The BIS has announced Project Meridian FX, a joint initiative for foreign exchange (FX) transactions with the Bank of England, the Eurosystem and the London BIS Innovation Hub. The payment versus payment (PvP) transactions will synchronize between DLT-based systems and real time gross settlement systems (RTGS).
Last year the Bank of England and the London BIS Innovation Hub shared the results of the first stage of Project Meridian, a delivery versus payment trial. It used a “synchronization operator” to simultaneously settle a DLT-based real estate transaction and the money movement on the real time gross settlement system (RTGS).
At the time it also mentioned the potential to explore PvP as route to address foreign exchange settlement risks, which amounted to $2.2 trillion daily in April 2022. A previous BIS paper highlighted that the UK has the largest exposure.
Project Meridian FX aims to explore how to reduce the liquidity needs of participants. Compared to the first iteration of Meridian, it will expand the scope of assets and technologies for the RTGS synchronization trials.
One of the expansions is to interoperate with the infrastructures used in the European Central Bank and Eurosystem’s wholesale DLT settlement trials in central bank money. This involves three settlement offerings, including a wholesale CBDC from the Banque de France and two interoperability systems that link to the European RTGS systems. The Bundesbank trigger solution links to Target2 and the Bank of Italy escrow solution, TIPS Hashlink, links to TIPS, the Target2 extension that operates 24/7.
Hence, apart from DLT, the experiments also involve connecting one RTGS system to another.
The timeframe for the trial is late 2024. That fits in with the Eurosystem wholesale DLT work that runs through late November.
