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Central banking entities of Singapore, Australia, Malaysia, and South Africa agree on a mutual agreement to carry out trials regarding performance of CBDCs.
The Reserve Bank of Australia, Monetary Authority of Singapore, Bank Negara Malaysia, and the South African Reserve Bank are collaborating to evaluate consumer response over state-issued virtual currency for global transactions. The trial led by the Bank for International Settlements based in Switzerland plans on making digital payments convenient and more affordable.
Various countries across the globe are still testing out Central Bank Digital Currency (CBDC) in their local financial system while others are preparing to move towards the international landscape. Owing to these changes, the central banks of Australia, Malaysia, Singapore and South Africa have decided to conduct trials for cross-border payments.
The main purpose of this association is to introduce and implement shared platforms for international payments using CBDCs. The assistant governor at the Malaysian central bank, Fraziali Ismail, quoted:
“The multi-CBDC shared platform… has the potential to leapfrog the legacy payment arrangements and serve as a foundation for a more efficient international settlement platform.”
As per the details provided in the report, the prototype system will allow financial institutions to transmit information across borders using sovereign virtual currencies, enabling service consumers to carry out transactions without the need of third-party intermediaries. As a result, the total time and cost required per transaction is also expected to decrease, allowing participating entities to discover design opportunities regarding operations, technology and governance.
BIS Innovation Hub further elaborates that this isn’t the first-of-its-kind project since another project is already underway with the central banks of Hong Kong, China, the United Arab Emirates (UAE), and Thailand.
Moreover, the Swiss National Bank and the Bank of France also declared their collaboration with the hub in June earlier this year to examine how wholesale digital currencies perform in international settlements.