(Kitco News) - The Bank for International Settlements (BIS) has announced the launch of Project Icebreaker, a joint exploration with the central banks of Israel, Norway and Sweden on how central bank digital currencies (CBDCs) can be used for international retail and remittance payments.
Through Project Icebreaker, the three central banks and the BIS Innovation Hub Nordic Centre will collaborate to “develop a ‘hub’ to which participating central banks will connect their domestic proof-of-concept CBDC systems,” the BIS said.
The overall objective of the project is to test some of the key functions of CBDCs and evaluate the technical feasibility of interlinking different domestic CBDC systems.
According to the BIS, the new system is designed to enable the immediate use of retail CBDC payments for cross-border transactions for significantly lower costs compared to those incurred with the current correspondent banking system.
The #BISInnovationHub Nordic Centre, @riksbanken @NorgesBank and Bank of Israel are launching Project Icebreaker to explore how #CBDCs can be used for international retail and remittance payments using a hub-and-spoke model. Read more: https://t.co/1aRTCtJprM pic.twitter.com/CR1tCdAh1j
— Bank for International Settlements (@BIS_org) September 28, 2022
Beju Shah, the head of the Innovation Hub Nordic Centre, said the “first-of-a-kind experiment” will explore CBDC designs and architecture, as well as related policy concerns. “These learnings will be invaluable for central banks thinking about implementing CBDCs for cross-border payments,” Shah stated.
These statements were echoed by Mithra Sundberg, Head of the E-krona Division of Sveriges Riksbank, who said the project will provide “valuable lessons regarding cross-border payments using a CBDC,” allowing the bank to gain a “better understanding of important design and policy choices needed to secure cross-border functionalities if we decide to issue an e-krona.
Andrew Abir, Deputy Governor of Bank of Israel, cited the country’s “small and open economy” as the reason that efficient and accessible cross-border payments are of critical importance, which is the country’s main motivation for potentially issuing a digital shekel.
“The results of the project will be very important in guiding our future work on the digital shekel,”
Abir said.
The final report for Project Icebreaker is expected in Q1 2023.
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| Bank of International Settlements concludes a ‘successful' CBDC trial |
This announcement from the BIS follows its recent report on the successful completion of a month-long CBDC pilot project involving the central banks of Hong Kong, Thailand, China and the United Arab Emirates.
CBDCs have been receiving a lot more coverage in the press in 2022 as multiple central banks from around the world are in various stages of testing out their own versions of digital fiat. Australia, Singapore, Malaysia and South Africa have also announced a joint initiative to test international settlements using central bank digital currencies (CBDC).
