BIS concludes its retail CBDC payment system study

The Central Bank of the Bahamas was the first central bank to make its CBDC, the Sand Dollar, available to residents in 2020.

The Bank for International Settlements, or BIS, has announced the conclusion of a study researching international retail and remittance payment use cases for central bank digital currencies, or CBDCs, in collaboration with the central banks of Israel, Norway, and Sweden.

The BIS announced on March 6 that it had completed Project Icebreaker, an initiative involving the bank’s Innovation Hub Nordic Center testing key functions and the technological viability of interconnecting domestic CBDC systems via the Central Bank of Norway, the Bank of Israel, and the Sveriges Riksbank.

The BIS stated in its analysis that a hub-and-spoke arrangement connecting domestic systems may “lower settlement and counterparty risk by employing coordinated payments in central bank money and completing cross-border transactions in seconds.”

Without a hub-and-spoke architecture, each retail CBDC or rCBDC system would need its own network and infrastructure configurations in order to interface with other rCBDC systems, according to the research.

“Communication between these rCBDC systems may not be standardized through a common interface; rather, it would be a custom integration between each pair of rCBDC systems.”

Not only would this be difficult to run and maintain, but it might also pose cyber security issues.”

The #BISInnovationHub Nordic Centre and the central banks of Israel, Norway and Sweden have concluded Project Icebreaker, which studied the potential benefits and challenges of using retail #CBDC in international payments @riksbanken @NorgesBank https://t.co/2OfFYaPbr6 pic.twitter.com/jPFjrCXDlT— Bank for International Settlements (@BIS_org) March 6, 2023

If the central banks of Israel, Norway, and Sweden decide to issue a digital shekel, a digital krone, and a digital krona, respectively, this research might provide the framework for an international payment system.

The bank claimed in October 2022 that a CBDC pilot including the central banks of Hong Kong, Thailand, China, and the United Arab Emirates was “successful” following a month-long test that facilitated $22 million in cross-border transactions.

In 2020, the Central Bank of the Bahamas became the first central bank in the world to make the Sand Dollar, a CBDC issued by a central bank, accessible to all island country inhabitants.

Several nations have been conducting large-scale testing of digital currencies, notably China, whose central bank allegedly issued millions of digital yuan for the Chinese New Year.