The Bank for International Settlements (BIS) has published a report summarizing the trial of “Project Icebreaker”, which explored the potential benefits and pitfalls of using 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 between different proof-of-concepts based on CBDC (distributed ledger technology).”
Technical Feasibility of Cross-Border Retail CBDC Payments Purportedly Tested in Project Icebreaker Trial
Central bank digital currencies (CBDCs) have been a key focus for the Bank for International Settlements (BIS) of late. BIS recently released a report claiming that the majority of crypto asset investors lost money in the last seven years. The report highlighted that BIS insists that there is an urgent need to regulate the cryptocurrency industry and develop a CBDC.
Following the report, BIS CEO Agustín Carstens stated that crypto assets have already lost the battle against central bank-issued fiat currencies. Carstens also emphasized the need for central banks to take charge of innovation and create a functional CBDC. “If central banks don’t innovate, others will step in,” Carstens warned.
On March 6, 2023, BIS published a report titled “Icebreaker Project: Breaking New Grounds in CBDC Cross-Border Retail Payments.” The BIS study highlights the involvement of the Nordic Center of the BIS Innovation Center and the central banks of Norway, Israel and Sweden in the project. Project Icebreaker aims to connect home CBDC systems using a “hub-and-spoke” model.
In addition, the BIS report emphasizes the need to address the “legal considerations” for the icebreaker center approach. Cecilia Skingsley, director of the BIS Innovation Hub, explained that the Icebreaker Project is “unique in its proposition”.
“First it allows central banks to have almost complete autonomy in the design of a national retail CBDC,” Skinsley saying. “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 improve both privacy and “AML/CFT compliance and monitoring.” The project employed three technologies in each nation state, including Ethereum Quorum in Israel, Hyperledger Besu in Norway, and the Corda network in Sweden.
A CBDC can be custom created, and central banks can still “participate in a formalized interconnection agreement to enable cross-border payments.” Based on the BIS report, the author suggests that central banks should consider integrating conditional settlement and possibly adopting the current messaging and addressing standards in use today.
“If Israel is to issue a digital shekel, it would be very important that we do so in accordance with evolving global standards, so that Israelis can also use it for efficient and accessible cross-border payments,” said Andrew Abir, deputy governor of the Bank of Israel. , it’s a statement. “While there is still a lot of work ahead for the Icebreaker model to become a global standard, the learnings from this successful project have been very important to us and the central banking community,” Abir added.
What do you think about Project Icebreaker, CBDCs and cross-border retail CBDC payments? Share your views on this topic in the comments section below.
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