Summary Payment Systems Broadcast #22: Synchronising the Future of Cross-Border Payments:

Insights

6 Sept

As Global finance continues to evolve at pace, the complexity and inefficiency of settling foreign exchange (FX) transactions remain a critical bottleneck. A recent initiative by the Bank for International Settlements (BIS) Innovation Hub and a consortium of leading central banks aims to change that. Project Meridian FX is the latest phase in a broader series of experiments exploring payment infrastructure modernization, offering a practical vision for how foreign exchange settlement could become safer, faster, and more interoperable.

The findings of the initiative were discussed in FNA’s recent broadcast: Project Meridian FX Synchronising the Future of Wholesale Payments, featuring guests John Jackson, Head of the Payment Strategy Division at the Bank of England, and Stephanie Haffner, Advisor to the BIS Innovation Hub’s Eurosystem Centre. Drawing on the technical and policy aspects of the project, the conversation outlines both the conceptual breakthroughs and real-world challenges of enabling seamless cross-border PvP (payment-versus-payment) settlement.

At the head of the project is the concept of the synchronisation operator—a neutral interface that coordinates the simultaneous transfer of funds between ledgers, without ever holding or owning the money itself. This operator facilitates atomic settlement, ensuring that one leg of a transaction only settles if the other does, even when the systems involved are based on different technologies, including traditional RTGS systems and distributed ledger platforms.

“It’s about making sure that you only get one side settling if the other side settles,” explained Jachson. “We used the word ‘synchronized’, not necessarily immediate, but atomic in the sense of ‘if and only if’.

The project tested this model across simulated versions of the Bank of England’s renewed RTGS platform and the Eurosystem’s Target2, as well as across several distributed ledger-based solutions. Despite the technical differences between these platforms, including some that support earmarking and others that do not, the synchronisation model proved adaptable.

“We demonstrated that a synchronisation operator could be agnostic to the asset, the transaction, and the technology of the ledger,” said Haffner. “That’s really important for applying this model across jurisdictions.”

Beyond basic bilateral FX settlement, the project also explored more complex configurations, including the potential for synchronised settlement involving three currencies. In this model, a more liquid currency could act as a bridge to facilitate settlements between two less commonly traded currencies. Although tested in a stylised environment, the model offers a glimpse into how such orchestration could scale in the future.

Equally significant was the project’s exploration of liquidity-saving mechanisms. While the experiment did not quantify specific savings, the structure allowed transactions to be bundled for more efficient settlement. Jackson noted that users could choose between submitting transactions individually for speed or batching them to save on liquidity, an approach that mirrors real-world trade-offs faced by institutions.

“The main technical difference was the introduction of a message type that could accept groups of transactions and settle them simultaneously,” he said. “That’s not a massive technological step, but it offers users the ability to choose where they sit on the speed-liquidity trade-off.”

The implications of Project Meridian FX extended well beyond foreign exchange markets. Both John and Stephanie highlighted use cases in digital property transactions, intraday repo, tokenized bonds, and collateral mobility. The synchronization model has already seen real-world adoption. In the UK, PEXA recently completed a fully digital property purchase using a synchronized model; as Jackson pointed out, central banks in Australia and Switzerland have already been operating similar interfaces in specific markets.

Looking ahead, the Bank of England plans to establish a “synchronisation lab”—a controlled, non-live environment where prospective operators can test integration and demonstrate the business case before the functionality is formally built into the UK’s RTGS system. A full launch is targeted for 2027.

“We think by creating the lab and letting them experiment, they can build a strong support base before making the investment to go live,” said Jackson. “That gives us the chance to build something people are actually ready to use.”

The Broadcast also discussed how synchronisation fits into the broader debate over wholesale and central bank digital currencies (CBDCs). Both speakers framed the synchronisation model not as a replacement, but as a practical alternative or complement to wholesale CBDCs, particularly where timelines, regulatory frameworks, or integration burdens present barriers to wholesale CBDC adoption.

“Wholesale CBDC has existed for decades in practice,” Haffner said. “But they need to be modernized. Synchronization could be one way of allowing DLT-based participants to access central bank money more flexibly.”

Jackson was even more direct: “It’s a very credible alternative, much faster to market, much lower impact in the near term.”

The session concluded by exploring the issue of governance. While synchronisation operators are by function, infrastructures, whether and when they become regulated, remains an open question. Both Jackson and Haffner agree that as usage grows, regulatory scrutiny will be essential.

“We wouldn’t expect that every operator would need to be regulated from the outset,” Jackson said, “but once they become critical to the functioning of a particular market, then, yes, supervision would be appropriate.”

As financial markets become increasingly digital and interconnected, the need for more efficient cross-border payment systems has never been greater. Project Meridian FX offers a compelling alternative to more radical solutions like wholesale CBDCs, providing a faster path to market with lower implementation risks.

The project represents what the BIS Innovation Hub calls “public goods”- foundational technologies that can benefit the entire financial system. As central banks worldwide grapple with how to modernize their payment systems, the synchronization operator model provides a practical and tested approach to achieving interoperability without requiring complex system overhauls.