The use of blockchain-based of central bank digital currencies (CBDC) can reduce the time of cross-border transactions from days to seconds and significantly reduce costs. The Bank for International Settlements (BIS) stated this, following the results of the pilot project.
According to the report on the program “Inthanon-LionRock to mBridge: Building a multi CBDC platform for international payments”, digital currencies allowed making payments in a few seconds. Instead of three to five working days, bypassing the network of correspondent banks.
Thus, the prototype of the blockchain platform also demonstrated a possible reduction in the cost of payments by 50%. By reducing the cost of “some of the main components of correspondent banking”.
Initial participants of the pilot project
The results were obtained during the second stage of the Inthanon-LionRock project, implemented under the auspices of BIS. The initial participants of the pilot were the Hong Kong Monetary Authority and the Bank of Thailand. At the new stage, they were joined by the Digital Currency Institute of the People’s Bank of China and the Central Bank of the United Arab Emirates.
“The prototype is part of our efforts to develop CBDC technology. The project includes experiments with use cases and trials, balanced with management analysis, political and legal considerations. With an emphasis on cross-border applications,” explained Benoit Coeure, head of the BIS innovation hub.
In the next phase of the project, participants will study the existing limitations of the created platform related to privacy control, liquidity management. As well as the scalability and performance of Distributed Ledger Technology (DLT) when processing large volumes of transactions.
BIS called on central banks to accelerate CBDC development
Recall that BIS is simultaneously implementing a project to create a platform for cross-border settlements in CBDC. Together with the central banks of Australia, Malaysia, Singapore and South Africa.
The institution also took part in experiments with the use of digital currencies in international settlements between the monetary regulators of France and Switzerland.
In early September, the BIS called on central banks to accelerate the development of CBDC. This was due to the problems of the traditional banking system related to stable coins and decentralized financing (DeFi).