The Bank for International Settlements (BIS) and the central banks of Israel, Norway and Sweden are launching Project Icebreaker, a joint exploration of how central bank digital currencies (CBDCs) can be used for international retail and remittance payments.
Cross-border payments are an Achilles heel of the international banking system, which are plagued by high costs, low speed, limited access and insufficient transparency.
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The Bank of Israel observes that the G20 has launched an ambitious program to improve cross-border payments, aiming to achieve faster and cheaper, as well as more transparent and inclusive cross-border payments.
One of the work-streams explores how CBDCs could play a role in enhancing cross-border payments.
Project Icebreaker is a collaboration between the Bank of Israel, Central Bank of Norway, Sveriges Riksbank and BIS Innovation Hub Nordic Centre to develop a “hub” to which participating central banks will connect their domestic proof-of-concept CBDC systems. The objective is to test some specific key functions and the technological feasibility of interlinking different domestic CBDC systems.
The architecture is designed to enable immediate retail CBDC payments across borders, at a significantly lower cost than with existing systems, which are typically based on payments being sent via several different banks to the final recipient (the so-called correspondent banking system).
The project will run through the end of the year, with a final report expected in the first quarter of 2023. This project joins a trial that the Bank of Israel is conducting with the BIS and the Hong Kong Monetary Authority to test the cybersecurity of two-tier retail CBDC.
Bank of Israel Deputy Governor Andrew Abir said, “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 a potential issuance of a digital shekel. We are privileged to be exploring the topic in this project together with partners that have vast knowledge and experience on CBDCs as well as on cross-border payment policies. The results of the project will be very important in guiding our future work on the digital shekel.”
Published by Globes, Israel business news – en.globes.co.il – on September 28, 2022.
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