Bank for International Settlements (BIS) completes successful pilot of cross-border retail CBDC payments
The Bank for International Settlements (BIS) has announced the successful completion of Project Icebreaker, a pilot retail central bank digital currency (CBDC) study that focused on the potential benefits and challenges of using retail CBDCs in international payments.
The project was a collaboration between the BIS Innovation Hub Nordic Centre, Bank of Israel, Norges Bank, and Sveriges Riksbank, and it tested the technical feasibility of conducting cross-border and cross-currency transactions between different experimental retail CBDC systems.
One of the key objectives of Project Icebreaker was to develop a hub-and-spoke model to interlink domestic systems, allowing for cross-border transactions to be broken down into two domestic payments, facilitated by a foreign exchange provider active in both domestic systems.
The project demonstrated that this model could reduce settlement and counterparty risk by using coordinated payments in central bank money and complete cross-border transactions within seconds. It also found that using bridge currencies if transactions between two specific end currencies are unavailable, or not favourable, promotes competition among foreign exchange providers.
The outcome of Project Icebreaker provides a deeper understanding of the technologies that can be used and the technical and policy choices available for central banks contemplating the implementation of retail CBDCs. It also provides a model for extending them and innovative services into cross-border transactions. Project Icebreaker is unique in its proposition, as it allows central banks to have almost full autonomy in designing a domestic retail CBDC and provides a model for that same CBDC to be used for international payments.
The success of Project Icebreaker is a significant step forward in the development of CBDCs for international payments. While there is still much work to be done for the Icebreaker model to become a global standard, the learnings from this successful project have been very important for the central banking community.
The project has also been a great example of collaboration and sharing of knowledge between the participating central banks and the BIS. Overall, the project has contributed significantly to the important global effort to improve cross-border payments.
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