BIS Complete CBDC Pilot Test After $22M Transactions
The Bank for International Settlement (BIS) recently announced the conclusion of a month-long multi-jurisdictional central bank digital currency (CBDC) pilot test for cross-border transactions.
BIS Confirm “Successful” Pilot Test
In a collaboration between the central banks of Thailand, Hong Kong, China, and the United Arab Emirates (UAE), BIS has facilitated the first multi-jurisdictional CBDC test.
In addition, about 20 commercial banks from the participating countries also took part in the test program. The test phase saw cross-border transactions of $22 million worth of value.
Furthermore, the test program recorded over $12 million in value by facilitating 164 foreign exchange transactions.
According to Daniel Eidan, a solution architect at BIS, the test is centered on wholesale CBDC and cross-border payments. It also includes central banks’ role in managing such commercial-scale transactions. Eidan added that BIS would consider more commercial inclusion in future works.
The latest development is dubbed “mBridge” or “Multiple CBDC” (mCBDC). The initiative is part of the Project Inthanon-LionRock based on distributed ledger technology (DLT) CBDC project.
Launched in September 2019 with the central banks of Thailand and Hong Kong as the drivers. The project aims to develop a single CBDC for cross-border payment across participating nations.
After completing the first pilot test, the project will begin its third and final development phase. After then, a minimum version of the project involving the platform’s core feature will be open to the public.
However, a fully functional CBDC will become available subject to review from the feedback of the minimum version.
Meanwhile, BIS noted that it would release a detailed progress report for mBridge in October. The report will highlight the regulatory framework, legal considerations, technical design, and policy outlook.
Will CBDC Promote Financial Inclusion?
The mass adoption of privately-issued cryptocurrency has shaken the core of monetary policy in many countries. Realizing that digital assets are here to stay prompted monetary authorities to implement mechanisms to address the rising crypto adoption.
As a result, the CBDC emerged to give central banks control of digital currencies within their jurisdictions. However, cryptocurrency proponents infer that it would help expand financial inclusion due to its decentralized functions.
Meanwhile, most central banks seem to share the same sentiments. As a result, many monetary policies are designed to incorporate CBDC to provide accounts and access payment services.
Furthermore, authorities have realized that banks are not the only platform that can accommodate the unbanked population. The emergence of non-banks in the payment gateway has increased interoperability and made CBDC more relevant to policymakers.
Moreover, some regulators have identified CBDC as critical to their economic development plan. With the high cost of transactions, CBDCs, like cryptos, reduce high fees making payments seamless and affordable. Central banks can utilize CBDC to speed up digital payment processes and reduce the cost of printing more paper cash.
The BIS June reports show that 11 CBDCs are already launched. 15 are in their pilot stage, and 26 are still in development.
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