Project Dunbar: International Settlements Using Multi-CBDCs (Journal of Asia Entrepreneurship and Sustainability)

Summary

• Project Dunbar explores how a common platform for multiple central bank digital currencies could enable cheaper, faster and safer cross-border payments.p.3
• The project is a collaboration between the BIS Innovation Hub Singapore Centre, the Reserve Bank of Australia, Bank Negara Malaysia, the Monetary Authority of Singapore and the South African Reserve Bank.p.3
• The prototypes proved that multi-CBDCs are technically viable and validated design approaches to access, jurisdictional boundaries and governance.p.3
• The G20 roadmap addresses cross-border payment challenges through 19 building blocks, and building block 19 seeks to factor an international dimension into CBDC designs.p.5
• Payment-versus-payment settlement on a common platform eliminates settlement risk because the two linked transactions either succeed or fail together.p.26
• The Partior platform is used for USD and SGD payments, with additional currencies and corridors going live in 2022.p.27

Key insights

1. Cross-border payments are generally slower, opaque and more expensive than domestic payments because they pass through multiple correspondent banks.p.4
2. On a multi-CBDC platform each central bank issues its own CBDC and participating banks can hold CBDCs of other currencies directly without correspondent accounts.p.9
3. Transfers on a multi-CBDC platform are recorded on a single ledger in one step, removing the need for reconciliation.p.11
4. The project focused on challenges of access, jurisdictional boundaries and governance that are distinct to a multi-CBDC common platform.p.12
5. The central bank retains full autonomy over its participation in the network, including issuance, destruction and maintenance of its own currency.p.20
6. Decisions on a shared platform are classified into strategic and platform, tactical, and day-to-day operational levels.p.21
7. Settlement processes would run on-platform, while many non-settlement processes such as KYC and AML/CFT may stay off-platform.p.25
8. In this phase only FX settlement was in scope, and FX trading was assumed to take place outside the platform.p.26