CBDC News: The central banks of France and Singapore have teamed up to explore cross-border applications of central bank digital currencies (CBDC).
The Bank of France and the Monetary Authority of Singapore (MAS) issued a joint statement on CBDC testing on Thursday. The banks shared that they worked together and successfully completed a cross-border payment and settlement experiment using CBDC. Experimental transactions involve a number of different CBDCs interconnected on a common network between the two countries.
The tests were conducted with the help of JPMorgan’s digital currency Onyx and sought to simulate cross-border transactions as they would in the real world. The Onyx suite of apps uses an automated digital contracting system that helps push the popularity of things like DeFi into the mainstream. Onyx had previously participated in a similar cross-border CBDC test for the Central Bank of Bahrain in 2021.
The test is the final phase of Banque de France’s wholesale experiment program. According to the Bank, the project is “the first m-CBDC experiment to apply automated market generation and liquidity management capabilities to achieve cross-border settlement and settlement efficiencies.” The project is scheduled to be completed in the second half of 2021.
Cross-border CBDC experiment yields positive results
According to the report, four key results were achieved in the experiment between France and Singapore. The first is “Demonstration of interoperability between different types of cloud infrastructure.” This was done by installing blockchain nodes in both public and private cloud infrastructures in each country.
Second, it was the design of the network that allowed central banks to have visibility into international payments. Meanwhile, each country will have “independent control over the issuance and distribution of their CBDCs.”
The third positive outcome was the establishment of a new m-CBDC network that will combine an automated liquidity pool and market making services. Smart contracts will perform the automatic exchange between EUR and SGD in real time.
Finally, the report cites a positive result of the simulation of an experimental m-CBDC network showing how the number of parties involved in the settlement of international transactions can be reduced. The report suggests that this can reduce the number of contractual arrangements, your customer’s burden and all associated costs.
Valérie Fasquelle, Director of Infrastructure, Innovation and Payments at Banque de France, said:
Banque de France and MAS tested the possibility of connecting with other CBDCs around the world by experimenting with EUR CBDC circulation in a common corridor network.
It is an important opportunity to make arrangements for multiple CBDC models, improve cross-border payments and increase the alignment of post-trade procedures.
The test was limited to just two banks, but the design of the network allows for scaling and support of multiple banks in different jurisdictions is considered a key finding.