BIS And Central Banks Test New System For Cross-Border Currency Payments

The Bank for International Settlements (BIS), together with several leading central banks, has completed a successful trial showing how different payment systems can work together during foreign currency transactions.

This test used distributed ledger technology (DLT) to support faster, safer, and more trustworthy money exchanges between banks in different countries.

Synchronization Tool Brings Platforms Together

The central banks that joined the project include the Bank of England, the Bank of France, the Bank of Italy, the Deutsche Bundesbank, and the European Central Bank. These institutions teamed up to build a system where both sides of a currency trade are confirmed at the same time. For example, one bank buys a currency while selling another—but the trade only happens if both sides are completed.

This process is called synchronized settlement. It helps prevent problems where one side of trade goes through but the other doesn’t. By using technology to connect systems, the project aims to improve how financial institutions exchange large amounts of money across borders.

At the center of Project Meridian FX is a special tool known as the synchronization operator. This is a technology-neutral interface that links multiple payment systems. Its job is to make sure that both sides of a transaction are confirmed and settled at the same time, without depending on any specific technology or currency.

During the test, a synthetic version of the UK’s RTGS (Real-Time Gross Settlement) system was connected to three experimental platforms from the eurozone. These platforms included DL3S from the Bank of France, TIPS Hash-Link from the Bank of Italy, and the Trigger Solution from the Deutsche Bundesbank.

In each case, the synchronization operator completed payment-versus-payment (PvP) transactions. This shows that the tool can support fair and balanced trades where one asset is exchanged only if the other asset is also transferred.

New Features Allow More Control And Flexibility

Project Meridian FX also explored extra features that could improve how central banks handle transactions. These included tools for saving liquidity, as well as options for setting rules such as approval limits or custom transaction conditions.

BIS noted that insights from this project will help shape future research and development for the central banks involved. As the world shifts more toward digital money and blockchain-based systems, tools like the synchronization operator may become key parts of global financial infrastructure.

The synchronization operator is capable of working with various asset and ledger kinds, according to the test findings. It can be applied to a wide range of financial fields outside of currency trading because it is not dependent on any one technology. This adaptability might enhance confidence in digital systems and aid in the modernization of international payment networks.