The logo of MUFG Bank
17:55 JST, September 22, 2024
Tokyo (Jiji Press) — Four Japanese banks are among more than 40 commercial financial institutions participating in an international demonstration test for cross-border payments using digital currencies, led by the Bank for International Settlements.
Project Agora, as the international public-private project is called, aims to accelerate international money transfers, reduce costs and increase transparency.
In April, the BIS announced the launch of the project, which involves seven central banks, including the Bank of Japan, the Federal Reserve Bank of New York, and the British, French and South Korean central banks.
Last week, the BIS announced the participation of private financial institutions, saying those involved “will now begin the design phase of the project.”
The following companies from Japan are participating: MUFG Bank, Sumitomo Mitsui Banking Corp., Mizuho Bank and SBI Shinsei Bank.
Other participants include U.S. giants JPMorgan Chase Bank and Citigroup Inc., as well as Deutsche Bank, France’s BNP Paribas SA and Britain’s HSBC Holdings PLC. U.S. credit card companies Visa Inc. and Mastercard Inc. are also members.
The demonstration test will pursue smooth trading of digitized central bank currencies and commercial bank deposits on a unified platform to improve the efficiency of international bank transfers. A report on the basic system design and issues to be resolved will be prepared by the end of next year.
Currently, cross-border payments rely on the Society for Worldwide Interbank Financial Telecommunication (SWIFT) bank settlement network and intermediaries known as correspondent banks.
Financial settlements under the systems involve multiple intermediaries, leading to duplication of operations, including identity verification and anti-money laundering. In addition, some operations need to be processed manually. As a result, money transfers take time and are costly.
Digital currencies are promising in this regard. But there are issues that need to be resolved, such as technical limitations, regulatory differences between countries, and different opening hours.
“A long period of deliberation may be needed,” a BOJ official said.
The demonstration test focuses on how close the project can come to practical implementation.
