The Bank for International Settlements, or BIS, has reported it has concluded a project exploring international retail and remittance payments use cases for central bank digital currencies, or CBDCs, with the central banks of Israel, Norway and Sweden.
In a March 6 report, the BIS said it had finished Project Icebreaker, an initiative involving the bank’s Innovation Hub Nordic Centre testing key functions and the technological feasibility of interlinking domestic CBDC systems through the Central Bank of Norway, the Bank of Israel, and Sveriges Riksbank. According to the report, the BIS concluded that a ‘hub-and-spoke’ model between domestic systems could “reduce settlement and counterparty risk by using coordinated payments in central bank money and complete cross-border transactions within seconds”.
“Without a hub-and-spoke approach, each [retail CBDC, or rCBDC] system would need to make individual specific network and infrastructure configurations to communicate with other rCBDC systems,” said the report. “Communication between these rCBDC systems may not be standardised via a common interface and would instead be a bespoke integration between each pair of rCBDC systems. This would be not only complex to support and maintain but could also introduce cyber security risks.”
The #BISInnovationHub Nordic Centre and the central banks of Israel, Norway and Sweden have concluded Project Icebreaker, which studied the potential benefits and challenges of using retail #CBDC in international payments @riksbanken @NorgesBank https://t.co/2OfFYaPbr6 pic.twitter.com/jPFjrCXDlT
— Bank for International Settlements (@BIS_org) March 6, 2023
The report could provide the groundwork for a cross-border payment system should the central banks of Israel, Norway and Sweden move forward with issuing a digital shekel, digital krone, and digital krona, respectively. In October 2022, the bank reported that a CBDC pilot involving the central banks of Hong Kong, Thailand, China and the United Arab Emirates was “successful” after a month-long test facilitating $22 million worth of cross-border transactions.
Related: Some central banks have dropped out of the digital currency race
In 2020, the Central Bank of the Bahamas became the first in the world to make a central bank-issued CBDC called the Sand Dollar available to all residents of the island nation. Other countries have been moving forward on large-scale trials of digital currencies, including China — the nation’s central bank reportedly distributed millions of digital yuan over the Lunar New Year holidays.
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