Project Meridian FX is an experiment led by the BIS Innovation Hub’s London and Eurosystem Centres together with the Bank of England, Bank of France, Deutsche Bundesbank, Bank of Italy and European Central Bank. The project demonstrates how operators of wholesale payment infrastructures can enable interoperability with new technologies, such as distributed ledger technology (DLT), with a focus on FX transactions.
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, according to a press release.
The project 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.
Meridian FX sought to address some of the actions called for in the Group of 20 cross-border payments roadmap. For example, reducing foreign exchange settlement risk using payment-versus-payment transactions and establishing realistic links between the wholesale payment infrastructures of different countries. Synchronisation could also mitigate some of the liquidity risk and credit risk challenges in the foreign exchange market.
The project connected a synthetic version of the UK RTGS system to three experimental Eurosystem interoperability solutions: 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).
Meridian FX also explored additional functionalities, including liquidity-saving mechanisms and user-defined transaction rules, such as approval limits.
Combined with the results of previous work undertaken by the BIS and the Bank of England, Meridian FX shows 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.
Report – Project Meridian FX: exploring synchronised settlement in FX
Banking 4.0 – „how was the experience for you”
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