The Bank of Japan is joining six other central banks to test what could be the future of money. The group is trying to smooth banking transactions by using digital currencies.

The Swiss-based Bank for International Settlements announced the test on Wednesday. It will involve the Federal Reserve Bank of New York as well as private institutions.

The group will test digital currencies backed by central banks, known as CBDCs. The aim is to use them for transactions between central banks and private financial institutions. The program will also examine cross-border payments between banks.

Currently, payments for trades mainly use the international settlement network called SWIFT. But transactions on the system take time and come with high fees.

CBDCs are seen as a way of speeding up cross-border settlements while lowering costs. They could also help prevent money laundering.

The test comes as China is believed to be one step ahead with its digital yuan.