The Bank for International Settlements (BIS) and three central banks have announced the conclusion of a joint project looking into the potential pros and cons of using retail CBDCs (central bank digital currencies) for cross-border payments.
Project Icebreaker, which was a joint initiative between BIS and the central banks of Israel, Norway and Sweden, looked into the technical feasibility of carrying out international payments using different experimental retail CBDC systems.
The project was aimed at finding a way to connect payment systems through a “hub-and-spoke” method. The solution works by “interlinking domestic systems through a technical platform that facilitates communication between rCBDC systems,” says the report.
“Each rCBDC [retail CBDC] system needs only to integrate with one external system (the Icebreaker hub), rather than integrating with every other individual rCBDC system,” says the BIS. “The advantage of this model is that it can scale up to support many participating systems without increasing the complexity of the design, given the total number of connections between rCBDC systems that would need to be configured once the network starts growing.”
The BIS says 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 considering implementing retail CBDCs. “The project presupposes very minimum technical requirements so as to be able to integrate domestic systems running on different technologies (as was the case with the proofs-of-concept used by the three central banks), thus promoting scalability, interoperability and simplicity.”
Read the full report here.