Today the Banque de France and Monetary Authority of Singapore (MAS) announced a cross border payment experiment using central bank digital currency. It involved simulating transactions using digital euro (EUR) and singapore dollar (SGD) CBDCs on the same network, referred to as multi-CBDC or m-CBDC. Borrowing from the decentralized finance (DeFi) world, it used automated market-making and liquidity management for the foreign exchange EUR/SGD pair. JP Morgan’s Onyx blockchain unit supported the wholesale CBDC experiment.
“This m-CBDC experiment has broken new ground by decentralizing financial infrastructure, to improve liquidity management and market making services,” said Sopnendu Mohanty, Chief FinTech Officer of MAS.
MAS previously stated that it was working on Project Dunbar, a single network m-CBDC platform with the Bank for International Settlements. In other words, multiple central banks issue a CBDC on the same network.
The G20 has set a plan to address cross border payments which are expensive, slow, lack transparency and suffer from restrictive trading times. A key friction is the use of intermediary correspondent banks where the sending bank doesn’t have an account at the destination, which adds to the know your customer (KYC) burden. With a 24/7 blockchain-based system, direct real-time payments are possible without intermediaries.
“By experimenting the circulation of EUR CBDC in a shared corridor network, the MAS and the Banque de France tested the possibility to provide a link with other CBDCs all over the world,” said Valérie Fasquelle, Director of Infrastructures, Innovation and Payments, Banque de France. “It is an opportunity to construct arrangements for multiple CBDCs models, improving cross-border payments and increasing harmonisation of post trade procedures.”
The solution runs on a permissioned blockchain network using Ethereum-based Quorum with nodes on public and private clouds.
Last month, the Banque de France ran a cross border CBDC trial with the Swiss National Bank.
The BIS is involved in two m-CBDC initiatives. One is the Project Dunbar initiative with MAS. The second involves the central banks of Hong Kong, Thailand, China and the UAE, each with separate CBDC infrastructures that are interoperable.