The CBDC “Icebreaker” initiative has been completed, according to the Bank for International Settlements
The Bank for International Settlements (BIS) has completed research investigating the benefits and drawbacks of utilizing central bank digital currencies (CBDC) in cross-border transactions with the central banks of Israel, Sweden, and Norway.
According to a March 6 study by the BIS, the ‘Icebreaker’ initiative attempted to assess the technical viability and potential efficacy of cross-border and cross-currency transactions amongst experimental retail CBDC systems.
According to the report, the project involved the collaboration of the BIS Innovation Hub Nordic Center, Bank of Israel, Sveriges Riksbank, and Norges Bank, and it enabled these organizations to gain a better understanding of the underlying technologies and associated policies, thereby promoting scalability, interoperability, and simplicity.
To achieve this objective, the central banks’ project teams tested specific methods of connecting domestic systems (“hub-and-spoke” solutions) by separating cross-border transactions into two domestic payments facilitated by a foreign exchange provider active in both countries. Hence, retail CBDCs never had to leave their systems.
In addition, the BIS emphasized the benefits of this approach in comparison to conventional cross-border payments:
“With the majority of current cross-border payment systems, the payer has no say over the exchange rate since it has no authority over the foreign currency supplier. Under the concept proposed by the Icebreaker project, many foreign exchange providers may submit bids to the system’s hub, which then picks the cheapest one for the end customer.
In addition, the Icebreaker project’s model can mitigate settlement and counterparty risk through coordinated payments in central bank money and conduct international transactions transparently and nearly instantaneously, with minimal technical requirements for integration and technological compatibility.
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