Project Icebreaker Concludes Experiment for Cross-Border CBDC
The Bank for International Settlements (BIS) has released a report on the "Project Icebreaker" trial, which explored the potential advantages and disadvantages of a retail central bank digital currency (CBDC) in cross-border payments. The experiment was designed to test "the technical feasibility of conducting cross-border, cross-currency transactions based on CBDC proof of concepts."
BIS Successfully Completes the Retail CBDC Pilot
The
central bank digital currencies (CBDCs) has been in the spotlight for the Bank for International Settlements
(BIS) in recent times. BIS recently published a report asserting that most crypto
asset investors lost money over the past seven years. The report highlighted an
urgent need to regulate the crypto industry and develop a CBDC.
The
BIS general manager, Agustin Carstens, stated that crypto assets have already
lost the battle to central bank-issued fiat currencies. Carstens also indicated
the central banks to take charge of innovation and create a
functional CBDC. "If central banks do not innovate, others will step
in," Carstens cautioned.
The BIS published on March 6, 2023, a report titled "Project Icebreaker: Breaking New Paths in Cross-Border Retail CBDC Payments." The BIS study highlights the participation of the BIS Innovation Hub Nordic Centre and central banks in Norway, Israel, and Sweden in the project. Project Icebreaker aims to connect domestic CBDC systems using a "hub-and-spoke" model.
Additionally,
the BIS report suggests the need to address "legal considerations"
for the Icebreaker hub-type approach. Cecilia Skingsley, the head of the BIS
Innovation Hub, explained that Project Icebreaker is "unique in its
proposition."
"It
first allows central banks to have almost full autonomy in designing a domestic
retail CBDC," said Skingsley. "Then it
provides a model for that same CBDC to be used for international payments.
According to the BIS report, implementing Icebreaker in the real world would "require a range of technology" and would need to enhance both privacy and "AML/CFT compliance and monitoring." The project employed three technologies in each nation-state, Ethereum Quorum in Israel, Hyperledger Besu in Norway, and the Corda network in Sweden.
Cross-Border Retail CBDC Payments
A
custom CBDC can be created, and central banks can still "participate in a
formalized interlinking arrangement to enable cross-border payments." The
author of the BIS report has suggested that central banks should consider
integrating conditional settlement and adopting the current messaging and
addressing standards used today.
"If
Israel is to issue a digital shekel, it would be very important that we do it
according to the evolving global standards so that Israelis could also use it
for efficient and accessible cross-border payments," said Andrew Abir, the
deputy governor at the Bank of Israel. "While there is still much work
ahead of us for the Icebreaker model to become a global standard, the learnings
from this successful project have been very important for us and the central
banking community," Abir added.
What
is your take on Project Icebreaker, CBDCs, and cross-border retail CBDC
payments? Please post your comments.
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