The Bank for International Settlements (BIS) is cooperating with several countries to test the use of central bank digital currencies (CBDCs) for international settlements.

In participation are the central banks of Australia, Malaysia, Singapore and South Africa. The experiment could lead to a more efficient global payments platform.

Led by BIS’ Singapore Center, “Project Dunbar” aims to develop prototype shared platforms for cross-border transactions using multiple CBDCs. This would allow financial institutions to transact directly with each other using the digital currencies. Consequently, this would eliminate the need for intermediaries and cut the time and cost of transactions. BIS said that they would likely published the results of the study next year.

“We are confident that our work on multi-CBDCs for international settlements will break new ground in this next stage of CBDC experimentation and lay the foundation for global payments connectivity,” said head of the BIS Innovation Hub Singapore Center Andrew McCormack.

Globally, central banks are trying to come to terms with emerging payment technologies and privately-issued digital currencies. For instance, Facebook Inc.’s Diem project, formerly known as Libra, is building out a global payments network. Its sheer size and depth of user base means that it coul service its own stablecoin or CBDCs.

BIS said earlier this year that CBDCs are necessary for governments to retain control of the money supply. Amidst the falling use of cash, cryptocurrencies are also gaining traction as both investments and legal tender. This has motivated other large-scale payment projects, such as Facebook’s Diem. BIS believes that without CBDCs, these firms could leverage their enormous social media user base and come to dominate the digital payments space.

Additionally, in its Annual Economic Report, BIS said that “CBDCs and open platforms are the most conducive to a virtuous circle.”. By this, BIS means that CBDCs would facilitate broader access, lower costs, as well as better services than an alternative.

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