On July 8, The Banque de France (BdF) and the Monetary Authority of Singapore (MAS) announced a successful experiment of wholesale cross-border payment and settlement using central bank digital currency (CBDC).
The simulated cross-border and cross-currency transactions are notable for being the first multiple CBDC transactions to apply “automated market making and liquidity management capabilities to reap cross-border payment and settlement efficiencies”.
The experiment demonstrates the potential to simplify the integration of multiple CBDC models and improve efficiencies. The joint press release from the BdF and MAS highlighted four key outcomes achieved during the experiment:
1 - Interoperability across different types of cloud infrastructures
2 - Visibility on cross border payments combined with independent control over the issuance and distribution of individual country CBDC
3 - Automated liquidity pool and market-making service, involving smart contracts to automatically manage the currency exchange rate
4 - Potential to reduce the number of correspondent banking parties involved in a payment chain for cross-border transactions and in consequence, the number of contractual arrangements, the KYC (Know Your Customer) burden as well as the associated costs