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The Bank for International Settlements (BIS) and the central banks of Sweden, Norway, and Israel have joined forces to investigate the potential applications of central bank digital currency (CBDC) for international remittance and retail payments. The BIS, an organization of 61 central banks from around the world, has innovation hubs set up worldwide to examine how new financial technology, such as CBDCs, virtualized copies of national currencies, can be employed.
Test Use of Retail CBDC
The Nordic Centre at the BIS Innovation Hub is a part of the new collaboration known as Project Icebreaker. According to a press release, it would test critical features and technical aspects of connecting various domestic CBDC systems.
"This first-of-a-kind experiment will dig deeper into the technology, architecture, and design choices and trade-offs and explore related policy questions," said Beju Shah, head of the BIS Innovation Hub Nordic Centre. "These learnings will be invaluable for central banks thinking about implementing CBDCs for cross-border payments."
Cross-Border Payments
According to BIS, cross-border payments remain plagued by high costs, slow speeds, restricted access, and a lack of transparency. According to the International Monetary Fund (IMF), CBDCs could lower international payment costs. Earlier this week, the BIS Innovation Hub reported completing a project involving numerous Asian CBDCs that enabled the exchange of nearly $22 million in foreign currency. Project Icebreaker would explore low-cost, instantaneous retail CBDC payments across borders. The project's final report is anticipated in the first quarter of 2023.