Australia, Malaysia, Singapore and South Africa launch CBDC Scheme
Central banks in Australia, Singapore, Malaysia and South Africa launched a Central Bank Digital Currencies (CBDC) Scheme on August 2, 2021.
- CBDC scheme is a cross border payments trial that uses different central bank digital currencies (CBDC) in order to assess if this allows transactions to be settled in a cheap and easy manner.
- Many governments and central banks across the world are exploring the use of CBDCs.
- CBDCs are digital forms of existing currencies.
- Countries like China, are trialling retail-focused CBDCs that have been designed to replicate cash in circulation.
- Other countries are considering to use wholesale CBDCs in order to improve the internal workings of financial systems.
- Most of the projects are still in early stages and are domestically focused. But, the developing global rules and frameworks on how CBDCs can be used internationally is complicated technically.
- A separate BIS-led project to explore CBDCs for cross-border payments is also in process which involve central banks from China, Hong Kong, the UAE And
Aim of the latest CBDC project
The latest CBDC project was launched by stated countries with the aim of developing prototype shared platforms for cross-border transactions by using multiple CBDCs.
Significance of the platform
These new platforms would enable the financial institutions to transact directly with each other across CBDCs. It will eliminate the requirement for intermediaries and reduce the time and cost of transactions. The initiative, will also explore different technical, governance and operating designs. It will also publish its results in early 2022. This platform will also leapfrog the legacy payment arrangements and serve as the foundation for more efficient international settlement platform.
Central bank digital currency (CBDC)
CBDC is the virtual format of a fiat currency in a particular nation or region. It is an electronic record or digital token of official currency. This currency is issued and regulated by its monetary authority.
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