Date: 05 April, 2024
The Bank for International Settlements (BIS) announced a collaborative effort with the Bank of Japan and six other major central banks to trial a groundbreaking platform aimed at expediting and reducing the costs associated with digital currency transactions. This initiative comes in response to China’s exploration of its digital yuan, prompting global monetary authorities to delve into the potential benefits and complexities of introducing central bank digital currencies (CBDCs), which could revolutionize transaction settlements for individuals and businesses.
Dubbed the “Agora” project, the endeavor seeks to streamline cross-border, tokenized payments through this innovative platform. Currently, international payments can take days to process via the SWIFT global financial messaging network, largely due to the involvement of correspondent banks serving as intermediaries in cross-border transactions.
The seven participating institutions are the Bank of Japan (BOJ), the Federal Reserve Bank of New York, the Bank of England, the Swiss National Bank, the Bank of France, the Bank of Korea, and the Bank of Mexico. The BIS emphasized that the project will not only test the technology but also navigate through specific operational, regulatory, and legal conditions associated with each participating currency.
Mizuho Financial Group Inc., among Japan’s major banks, announced its intent to review the project’s details before deciding on participation. While the BOJ currently has no immediate plans to issue a digital yen, it has been actively experimenting in recent years. Similarly, the Federal Reserve and the European Central Bank are exploring the feasibility of digital versions of the dollar and euro, respectively.
Key Points:
- BIS collaborates with Bank of Japan and six other major central banks for digital currency platform trial.
- Project “Agora” aims to speed up and reduce costs of digital currency transactions.
- Initiative driven by China’s digital yuan exploration, prompting CBDC examination globally.
- Platform targets cross-border, tokenized payments for enhanced efficiency.
- SWIFT network’s current delays in international payments underscore the need for innovation.
- Participating banks include BOJ, Federal Reserve Bank of New York, and others.
- Project will test technology under specific operational, regulatory, and legal conditions.
- Mizuho Financial Group Inc. to review details before potential participation.
- BOJ experimenting with digital yen but has no immediate issuance plans.
- Federal Reserve and European Central Bank also studying digital currency feasibility.