With plans for central bank digital currencies (CBDC) already underway in some countries, France and Singapore have come together in a synergistic move to test-run transnational CBDC transactions. According to reports, both countries are working on an interoperable digital currency system which will accommodate numerous global government-backed digital currencies.
Further reports reveal that the interoperable system would enable a trans-border implementation of the proposed digital currencies to be issued by central banks in a host of countries including the UK. Earlier today, the principal banks in France and Singapore- the Bank of France and Monetary Authority of Singapore announced that they were able complete with success a comprehensive trans-border payment and settlement test via CBDCs and the digital ledger technology, otherwise known as blockchain.
JPMorgan Involved in Transnational CBDC Testing
US Bank, JPMorgan was involved in the testing with its Onyx business unit, focused on digital currencies and blockchain activities. The test was carried out on a centralized and privatized blockchain similar to the blockchain framework of investment bank, Quorum. With the piloting, both principal banks were able to facilitate transnational and trans-currency activities for a Singaporean fiat-based CBDC and the Euro.
The notice issued on the test observed that though the test was restricted to the two principal banks. However, the structure of the trans-CBDC infrastructure indicated that it could be improved to include and accommodate numerous principal banks and mercantile banks situated in various regions.
The test also showed interfunctionality among various kinds of cloud framework with digital ledger nodes created on public and private cloud service in both countries. According to the Bank of France, the test is one of the recent remarkable successes recorded on its large-scale testing program, which it hopes to finalize by mid-2021.
MAS Chief Fintech Officer Praises Successful Piloting
Sopnendu Mohanty, Singapore’s MAS chief financial technology officer, commented on the successful test, saying it allows banking institutions in many countries to conduct direct transactions with one another in various currencies. He noted that the m-CBDC (as it is fondly termed) testing is a giant stride as regards decentralizing financial systems, in order to foster liquidity provision and market making offerings.
The latest CBDC testing serves as a watershed moment for the establishment of transnational CBDC systems. Back in May, JPMorgan’s Onyx digital currency and blockchain business unit was involved in a trans-border CBDC testing for the Middle East country, Bahrain. It also collaborated with the biggest bank in Singapore, DBS to establish a new firm to be concerned with transnational transactions.
Lately, CBDCs have been gaining acceptance in most countries with a handful of them doing research to assess its possibility and risks. China has gone far in its CBDC business and has even begun distribution in some regions. Meanwhile, privacy has been the major concern about CBDCs.