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Competing systems for settlement of “multiple assets and currencies” may emerge, and it is the job of central banks to ensure the maintenance of “equitable access” to central bank-issued money, a new report from the Bank for International Settlements (BIS) has said.
“In the future, multiple settlement platforms could emerge, with multiple assets and currencies,” the report said, and “central banks would want to ensure that equitable access to central bank money is maintained, guided by objective criteria.”
The apparent admission from the BIS – often referred to as the central bank of central banks – came in a report that summarized findings from its own experimentation with cross-border settlement of central bank digital currencies (CBDCs), known as the Jura project.
Moreover, the report pointed out that findings from the Jura project “might pave the way for the broader and direct use of central bank money.” It added that this will contribute to “safer and more efficient cross border settlements,” which it said will ultimately be good for financial stability.
The Jura project is initiated by the BIS to experiment on the use of CBDCs for cross-border settlement. Specifically, the project involved settlement of transactions of euro and Swiss franc CBDCs, as well as transferring and redeeming tokenized securities denominated in euros between Swiss and French financial institutions.
The project has been led by the BIS Innovation Hub, the Bank of France and the Swiss National Bank, with participation from a number of companies from the private sector, including Accenture, Credit Suisse and UBS.
Meanwhile, the Switzerland-based institution argued that giving financial institutions direct access to central bank money raises “intricate policy issues.” However, it also said that a new approach of “dual notary signing” used in the experiment may give central banks the comfort they need to issue CBDCs on third-party platforms.
Central banks could choose to issue CBDCs on several distributed ledger technology (DLT) platforms, the report said, although it noted that this has the potential to cause “liquidity fragmentation” unless seamless mechanisms for transferring funds between platforms exist.
Lastly, the financial institution wrote that the entire experiment was carried out in a “near-real setting, used real-value transactions and met current regulatory requirements.” However, it also stressed that the Jura project is of “exploratory nature,” and that it should not be interpreted as an indication that the Bank of France or the Swiss National Bank are planning to issue CBDCs.
The BIS is an international financial institution owned by 62 central banks from around the world, and is led by former Banco de México Governor Agustín Carstens.