Australia, Malaysia, Singapore and South Africa launch Cenbank digital currency scheme

Reuters

September 02, 2021, 1:10 p.m.

Last changed: September 2nd, 2021, 1:15 p.m.

A view of the headquarters of the Monetary Authority of Singapore in Singapore June 28, 2017. REUTERS / Darren Whiteside

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A view of the headquarters of the Monetary Authority of Singapore in Singapore June 28, 2017. REUTERS / Darren Whiteside

Central banks in Australia, Singapore, Malaysia and South Africa will conduct a cross-border payment attempt with various central bank digital currencies (CBDC) to see if it can make transactions cheaper and easier, the banks said on Thursday.

Many governments and central banks around the world are investigating the use of CBDCs, which are digital forms of existing currencies. Some, like China, are testing retail-focused CBDCs to replicate cash in circulation, while others are considering using so-called wholesale CBDCs to improve the internal functioning of their financial systems.

Most projects are still in the early stages and are domestically targeted, but developing global rules and frameworks for the international use of CBDCs is technically and potentially politically complex.

This latest project aims to prototype common platforms for cross-border transactions with multiple CBDCs, according to a statement from the Reserve Bank of Australia, Bank Negara Malaysia, the Monetary Authority of Singapore, the South African Reserve Bank and the Bank of International Settlement Innovation Hub who runs the program.

These platforms would allow financial institutions to trade directly with one another in CBDCs, which could eliminate the need for intermediaries and reduce the time and cost of transactions.

The initiative, which will also examine various technical, governance and operational concepts, is slated to publish its results in early 2022, the statement said.

“The platform shared by several CBDCs … has the potential to skip the old payment arrangements and serve as the basis for a more efficient international settlement platform,” Bank Negara Malaysia Deputy Governor Fraziali Ismail said in the statement.

A separate BIS-led project exploring the use of CBDCs for cross-border payments is also underway, involving central banks from China, Hong Kong, Thailand and the United Arab Emirates.

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