The Bank for International Settlements (BIS) has finished a joint project exploring international retail and remittance payments use cases for CBDC with the central banks of Israel, Norway and Sweden
Project Icebreaker, the joint CBDC research initiative of the Bank for International Settlements (BIS), the Central Bank of Norway, the Bank of Israel, and Sveriges Riksbank, has successfully finished, revealing important outcomes.
The project has been exploring international retail and remittance payments use cases for CBDCs since September 2022. The study focused on testing specific key functions and the technological feasibility of interlinking different domestic CBDC systems.
In a March 6 report, BIS concluded that a “hub-and-spoke” model between domestic systems could “reduce settlement and counterparty risk by using coordinated payments in central bank money and complete cross-border transactions within seconds.”
However, without implementing such a model, communication between separate CBDC systems may not be standardised via a common interface, making it complex to support and maintain, while also endangering the systems with cyber security risks.
Recently, BIS has launched a similar project with the Bank of France, the Monetary Authority of Singapore and the Swiss National Bank. Project Mariana explored cross-border CBDC trading and settlement using DeFi protocols. Namely, it tested the use of AMMs to automate foreign exchange markets and settlement, potentially improving cross-border payments.
BIS also introduced a new CBDC prototype designed to improve cyber resiliency, scalability and privacy. The project Tourbillion aims to combine technologies such as blind signatures and mix networks with the research on quantum-resistant cryptography to avoid trade-offs between the three elements.
While most central banks in the world are exploring the potential of centralised digital currencies, debates around the concept continue, raising solid arguments against CBDCs.