KUALA LUMPUR: Bank Negara Malaysia has joined the central banks in Australia, Singapore and South Africa to test the use of central bank digital currencies (CBDCs) for international settlements.
The central banks are the Reserve Bank of Australia, Monetary Authority of Singapore and South African Reserve Bank.
Known as Project Dunbar, it will be led by the Bank for International Settlements (BIS) Innovation Hub's centre in Singapore.
Project Dunbar aims to develop prototype shared platforms for cross-border transactions using multiple CBDCs.
Bank Negara said these multi-CBDC platforms would 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.
"The project will work with multiple partners 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 infrastructures, benefitting from the collaboration between public and private sector experts in different jurisdictions and areas of operation," it said in a statement.
BIS Innovation Hub Singapore centre's Andrew McCormack said Project Dunbar brought 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.
"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," said McCormack.
Bank Negara assistant governor Fraziali Ismail said the multi-CBDC shared platform explored under Project Dunbar has the potential to leapfrog the legacy payment arrangements.
Fraziali said the platform would also serve as a foundation for a more efficient international settlement platform.
"We hope the project will spur greater public-private collaboration to enable fast and frictionless cross-border payments, combining both the benefits of distributed ledger technology and the efficiency of a common platform," he added.
Project Dunbar's work will explore the international dimension of CBDC design and support the efforts of the G20 roadmap for enhancing cross-border payments.
Its results, expected to be published in early 2022, will inform the development of future platforms for global and regional settlements.
Technical prototypes of the shared platforms, developed in collaboration with different technology partners, will be demonstrated at the Singapore FinTech Festival in November 2021.