The Bank for International Settlements and its central bank partners have 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.
The joint project between the BIS, Bank of England, Bank of France, Bank of Italy, Deutsche Bundesbank and European Central Bank involved synchronising the settlement of FX transactions, using distributed ledger technology, so that the transfer of one leg of the transaction - such as buying a currency - happens only if the transfer of the other - such as selling another currency - occurs.
At the heart of Project Meridian FX is the synchronisation operator - a technology-neutral interface designed to coordinate the simultaneous exchange of assets across payment systems.
The project connected a synthetic version of the UK RTGS system to three experimental Eurosystem DLT platforms: DL3S (developed by the Bank of France), TIPS Hash-Link (developed by the Bank of Italy) and the Trigger Solution (developed by the Deutsche Bundesbank).
In each case, the synchronisation operator successfully orchestrated payment-versus-payment (PvP) FX settlements.
Meridian FX also explored additional functionalities, including liquidity-saving mechanisms and user-defined transaction rules, such as approval limits. The findings show that synchronisation can be agnostic to both the asset or fund of the transaction involved and the technology of the ledgers, highlighting its potential use in other markets.
The BIS says insights gained from the project will inform the work programmes of the participating central banks.