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Tokyo (Jiji Press)—Four Japanese banks are among over 40 commercial financial institutions participating in an international demonstration test for cross-border payments using digital currencies led by the Bank for International Settlements.
Project Agora, as the international public-private project is called, is aimed at expediting international money transfers, cutting costs and enhancing transparency.
In April, the BIS announced the launch of the project, involving seven central banks, including the Bank of Japan, the Federal Reserve Bank of New York and the British, French and South Korean central banks.
Last week, the BIS announced the participation of private financial institutions, saying that those involved “will now begin the design phase of the project.”
From Japan, MUFG Bank, Sumitomo Mitsui Banking Corp., Mizuho Bank and SBI Shinsei Bank participate.
Other participants include U.S. giants JPMorgan Chase Bank and Citigroup Inc., as well as Deutsche Bank, France’s BNP Paribas SA and Britain’s HSBC Holdings PLC. U.S. credit card companies Visa Inc. and Mastercard Inc. are also members.
The demonstration test will pursue smooth trading of digitalized central bank currencies and commercial bank deposits on a unified platform to enhance the efficiency of international bank transfers. A report on the basic system design and problems that must be solved will be drawn up by the end of next year.
Currently, cross-border payments rely on the bank settlement network provided by the Society for Worldwide Interbank Financial Telecommunication, or SWIFT, and on intermediaries known as correspondent banks.
Financial settlements under the systems involve multiple intermediaries, leading to duplicated operations including for identity verification and fight against money laundering. In addition, some operations need to be processed manually. As a result, fund transfers take time, while fees are high.
Digital currencies hold promise in this regard. But there are problems that need to be resolved, such as technical limitations, regulatory disparities across countries and differing business hours.
“A long period of deliberation may be necessary,” a BOJ official said.
The focus of the demonstration test would be how close the project can be brought to practical implementation.
