Known as Project Dunbar, this will be led by the BIS Innovation Hub's centre in Singapore and aims to develop prototype shared platforms for cross-border transactions using multiple CBDCs.

These prototypes will be demonstrated at the Singapore Fintech Festival in November this year.

CBDCs refer to digital currencies that are backed by central banks, with attention gaining on how these can speed up cross-border payments.

The multi-CBDC platforms to be developed 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.

Not only will this project entail multiple partners coming together to develop technical prototypes on different distributed ledger technology platforms, it will also explore different governance and operating designs that would enable central banks to share CBDC infrastructure.

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Project Dunbar's work will explore the international dimension of CBDC design and support the efforts of the G-20 (Group of 20 countries) roadmap for enhancing cross-border payments. Its results, expected to be published in early 2022, will impact the development of future platforms for global and regional settlements.

Andrew McCormack, centre head of the BIS Innovation Hub Singapore Centre, noted: "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 expressed confidence that their 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.

Sopnendu Mohanty, chief fintech officer at MAS, concurred that it will be a "significant contribution" to the global vision to make payments cheaper and faster.

"The findings on how a common platform can be governed effectively and managed efficiently will shape the blueprint of the next-generation payment systems," he added.

This is not the MAS's first foray into CBDCs. Project Dunbar follows Singapore's work on Project Ubin, a five-year project that looked at models for cross-border payments using blockchain and CBDCs. It had partnered the Bank of Canada, and more broadly, with the financial industry to consider the benefits of such models.

The project's final phase in 2019 looked at ways for other blockchain networks to connect and integrate seamlessly, as well as payment commitments for trade finance, among other things, MAS said on its website.

More recently in June, MAS launched a Global CBDC Challenge in partnership with the International Monetary Fund, World Bank, Asian Development Bank, United Nations (UN) Capital Development Fund, UN High Commission for Refugees, UN Development Programme, and the Organisation for Economic Co-operation and Development.