Project Dunbar

Cross-border payments today can be slow and expensive. Unlike domestic payments, where banks can pay each other directly on a single national payments platform, there is no single international platform today for cross-border payments and settlements.

Instead, the correspondent banking model is used, where banks hold foreign currency accounts with each other. A single cross-border payment could pass through multiple correspondent banks, using the foreign currencies held with them. Each leg of the overall transaction takes time and effort to process, with fees levied that add up quickly and are passed on to customers, resulting in slow and costly cross-border payments.

A multi-currency common settlement platform would enable transacting parties to pay each other in different currencies directly, without the need for intermediaries such as correspondent banks.

On this common shared platform, multiple central banks issue their digital currencies (CBDCs), which can be used by participating commercial banks for payments.

Participating commercial banks can hold and transact in the CBDCs issued. This includes CBDCs in both local and foreign currencies. Banks that are connected to the domestic payment system can exchange their central bank balances for CBDC. Non-local banks (those licensed as banks in other jurisdictions, but not in the local jurisdiction) which are not connected to the domestic payment system can exchange CBDC with other banks.

In this way, all participating banks can exchange and hold different central bank balances in the form of CBDC, including those to which they usually would not have access. Banks can now pay each other directly in all the different CBDCs of different currencies