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Researchers at Project Meridian identified several benefits of synchronization, including reduction of risk, time and cost in settling a series of transactions.
In a joint financial program called Project Meridian, bank of england and the Bank for International Settlements’ (BIS) innovation hub London Center examined the use of modern technology to advance financial payments through the Real-Time Gross Settlement (RTGS) system. Project Meridian used central bank money that is free of credit risk and held by commercial banks in RTGS accounts. Notably, the Bank of England published a report on Project Meridian detailing the findings and the importance of updating the financial payments infrastructure.
“Central banks may use the findings of the project to consider implementing synchronization in their RTGS systems,” the report said. noted,
Synchronizing payment processing is a way to ensure that ownership of funds changes if and only if ownership of another asset also changes. Synchronized payment processing is already in use in some global markets, including Australia and Switzerland. With notable success, Project Meridian is eager to replicate this in other markets as the demand for fast, efficient and affordable payments arises.
In addition, Project Meridian researchers identified several benefits of synchronization, including a reduction in risk, time, and cost in settling a series of transactions.
Synchronizing changes in asset ownership with corresponding changes in funds eliminates the risk of one party not delivering, as well as reducing liquidity and transaction costs. Project Meridian shows how this can be done: https://t.co/Vcufu7toTi#BISInnovationHub @bankofengland pic.twitter.com/KWW2hhZgW1
– Bank for International Settlements (@BIS_org) April 19, 2023
One of the use cases for the Meridian prototype was a housing transaction. Reportedly, the Bank of England and the Bank for International Settlements (BIS) have successfully bought homes in Wales and England through a synchronization network using distributed ledger technology (DLT).
Through the digitization of documents stored in a decentralized ledger, the bank concluded that the Meridian prototype has potential benefits beyond settlements.
“In the Meridian prototype, transactions are digitized, and the movement of funds is conditional on the movement of assets. This provides an opportunity for professionals working in the property market – in this case the housing market – to improve their processes To streamline,” the report said.
Project Meridian precedes CBDC payments
A month after the completion of Project Meridian, the Bank for International Settlements announced the end of a CBDC program called Project Icebreaker. In particular, the central banks of Israel, Norway and Sweden were involved in the project, studying the benefits and challenges of implementing cbdc in international payments.
#BISInnovationHub The Nordic Center and the central banks of Israel, Norway and Sweden have concluded Project Icebreaker, studying the potential benefits and challenges of retail access. #cbdc in international payments @riksbanken @NorgesBank https://t.co/2OfFYaPbr6 pic.twitter.com/jPFjrCXDlT
– Bank for International Settlements (@BIS_org) March 6, 2023
The Bank of England is also rigorously testing the use of Central Bank Digital Currency (CBDC) to update its payments infrastructure. In February this year, the Bank of England published a CBDC consultation paper with public responses expected by June 7, 2023. Meanwhile, the Bank of England continues to assess the future need for a CBDC amid increased crypto adoption.
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