Bank of England and BIS launch Project Meridian FX to test synchronised settlements

The Bank of England, in collaboration with the Eurosystem and the London Centres of the BIS Innovation Hub, has embarked on an ambitious initiative known as Project Meridian FX. This project aims to transform the landscape of foreign exchange (FX) transactions by leveraging the concept of the synchronisation operator (SO) developed in the initial Meridian project. The primary goal is to explore the SO’s applicability across various assets and technologies, thereby addressing longstanding challenges in FX trade settlements.

One of the key objectives of Project Meridian FX is to enhance interoperability between real-time gross settlement (RTGS) systems and emerging payment technologies such as distributed ledger technology (DLT). By doing so, the project seeks to unlock more efficient settlement services using central bank money. The synchronisation model, central to this initiative, promises to reduce liquidity needs for participants and offer innovative solutions to the costs, risks, and time inefficiencies associated with cross-border FX transactions.

The project will conduct experiments towards the end of 2024, connecting the SO to different RTGS systems and DLT-based platforms. These experiments will test the SO’s ability to facilitate seamless payment versus payment (PvP) FX transactions, thereby providing valuable insights into the future of wholesale settlement solutions.

FX trade settlements have historically been plagued by high costs, significant risks, and time-consuming processes, especially in cross-border transactions. Project Meridian FX aims to tackle these issues head-on by building on the technology behind the SO. The project will connect two RTGS systems based in different jurisdictions and also link an RTGS system with a DLT-based settlement platform. This dual approach will test the SO’s capability to support interoperability between existing and new ledger technologies.

The experiments will involve connecting the SO to three solutions being explored as part of the Eurosystem’s broader exploratory work on wholesale settlement:

• the Trigger Solution developed by Deutsche Bundesbank
• the TIPS Hash-Link developed by Banca d’Italia
• the DL3S DLT Interoperability Solution developed by the Banque de France

The findings from these experiments are anticipated to be published in Spring 2025, offering a comprehensive overview of the project’s impact on FX settlements.

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