This week the central banks of Australia, Malaysia, Singapore and South Africa have started a new experiment: building a cross-border central bank digital currency system called “Project Dunbar”, under the auspices of the Bank for International Settlements.
The idea is to let institutions in those countries use cryptocurrency and distributed ledger technology to make cheap, instant payments in different currencies. And if Dunbar works — a big “if” — this will give a new twist to 21st-century digital finance.
While some central banks, such as the Bahamas, have tested domestic CBDCs, and others, such as the Monetary Authority of Singapore and Switzerland, have tested domestic and cross-border settlement systems in one currency, none have tackled multiple currencies.