Yes, another posting about CBDCs, this one at the Block, so we will keep everyone posted, although much of this is repetitive for those following the space and certainly for members of our advisory service, for whom we wrote a report a few months back that included commentary about a similar BIS initiative. This effort is called Project Dunbar and explores prototypes for instant cross-border payments using CBDCs.
‘The Bank for International Settlements (BIS) Innovation Hub partnered with central banks in Australia, Malaysia, Singapore and South Africa to create two prototypes for an international settlement platform using multiple central bank digital currencies (CBDCs)…
“This initial phase of the project successfully developed working prototypes and demonstrated practicable solutions, achieving its aim of proving that the concept of multi-CBDCs was technically viable,” the executive summary of the project report states…
The collaboration, called Project Dunbar, focuses on how a shared platform incorporating several CBDCs could help make cross-border payments “cheaper, faster and safer” as described in that report.’
This following is excerpted from the Mercator Report of several months back, which was discussing what was then a single entity named Nexus, and this current project seems to be similar in nature with a couple of different central banks:
The BIS Innovation Hub has also jumped into the action with a July 2021 announcement about connecting instant payments systems (IPS) in multiple countries through a single entity, which they have named Nexus. According to the BIS website, they are already transitioning from design to a test phase, involving a proof of concept with the Monetary Authority of Singapore, Bank of Italy, Central Bank of Malaysia, BCS in Singapore, and PayNet in Malaysia, to connect the payment systems of Singapore, Malaysia and the euro area. This standardized way for IPS to connect should enable interoperability between systems at scale.
There are two main elements of the system: the Nexus Scheme and the Gateway. The Scheme defines the rules and obligations for participating users, while the Gateway software component coordinates the foreign exchange (FX), clearing, and sequencing of payments. Settlement remains part of the existing domestic schemes, also introducing destination liquidity providers where necessary. Once compatibility with Nexus is established, the IPS can exchange payments with any other Nexus user across the scheme. Although we could not locate an expected full launch date, typical timeframes would suggest sometime in 2023.
Overview by Steve Murphy, Director, Commercial and Enterprise Payments Advisory Service at Mercator Advisory Group
