Project Rialto to Enhance Instant Cross-Border Payments via Wholesale CBDC Settlement

Project Rialto is focused on improving instant cross-border payments via wholesale CBDC or central bank digital currency settlement

The Bank for International Settlements (BIS) is introducing Project Rialto in order to explore how instant cross-border payments may be enhanced through a modular foreign exchange (FX) component combined with “settlement in wholesale central bank digital currencies (wCBDC).”

As explained in a blog post, improving cross-border payments is an explicit international policy goal and “a priority of the G20.”

As noted by BIS, FX is a key “component of cross-border payments but currently, the FX services facilitated by correspondent banks can be costly, slow and complex, and they expose participants in the payments chain to liquidity, credit, and settlement risks.”

As mentioned in the update from BIS, decentralised solutions, CBDC and interlinked payment infrastructures “are considered promising avenues to improve cross-border payments.”

How they interact has “not yet been explored and could yield answers that advance cross-border payments globally.”

Project Rialto is a collaboration of “the BIS Innovation Hub Eurosystem and Singapore Centres in partnership with several central banks.”

It explores a new automatic FX settlement layer solution using wCBDC as “a safe settlement asset that could be deployed for interlinked instant payment systems or digital asset systems.”

Rialto in Venice is both “a bridge connecting the two sides of the Grand Canal (symbolising the cross-border payment infrastructure), and a marketplace (symbolising the automatic FX settlement using wCBDC).”

During the past 5-6 years, CBDC-focused projects have come a long way with countries like China launching full-scale CBDC initiatives on a major scale. While most other countries are still in the initial stages of CBDC development and understanding its role in global transactions, a considerable number of pilots have been introduced internationally.

Currently, large economies like India have explored the feasibility of a CBDC. The European Union has also examined the potential benefits and drawbacks of issuing a virtual currency. Meanwhile, the US has also seen researchers extensively study the role of CBDCs in globalized economies. In addition, the IMF and other world organizations like the World Bank and World Economic Forum (WEF) have been actively exploring the potential use of CBDCS in carrying out international payments.

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