BIS Innovation Hub: Enhancing Cross-Border Payments and the Promise of Multi-CBDC Platforms

Introduction

Today’s cross-border payments are limited by high costs, low speed, a lack of transparency, operational complexities and limited access. To make things worse, all this is happening while global correspondent banking networks and services are declining.[1] Resolving these shortcomings should enable immediate, cheap and universally accessible payments that are settled in a secure medium.[2] In this context, central bank digital currencies (CBDCs) may hold significant potential. Indeed, nine out of ten central banks around the world are exploring various applications of CBDCs, with cross-border payments efficiency among their key drivers.[3] Notably, a platform upon which multiple central banks can directly issue and trade/ exchange their CBDCs can enhance and diversify cross-border payments.

CBDC and the BIS Innovation Hub

CBDCs are a digital representation of a central bank liability that may be accessible to a wider set of economic participants. They differ from the two most common forms of central bank money – cash and reserves. Cash is universally accessible but only in physical form; central bank reserves are digital but only accessible to a limited set of financial entities. Similar to traditional money, CBDCs are denominated in an existing unit of account, and serve as both a medium of exchange and a store of value.[4] Unlike it, CBDCs offer potential enhancements underpinned by novel technological implementations.

...

With a mandate of developing public goods in the technology space geared towards improving the functioning of the global financial system, the BIS Innovation Hub is well placed to build solutions leveraging central bank money to tackle the inefficiencies of today’s cross-border payments. The BIS Innovation Hub is an active contributor to CBDC work through applied research and development and experimentation of CBDC platforms in collaboration with central banks from a wide range of jurisdictions. Focusing on the wholesale cross-border space, the BIS Innovation Hub has run three mCBDC cross-border experiments covering different jurisdictions with different technology architecture choices – Projects Jura, Dunbar and mBridge.

The most recent mCBDC project – mBridge – is a joint initiative between the Hub’s Hong Kong Centre, and four participating central banks in Asia and the Middle East – the Hong Kong Monetary Authority, the Bank of Thailand, the Central Bank of the United Arab Emirates and the Digital Currency Institute of the People’s Bank of China.

The platform is built on blockchain technology. After experimenting with different technology architectures in earlier phases, the project team developed a new native blockchain, the mBridge ledger, to meet the needs of ... 

Read more in the CBPN Members' Library with your annual subscription.

No part of Central Bank Payments News may be reproduced, copied, republished, or distributed in any form or by any means, in whole or in part, without the express and prior written permission of the publisher, Currency Research Malta, Ltd.