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Faster, cheaper cross-border payments are the goal of an experiment to replace the traditional correspondent banking system with multiple central bank digital currencies (CBDCs).

The project to join multiple CBDCs on a common platform — which was developed by the Bank for International Settlements (BIS) Innovation Hub along with the central banks of Hong Kong, Thailand, China and the UAE — aimed to test an alternative to the existing cross-border banking system using digital currencies and distributed ledger technology.

The BIS reported that its prototype platform for multiple CBDC settlements “was able to complete international transfers and foreign exchange operations in seconds, as opposed to the several days” that are normally required by commercial banks.

The platform was also able to operate around the clock and, according to a report on the project, could halve the cost of these kinds of transactions.

“The prototype is part of our efforts to design CBDC technology,” said Benoît Cœuré, head of the BIS Innovation Hub. “The project includes experimenting with use cases and trials, balanced with analysis of governance, policy and legal considerations with a focus on cross-border use.”

Future research will explore privacy controls, liquidity management and the scalability and performance of distributed ledger technology in handling large transaction volumes.

The project’s next phases will include tests with commercial banks and other financial market participants.

“Enabling faster and cheaper cross-border wholesale payments, including to jurisdictions that don’t benefit from a vibrant correspondent banking system, would be positive for trade and economic development,” said Bénédicte Nolens, head of the BIS Innovation Hub in Hong Kong.