The Bank of England, the Monetary Authority of Singapore, and the Bank of Thailand have joined together to explore the technical and policy implications of settling tokenised foreign exchange (FX) transactions using synchronised settlement mechanisms.
The project builds on insights gained from a Bank for International Settlements-led initiative - Project Meridian - that successfully demonstrated how wholesale payment infrastructures, such as RTGS systems, can interoperate with each other for FX transactions via new technologies, such as distributed ledgers.
For the current trials, the experiments will leverage simulated versions of participating central banks’ RTGS systems and distributed ledger technology-based settlement environments to test interoperability across a number of complex use cases involving different types of settlement infrastructure.
Specifically, this collaborative effort will explore synchronisation’s potential to support Payment versus Payment tokenised FX settlement across jurisdictions with different infrastructures, time zones, and regulatory frameworks.
Tom Mutton, director of fintech at the Bank of England, says: “This project explores, in more realistic conditions, how synchronisation solutions might support an open and effective global financial system by providing a new, innovative FX settlement channel. This, together with our RT2 Synchronisation Lab2, forms part of our wider roadmap to support innovation and new functionality in money and payments.”