Beyond Project Dunbar’s Shared Platform, Unknowns Loom for Central Banks, CBDCs

With new technology, especially with new payment methodologies, there are two heavy lifts — the technical infrastructure that makes it all possible, and then the adoption of new behaviors, the transformation of what could be into what is.

News has come in recent days that the Bank for International Settlements (BIS) and four central banks have made strides with Project Dunbar to trial blockchain-based initiatives focused on cross-border transactions.

Read more: Regional Central Bank Alliances May Shape the Digital Dollar’s Future

In broad strokes, the blockchain-powered platforms make it possible for all central bank digital currencies (CBDCs) to operate with one another. Interoperability is a critical feature that would be necessary to power international trade, finance and credit.

Thus far, the initial progress of Project Dunbar is tied to BIS and four central banks — Australia, Malaysia, South Africa and Singapore, as well as several commercial banks — which indicates the somewhat regional concentration of using CBDCs for cross-border payments.

But beyond the tests and trials, there’s at least some urgency to get interbank payments CBDC ready, and able, and to see just who’s willing. China has been at the head of the class in creating and actually deploying CBDCs. China’s digital yuan is ready to be used in cross-border activity.

See more: China’s X-Border CBDC Ambitions Will Bring Digital Yuan to Broader Global Stage

Beyond the jockeying, so to speak, to have a CBDC in the field, there are any number of observers who contend that the dollar’s global dominance might be threatened if the United States does not speed its own CBDC efforts.

The question remains as to what happens as central banks — name the central bank of your choice — adopt and adapt to new platforms. Those platforms — taking a cue from Dunbar — would be shared, and would not be solely under the control of any single central bank or group of banks.

Moving Cryptos Aside

But in doing all this, in making sure that CBDCs are interoperable, these same banks, and by extension the corporates and commercial banks that rely on them, crowd out at least some competition.

That competition might rest mainly with stablecoins, at least now, as CBDCs are in what might be termed the infancy stage.

As PYMNTS detailed in the report “Cryptocurrency, Blockchain and Cross Border Payments,” a collaboration with Circle, surveys of 250 executives revealed that cryptocurrency and blockchain technologies are proving increasingly useful for cross-border businesses. Fifty-eight percent of firms use at least one crypto, and bitcoin is the most widely used crypto at 31% of those respondents with sales of between $250 million to $1 billion, followed by stablecoins at 29%. Roughly 55% of companies use the blockchain.

Read more: 58% of Multinational Firms Use Cryptocurrencies

The firms surveyed have at least $10 million in annual sales.

The data point to the fact that corporates want to have a range of options in the global payments landscape. As CBDCs take shape, we may see a greater comfort level, buoyed by interoperability (and a dollar CBDC) that would include messaging standards and other guardrails to ensure some uniformity across borders.

We’re not there yet, and some unknowns still exist as to just how wholesale and interbank activities — and B2B interactions too — would work beyond those initial regional explorations of Project Dunbar. In addition, the continued reliance on central bank liabilities would be, arguably, a selling point against the volatility of cryptos and other digital offerings.

There’s a long road ahead — and Dunbar, pointing the way to technical feasibility, offers the onramp.