1. Project Meridian FX links two kinds of settlement
The Bank of England said on Friday, November 13, that Project Meridian FX APAC, a joint experiment with the central banks of Singapore and Thailand, showed cross-border foreign exchange transactions can be coordinated across conventional settlement systems and blockchain-based ones. Participants did not need to run identical infrastructure for the trades to settle safely.
The result goes to the heart of a long-standing problem in currency markets. When two parties swap one currency for another across borders, each side typically pays through its own domestic system, and those systems rarely talk to each other directly. Project Meridian FX set out to show that a coordinating layer can tie the two payments together even when one leg runs on traditional rails and the other on distributed ledger technology.
The experiment comes as stablecoins gain ground as an alternative route for moving money between countries, putting pressure on central banks to show that the official infrastructure can become faster, safer and more efficient.
2. Who took part
The project brought together the Bank of England with its counterparts in Singapore and Thailand, the Monetary Authority of Singapore and the Bank of Thailand. The three institutions represent financial systems in different regions and with different technical setups, which made them a useful test group for a system meant to work without forcing everyone onto the same platform.
The APAC label in the project's name reflects its focus on connections between the United Kingdom and the Asia-Pacific region, where Singapore and Thailand both operate active currency markets. Trades between the pound and Asian currencies can cross several time zones and pass through multiple intermediaries, which is exactly the kind of flow that settlement coordination aims to simplify.
3. Why currency settlement is such a big deal
Foreign exchange is the largest financial market in the world by turnover, and it underpins almost every form of international activity. Importers paying overseas suppliers, companies repatriating profits, investors buying foreign bonds and banks managing their own balance sheets all depend on the ability to convert one currency into another reliably.
Because the market is so large, even small improvements in how trades settle can have a meaningful effect on the overall level of risk in the financial system. A failure in one large currency transaction can spread to other institutions that were expecting to receive funds, which is why central banks treat settlement safety as a core part of financial stability.
Cross-border trades are especially demanding because they involve at least two currencies, two sets of payment rules and often two different time zones. Each of those differences creates a window in which one side of a trade can complete while the other is still pending. Closing that window, without making the process slower or more expensive, is the central objective behind synchronised settlement.
4. What is payment-versus-payment settlement?
Payment-versus-payment, or PvP, is a settlement method in which one currency changes hands only if the matching payment in the other currency also takes place. Neither side can end up having paid without being paid. Project Meridian FX APAC tested this safeguard across the linked systems.
The need for PvP comes from what is often called settlement risk or principal risk. In a currency trade without PvP, one bank may send its side of the transaction and then discover that its counterparty has failed to deliver, leaving it exposed to the full value of the trade rather than just the difference in price. Because foreign exchange transactions are often very large, this risk can be significant.
The classic illustration in banking history is the 1974 collapse of the German lender Bankhaus Herstatt, which was closed after receiving payments in one currency but before completing its matching payments in another. Its counterparties were left with losses, and the episode gave its name to Herstatt risk, the term still used for this type of exposure.
PvP arrangements already exist for major currencies within established systems, but extending the principle to a world in which some payments travel on blockchain networks and others on conventional central bank systems is a newer challenge. That is the gap Project Meridian FX was designed to address.
5. How synchronised settlement works
The idea at the center of the project is synchronisation. Rather than requiring every participant to move onto a single shared platform, a synchronisation mechanism coordinates the timing of separate transfers so that they complete together or not at all.
In practice, the coordinating layer checks that both legs of a trade are ready, holds them in a conditional state, and then instructs each settlement system to finalize its leg at the same moment. If one side cannot proceed, the other is released, and no money leaves either account.
This approach allows a payment recorded on a central bank's conventional real-time gross settlement system to be linked with a transfer on a blockchain-based network. The two systems remain independent, each governed by its own rules, but they act as one when it comes to completing a trade.
The significance of the Meridian result is that participants did not need identical infrastructure. Central banks are unlikely to rebuild their core systems around a single technology, so a mechanism that can bridge different architectures is more realistic than one that asks everyone to adopt the same platform.
6. Netting to cut liquidity needs
Alongside PvP, the experiment tested multilateral netting. Under this method, banks offset their payment obligations against each other instead of settling every transaction one by one.
Consider a group of banks that trade currencies with each other throughout the day. Without netting, each bank must fund every individual payment in full. With multilateral netting, the obligations are added up across all participants, and each bank only needs to pay or receive its net position at the end. The amount of money that actually has to move can fall sharply.
Lower settlement volumes mean lower liquidity needs. Banks can keep less cash idle to meet payment obligations, which frees funds for other uses and reduces the cost of participating in currency markets. Combining netting with PvP protection aims to deliver both safety and efficiency at the same time.
7. Why stablecoins are raising the stakes
Stablecoins, digital tokens designed to hold a steady value against a currency such as the US dollar, are increasingly offered as an alternative to conventional cross-border payments. Their supporters point to faster transfers and round-the-clock availability, since blockchain networks do not close at weekends or outside business hours.
Traditional cross-border payments, by contrast, often pass through a chain of correspondent banks and depend on the operating hours of domestic settlement systems in each country. That can make them slower and more expensive, and it leaves room for settlement risk when the two legs of a currency trade are processed at different times.
Projects such as Meridian FX represent one way for central banks to respond. Rather than leaving the field to private stablecoin issuers, they are working to make the existing public infrastructure more interoperable with newer technologies, so that the safety of central bank money can extend into environments where blockchain-based assets circulate.
8. What the experiment means for commercial banks
For commercial banks, the practical promise of the Meridian approach is the ability to settle currency trades with less risk and less idle cash, without having to abandon the systems they already use. A bank connected to a conventional central bank system could, in principle, complete a trade with a counterparty using a blockchain-based platform, with both legs protected by the same PvP safeguard.
That flexibility matters because financial institutions are moving at different speeds when it comes to tokenized money and digital assets. Some are experimenting actively with blockchain-based settlement, while others remain fully reliant on traditional infrastructure. A coordination layer that accommodates both groups avoids splitting the market into separate pools of liquidity that cannot easily interact.
The combination of PvP and multilateral netting also addresses two different costs at once. PvP removes the danger of paying without being paid, while netting reduces how much funding banks must hold to settle their trades. Together, they target the safety and the efficiency of cross-border settlement rather than trading one off against the other.
9. What the Bank of England said
Tom Mutton, the Bank of England's executive director for payments, innovation and fintech, said the project provides practical evidence of how synchronised settlement could help reduce risk and improve efficiency in cross-border foreign exchange.
His emphasis on practical evidence reflects the stage the work has reached. Central banks have discussed synchronisation and interoperability for several years, and Meridian FX APAC moves the conversation from theory toward demonstrated capability across real institutional boundaries.
10. What happens next for synchronisation?
The Bank of England plans to introduce a live synchronisation interface in 2028. That would turn the concept tested in the experiment into a working feature of the UK's payment infrastructure.
The central bank was clear that commercial use is not imminent. Further work is needed on legal arrangements, regulatory oversight and broader participation before the system can be deployed for live cross-border trades.
Each of those areas presents its own hurdles. Legal arrangements must define when a payment is final in each jurisdiction and how failures are handled. Oversight must clarify which authorities supervise a mechanism that spans several countries and technologies. Broader participation requires more central banks, commercial banks and settlement operators to connect, since the benefits of netting and coordination grow with the number of participants.
For now, Project Meridian FX APAC stands as a demonstration that the technical pieces can work together. Whether the approach becomes a standard feature of cross-border finance will depend on how quickly the legal and institutional groundwork catches up with the technology, with 2028 set as the Bank of England's own milestone.