Project Sela, Pioneering Collaboration for CBDC Innovation

Project Sela, Pioneering Collaboration for CBDC Innovation

Project Sela, Pioneering Collaboration for CBDC Innovation

The Hong Kong Monetary Authority (HKMA), the Bank of Israel (BOI), and the Bank of International Settlements Innovation Hub (BISIH) Hong Kong Center are collaborating to test a central bank digital currency (CBDC).

This initiative, known as Project Sela, seeks to develop an efficient, accessible, and secure CBDC (rCBDC) ecosystem that prioritizes privacy and cybersecurity. One of the primary focuses of Project Sela is determining how private sector tasks should be divided.

The initiative envisions a structure in which the central bank oversees the ledger and provides accounts to end users, while sector intermediaries manage customer-facing services and compliance.

According to those with knowledge of the situation, this novel arrangement will foster innovation, competition, and improved service access.

Legal analysis has verified the viability of introducing a new category of service providers known as “Access Enablers” (AEs) in implementing the proposed framework for Project Sela.

These specialized companies manage customer interactions but do not directly retain or control the digital currency. This arrangement eliminates credit risk since all transactions are settled directly on the balance sheet of the central bank, which retains ultimate responsibility for the currency.

This arrangement relaxes requirements for AEs, which could lead to a greater variety of payment service providers and stimulate market competition.

Project Sela’s emphasis on cybersecurity originates from the realization that increased accessibility may pose risks. Utilizing Israel’s expertise in cybersecurity and learning from Hong Kong initiatives, the objective is to ensure that security is not compromised while accessibility is improved.

Technological Foundation The backbone of Project Sela was created in collaboration with sector service providers such as FIS and M10 Networks.

This endeavor establishes a foundation by utilizing the lessons learned from Project Aurum in Hong Kong and Israel’s work on its digital shekel.

Collaborations such as Project Sela are laying the groundwork for the future as central banks around the world navigate the transition to CBDCs.

This collaboration between Hong Kong and Israel could revolutionize their financial systems and serve as a model for CBDCs worldwide if it strikes a balance between innovation and security and considers public responsibilities alongside private enterprise.

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