Soon, various systems for the settlement of multiple assets and currencies may be put forward, and it is the job of central banks to ensure the maintenance of “equitable access” to central bank-issued money. This is according to a new report from the Bank for International Settlements (BIS).
In the report, the Bank said “In the future, multiple settlement platforms could emerge, with multiple assets and currencies,” and “central banks would want to ensure that equitable access to central bank money is maintained, guided by objective criteria.”
The apparent admission from the BIS came in a report that revealed findings from a recent experiment around the cross-border settlement of central bank digital currencies (CBDCs), also known as the Jura project.
Furthermore, the report claimed that findings from the experiment “might pave the way for the broader and direct use of central bank money.” It then went on to explain that this could lead to “safer and more efficient cross border settlements.” This will ultimately be good for financial stability.
The Jura project was developed by the BIS to experiment on the use of CBDCs for cross-border settlement. The main focus of the project involved settlement of transactions of euro and Swiss franc CBDCs, as well as transferring and redeeming tokenized securities.
The project has been led by the BIS Innovation Hub, the Bank of France and the Swiss National Bank. A number of companies from the private sector have participated, including big names Accenture, Credit Suisse and UBS.
Meanwhile, the BIS, which is based in Switzerland, argued that giving financial institutions direct access to central bank money raises a number of intricate policy issues. However, it also said that a new approach of “dual notary signing” used in the experiment may give central banks the ability to issue CBDCs across third-party platforms.
The report made it clear that central banks could choose to issue CBDCs on several distributed ledger technology (DLT) platforms. However, it did say that this has the potential to cause “liquidity fragmentation” unless seamless mechanisms for transferring funds between platforms exist.
The Jura project was carried out in a realistic setting, used real-value transactions and met current regulatory requirements. This does not take away from the fact that the Jura project was of exploratory nature and that it should only be taken as an indication that banks could issue CBDCs.
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