- Central banks collaborate with the BIS for project Icebreaker.
- Head of BIS says these learnings will be invaluable to banks trying to implement CBDC for cross-border payments.
- The architecture will support retail CBDC payments across borders at lower cost.
The central bank of Israel, Sweden (Sveriges Riksbank), and Norway along with the Bank for International Settlements (BIS) are launching a pilot project named Icebreaker. The project will experiment with how central bank digital currencies could be used for international retail and remittance payments.
Commenting on the invaluable insights that the project will garner, the Head of the BIS Innovation Hub Nordic Centre, Beju Shah said:
This first-of-a-kind experiment will dig deeper into the technology, architecture and design choices and trade-offs, and explore related policy questions. These learnings will be invaluable for central banks thinking about implementing CBDCs for cross-border payments.
The joint exploration will address the pain points involved with cross-border payment, high cost, low speed, limited access, and insufficient transparency.
As per the BIS website, the project will test the functionality and technological feasibility of interlinking with different domestic CBDC systems. This testing will play a vital role as the trio of banks with the BIS have planned to develop a “hub” to which participating central banks will connect their domestic proof-of-concept CBDC system.
Ultimately, the architecture design will enable immediate retail CBDC payments across borders, at a significantly lower cost than with existing systems, where payments as of now are being sent via several different banks to the final recipient.
The Deputy Governor of the Bank of Israel, Andrew Abir, considered his country to be privileged to explore this sector with expert partners. Furthermore, he added:
Efficient and accessible cross-border payments are of extreme importance for a small and open economy like Israel and this was identified as one of the main motivations for potential issuance of a digital shekel.
Torbjørn Hægeland, Norges Bank’s Executive Director for Financial Stability expressed his delight to be a part of this project and Mithra Sundberg, Head of the E-krona Division said that they gain a better understanding of important design and policy choices needed to secure cross-border functionalities.
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