The South African Reserve Bank (SARB) is among only four banks that have developed two prototypes for a common digital currencies platform said to have the potential to make cross-border payments more efficient.
SARB is the only central bank out of Africa participating in this initiative.
The project, codenamed ‘Project Dunbar,’ participating central banks, via prototypes, have demonstrated that financial institutions could use central bank digital currencies to transact directly with one another on a shared platform thus reducing the need for intermediaries while cutting costs and time.
According to the Bank of International Settlements (BIS), which also participated in the prototypes, the two prototypes demonstrate the technical viability of such a platform.
The participating central banks include:
- Reserve Bank of Australia
- Bank Negara Malaysia
- The Monetary Authority of Singapore
- The South Africa Reserve Bank (SARB)
The two blockchain platforms that proved the technical feasibility of such as shared platform are:
- Corda – A private blockchain network that makes it easier for enterprises to build scalable applications
- Partior – A blockchain that’s designed for digital clearing and settlement
______________________________________________________________________
SEE ALSO: South African Reserve Bank Set to Launch Project Khokha 2 Blockchain Report in April 2022
______________________________________________________________________
As it is, there is no single international platform today for cross-border payments and settlements, thus banks have to hold foreign currency accounts with each other to enable such transactions.
However, the project noted some challenges to implementing the common platform largely stemming from the existence of banks in different jurisdictions.
These challenges include:
- How to get multiple banks to share a common platform
- How to resolve the national security concerns that come from sharing critical infrastructures with other central banks
- How to allow non-local banks to access and make payments with CBDCs from countries that do not have a presence
- Can central banks trust banks from other jurisdictions when they do not supervise those banks directly?
- How do we simplify the cross-border payment flow while respecting jurisdictional differences?
- How do we delineate the jurisdictional boundaries for different parts of a single cross-border payment?
Speaking about Project Dunbar, Rashad Cassim, Deputy Governor, South African Reserve Bank, said:
“Even though multi-CBDC exploration is at its infancy, Project Dunbar highlights the possibilities of using multiple CBDCs issued on a shared platform for international settlement.
While many unknowns remain, and a number of areas still require further investigation, it is only through our collective understanding and journeying together that we can meaningfully contribute to the G20 roadmap for enhancing cross-border payments.
We are privileged to be part of this pioneering piece of work.
– Deputy Governor, South African Reserve Bank (SARB)
Next steps include:
- The development of a detailed platform rulebook
- Reviewing legal and regulatory frameworks across participating jurisdictions
- Formation of governance committees for the project which could potentially transit into governance committees for a future live regional platform
- Finally, technical development and testing at a large-scale industry level would then be required at a regional level
