At Tel Aviv FinTech Week 2023, Yoav Soffer, Advisor to the Lieutenant Governor of the Bank of Israel, addressed the topic of central bank digital currencies (CBDCs) as an efficient cross-border payment option.
The talk comes after the Bank for International Settlements (BIS) concluded its investigation into international remittance and retail payments via CBDCs between the central banks of Israel, Norway and Sweden. the BIS project it is called “Project Icebreaker”.
Soffer, who is also a project manager for the CBDC program for the Central Bank of Israel, said that while domestic payments in Israel have become “very easy, convenient and cheap,” the same is not true for payments outside the country.
“Cross-border payments are often perceived to face challenges of high costs, slow speed, limited access, and insufficient transparency according to the financial stability board.”
Soffer referred to the result of an example transaction that took less than two minutes. In addition, he stressed that this model would significantly reduce the costs of sending funds internationally and is “much more competitive in terms of currency transactions.”
He went on to say that the technology requirements for countries to join the model are very limited and once a prototype is built, onboarding should essentially be a ripple effect.
“Once you build it for three countries, you could build it for 180 countries. Therefore, it is also very scalable.”
However, he said that when employing such a program, ways to provide liquidity to CBDC providers should be considered, as well as policy integration. Soffer said that privacy is another important consideration that the BIS team was aware of during the project.
Related: SWIFT moves to next phase of CBDC testing after positive results
Despite more than a hundred countries exploring the possibilities of CBDCs, the sentiment around these centralized digital currencies is mixed. They have useful capabilities, such as efficient cross-border transactions, although some say they could threaten the future of consumers.
Former CFTC Chairman Christopher Giancarlo recently emphasized that CBDCs should protect privacy and not be a surveillance tool as many fear. A US congressman, Tom Emmer, also commented that they could be ‘easily weaponized’ to spy on US citizens.
