BIS Completes Successful Pilot Study on Retail CBDCs for Cross-Border Payments

The Bank for International Settlements (BIS) has just completed a pilot study called “Project Icebreaker” to explore the potential benefits and challenges of using retail central bank digital currencies (CBDCs) in international payments. The project was conducted in collaboration with the central banks of Israel, Norway, and Sweden.

The study aimed to evaluate the technical feasibility of interlinking different domestic CBDC systems and exploring how CBDCs can be used for international retail and remittance payments. It included the development of a “hub” where participating central banks connected their domestic proof-of-concept CBDC systems.

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The results showed that the collaboration successfully explored a “hub-and-spoke solution” to interlink domestic payment systems, breaking down cross-border transactions into two domestic payments, which mitigates the risk of insufficient liquidity in the desired currency pair, and can reduce fees and even delays. The system was also able to complete cross-border transactions within seconds and reduce settlement and counterparty risk.

This pilot study helps provide central banks with a deeper understanding of the technologies that can be used and the technical and policy choices available to them. It also found that minimum technical requirements were needed to enable the integration of domestic systems running on different technologies, and the benefits of doing so include increased scalability, interoperability, and simplicity.

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Project Icebreaker shows how different CBDC solutions in different countries could enable instant cross-currency transactions in a way that would greatly benefit the end users. The project has also been a great example of collaboration and sharing of knowledge between the participating central banks and BIS. Although there are a lot of questions that need to be investigated further, Project Icebreaker is a valuable initiative and contribution to the discussion on how we can improve cross-currency payments.

Aino Bunge, Deputy Governor, Sveriges Riksbank.

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