The Bank for International Settlements (BIS) recently released a report summarizing the results of its “Project Icebreaker” trial, which explored the potential advantages and difficulties of utilizing a retail central bank digital currency (CBDC) in cross-border payments. The experiment was designed to test “the technical feasibility of conducting cross-border – cross-currency transactions between different [distributed ledger technology]-based CBDC proof of concepts.”
Central bank digital currencies (CBDCs) have been a key focus for the Bank for International Settlements (BIS) in recent times. BIS recently published a report asserting that most crypto asset investors lost money over the past seven years. The report highlighted BIS insisting there’s an urgent need for regulating the crypto industry and developing a CBDC.
On March 6, 2023, BIS published a report titled “Project Icebreaker: Breaking New Paths in Cross-Border Retail CBDC Payments.” The BIS study highlights the participation of the BIS Innovation Hub Nordic Centre and central banks in Norway, Israel, and Sweden in the project. Project Icebreaker aims to connect domestic CBDC systems using a “hub-and-spoke” model.
The BIS report emphasizes the need to address “legal considerations” for the Icebreaker hub-type approach. Cecilia Skingsley, the head of BIS Innovation Hub, explained that Project Icebreaker is “unique in its proposition.”
“It first allows central banks to have almost full autonomy in designing a domestic retail CBDC,” Skingsley said. “Then it provides a model for that same CBDC to be used for international payments.
According to the BIS report, implementing Icebreaker in the real world would “require a range of technology” and would need to enhance both privacy and “AML/CFT compliance and monitoring.” The project employed three technologies in each nation state, including Ethereum Quorum in Israel, Hyperledger Besu in Norway, and the Corda network in Sweden.
A CBDC can be created in a custom fashion, and central banks can still “participate in a formalized interlinking arrangement to enable cross-border payments.” According to the BIS report, the author suggests that central banks should consider integrating conditional settlement and possibly adopting the current messaging and addressing standards used today.
Project Icebreaker is an important step in the development of CBDCs and cross-border retail CBDC payments. It is a promising project that could potentially revolutionize the way we make payments and transfer money across borders. The project has the potential to make payments faster, more secure, and more efficient. It is also a great example of how central banks can take charge of innovation and create a functional CBDC.
However, there are still many challenges that need to be addressed before the project can be implemented in the real world. These include legal considerations, technology requirements, and privacy and AML/CFT compliance. It is also important to note that the project is still in its early stages and more research and development is needed before it can be implemented.
What are your thoughts on Project Icebreaker, CBDCs, and cross-border retail CBDC payments? Share your views on this topic in the comments section below.