Australia, Singapore, Malaysia, and South Africa to Trial Cross-Border Digital Currency Payments

Australia, Singapore, Malaysia, and South Africa to Trial Cross-Border Digital Currency Payments

The central banks of Australia, Singapore, Malaysia, and the Republic of South Africa have set out to test the use of state-issued digital currencies in cross-border payments. The trial, led by the Bank for International Settlements, aims to establish whether they can simplify transactions and make them cheaper.

Reserve Bank of Australia Teams Up With Counterparts in Asia-Pacific, Africa on CBDC Project

While a number of nations are still testing their central bank digital currencies (CBDCs) in domestic applications, some are preparing to conduct international experiments. The Reserve Bank of Australia, Bank Negara Malaysia, the Monetary Authority of Singapore, and the South African Reserve Bank have joined forces to carry out cross-border trials.

The cooperation aims to develop shared platforms for cross-border transactions using different CBDCs, the institutions said in a statement quoted by Reuters. The scheme is led by the Bank for International Settlements (BIS) Innovation Hub. Fraziali Ismail, assistant governor at Bank Negara Malaysia, has been quoted as saying:

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.

The prototype platforms should enable financial institutions to transact directly with each other using the sovereign digital currencies, the report elaborates. This approach would allow them to eliminate the need for intermediaries. Transaction times and costs are also expected to decrease. The participants will explore various designs in terms of technology, governance, and operation.

This isn’t the first experiment of this kind. BIS Innovation Hub heads another project involving central banks from China, Hong Kong, Thailand, and the United Arab Emirates. In June, Bank of France and the Swiss National Bank announced a collaboration with the hub to trial the use of wholesale digital currencies in cross-border settlements. In July, the IMF, the World Bank, and BIS recommended that countries work together on CBDCs to enhance cross-border payments.

Earlier this year, financial authorities in Hong Kong launched a second round of tests for the national digital currency issued by the People’s Bank of China, which has arguably the most advanced CBDC project. The Chinese special administrative region revealed it’s going to connect its domestic payments system to the mainland’s digital yuan network to assess the currency’s usability in cross-border scenarios.

Do you think central bank digital currencies will challenge the current international payments system? Share your thoughts on the subject in the comments section below.