The Monetary Authority of Singapore (MAS) and Banque de France (BdF) have on July 8 announced the completion of a wholesale cross-border payment and settlement experiment using central bank digital currency (CBDC).
The experiment, supported by JP Morgan’s Onyx, simulated cross-border transactions involving multiple CBDCs (mCBDC) on a common network between Singapore and France.
This is the first m-CBDC experiment that applied automated market making and liquidity management capabilities to reap cross-border payment and settlement efficiencies.
Cross border payments currently rely on correspondent bank arrangements that are subject to limited transparency on foreign exchange rates, restricted operating hours of payment infrastructures and currency settlement delays due to differences in time zones.
To address these challenges, the experiment used a common m-CBDC network, aimed at facilitating cross border payments on a 24 x 7 real time basis.
The experiment simulated cross-border and cross-currency transactions for Singdollar CBDC and euro CBDC, and was conducted using a permissioned, privacy enabled blockchain based on Quorum technology.
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While the experiment was limited to two central banks, the design of the m-CBDC network enables it to be scaled up to support the participation of multiple centrals banks and commercial banks located in different jurisdictions. This offers great potential to simplify integration and significantly improve cost efficiencies, since a single connection to a common platform is used in place of multiple connections needed in the current correspondent banking model. This experiment is also one of the last of BdF’s wholesale experiment programme, which will be achieved by fall 2021.
“By experimenting the circulation of euroCBDC in a shared corridor network, the MAS and the BdF tested the possibility to provide a link with other CBDCs all over the world. It is an opportunity to construct arrangements for multiple CBDCs models, improving cross-border payments and increasing harmonisation of post trade procedures,” says Valérie Fasquelle, director of infrastructures, innovation and payments at BdF.
Sopnendu Mohanty, chief FinTech officer of MAS says, “Building a multi-currency shared ledger infrastructure allows participants across countries to transact with each other directly in different currencies. This m-CBDC experiment has broken new ground by decentralizing financial infrastructure, to improve liquidity management and market making services. It charts the path for scalable CBDC networks where central banks and commercial banks can work together to achieve the vision of cheaper, safer and more efficient infrastructure for cross border payments.”
Photo: Bloomberg
