Central banks are trying to come to terms with emerging payment technologies pioneered by tech firms. Meta Platform Inc's (NASDAQ: FB) Diem project, formerly known as Libra, is building out a global payments network that could service its stablecoin or central bank digital currencies, reported Bloomberg.
What happened: Several central banks and the Bank for International Settlements (BIS) developed prototypes for a common digital currencies platform.
The two prototypes demonstrate the technical viability of such a platform, the BIS stated along with the Reserve Bank of Australia, Bank Negara Malaysia, the Monetary Authority of Singapore, and the South African Reserve Bank.
Codenamed "Project Dunbar," the development also proves that financial institutions could use central bank digital currencies to transact directly with one another on a shared platform.
"A common platform is the most efficient model for payments connectivity but is also the most challenging to achieve," commented Andrew McCormack, head of the BIS Innovation Hub Centre in Singapore.
Why It's Important: The rapid growth of cryptocurrencies that are distinct from digital currencies issued by central banks is posing a potential threat to existing monetary regimes and adding urgency to debates on handling cross-border money transfers, the report added.
"While there is clearly more work to be done in thinking about the feasibility and design of multi-CBDC platforms, the findings from Project Dunbar provide a good platform for future work in this area," stated Michele Bullock, Assistant Governor (Financial System), Reserve Bank of Australia.
The report further noted that the next steps include the development of a detailed platform rulebook, reviewing legal and regulatory frameworks, formation of governance committees for the project.
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