Understanding Project Dunbar and its future CBDC possibilities

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  • What form of digital currencies will take over the world? Cryptocurrency leads the way and is well received in the world
  • Project Dunbar’s goal is to test the possibilities for transacting with multiple CBDCs across borders
  • Having all central banks and potentially all banks on a single platform as Project Dunbar tested highlights issues such as ownership of the platform

Digital currencies are here to stay. It is more likely than not that the crypto enthusiasts have it right. The question remains: What form of digital currencies will take over the world? Cryptocurrency leads the way and is well received in the world. Central Bank Digital Currencies (CBDCs) are taking the best features of digital currency and bringing them within the fold of regulation. This presents a problem in our current monetarily fractured world with multiple currencies.

How would the world work with multiple CBDCs? One possible answer has been provided by the Bank for International Settlements in collaboration with four central banks that are working on CBDCs. It’s code-named Project Dunbar and looks at cross-border CBDC transfers’ feasibility.

  • The Bank of International Settlements and 4 Central banks (Australia, Malaysia, Singapore and South Africa)
  • Testing cross-border payments in a multi-CBDC environment
  • Project Dunbar still leaves questions

Central Bank Digital Currency

Central bank digital currencies are blockchain-based or digital assets issued and regulated by central banks of countries or monetary territories. With fiat currencies, a central bank issues notes and coins that are also represented by bank balances.

With a central bank digital currency, the digital currency is issued by a central bank and may work in tandem with an existing fiat currency. Motivations behind having central bank digital currencies are similar to those for having cryptocurrencies. It’s not all roses and sunshine as central bank digital currencies raise many questions. Fiat currencies suffer because of a lack of trust in the issuer, and there is no guarantee issuing the currency digitally on a blockchain makes any difference.

The problem

To understand the problem that Project Dunbar solves, we need to look at how money, fiat currency to be exact, is currently transmitted or transferred across borders. Banks as we know them, operate within a legal territory, a country, for example.

They are licenced, authorised and supervised to operate in that territory. When the bank needs to transfer money to a person or institution in another territory, they must do so through another bank they have a relationship with, a correspondent bank.

For many reasons, the problem is that banks cannot have single relationships worldwide, which sometimes means multiple correspondent banks in a single transaction. The more hands the money needs to go through, the higher the cost and longer the duration. CBDCs can easily inherit some of these problems. Being issued by an authority in a territory, international transfers would need to be facilitated similarly to correspondent banks.

The solution for CBDCs

Thanks to blockchain, CBDCs have advantages over fiat currencies regarding transacting. Ripple technologies have worked on a private ledger system built just for CBDCs. This allows for faster transacting with CBDCs as we have become used to digital currencies.

Read: The case for and against CBDCs

Cryptocurrencies, however, do not have the institutional problems that CBDCs have. Banks are authorised by central banks to operate within one country. To send country A CBDC to a person in country B as country B CBDC will require communication between country A commercial bank and country B Commercial Bank.

Country A commercial bank, in this case, is not authorised to operate in country B. Project Dunbar’s goal is to test the possibilities for transacting with multiple CBDCs across borders and, therefore, regulatory environments.

Project Dunbar

Bank for International Settlements (BIS) Innovation Hub and central bank partners in Australia, Malaysia, Singapore and South Africa announced in March 2022 a shared platform to facilitate international settlements with multiple central bank digital currencies (multi-CBDCs).

A multi-currency common settlement platform would allow transacting parties to pay each other directly in different currencies without intermediaries like correspondent banks. The project tested multiple methods, including allowing foreign domiciled banks to hold CBDCs on platforms of issuing countries and allowing direct access to banks in foreign domiciled countries. The test succeeded and proved that CBDCs could be transferred across borders and that there are many ways to do it.

Just as we have witnessed in decentralised finance, Project Dunbar showed a potential shake-up in the dominance of banks and intermediaries when it comes to CBDCs, just as with cryptocurrency. Simplified banking structures and fewer hands involved in keeping and moving money mean customer benefits.

However, this may come at the cost of the dominance of banks, and some resistance is expected. The impact on financing could be huge as funds will flow faster and freer than ever across borders.

There are still questions

Project Dunbar though a successful test, has still left some questions to be answered.

National security

Financial systems are an important part of national security. Having all central banks and potentially all banks on a single platform as Project Dunbar tested highlights issues such as ownership of the platform. Who would own and run the platform? Would it be equitable? How would the platform protect the sovereignty and stability of member countries? Would the platform be able to insulate members from instability in other members?


Supervision is an important conversation because, time and time again, we are reminded just how much we need it when it comes to the financial world. So when a system such as that tested in Project Dunbar goes live, what will the approach to supervision be? Can central banks trust banks from other jurisdictions when they do not supervise those banks directly?


Regulation differs from country to country. For example, daily transaction limits in one country could be 2 to three times that of another country. How do we factor these and other differences into our multi-CBDC platform? Transactions which are considered daily practice in some countries may be discouraged or completely outlawed in other countries.

Also, when payments happen across borders as with Project Dunbar there are matters of jurisdiction to consider. How do we decide which jurisdiction the transaction is happening in? How do we decide when it has changed?

While Project Dunbar gives us many reasons to be excited given the focus on CBDCs it also leaves us with a lot of questions. For now, the good news is a multi-cbdc environment is viable and transacting on it is possible. With roughly half of the countries in the world working on cbdcs, the findings of Project Dunbar will help move money forward.

Read: Lessons we can draw from the ongoing crypto market crash


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Kudzai G Changunda
Kudzai G Changundahttp://www.about.me/kgchangunda
Finance guy with a considerable interest in the adoption of web 3.0 technologies in the financial landscape. Both technology and regulation focused but, of course, people first.