The Bank for International Settlements (BIS) reports that it has completed a project with the central banks of Israel, Norway and Sweden exploring international retail and remittance payment use cases for central bank digital currencies (CBDC).
In a report on March 6, the BIS said it had completed an ice-breaking project involving the bank's innovation hub, the Nordic Centre, which tested key features as well as a joint venture with Norges Bank, the Bank of Israel and the Riksbank. . According to the report, the BIS concluded that a "hub-and-spoke" model between domestic systems could "reduce settlement and counterparty risk by coordinating payments using central bank currency and completing cross-border transactions within seconds."
“Without a hub-and-spoke approach, each [retail CBDC or rCBDC] system would require separate, specific network and infrastructure configurations to communicate with other rCBDC systems,” the report said. “Communications between these rCBDC systems may There will be no standardization through common interfaces, but bespoke integrations between each pair of rCBDC systems. Not only will this be complex to support and maintain, but it may also pose cybersecurity risks.”
The report could lay the groundwork for cross-border payment systems if the central banks of Israel, Norway and Sweden issue digital shekels, digital krona and digital krona, respectively. In October, the bank reported a “successful” CBDC pilot involving the central banks of Hong Kong, Thailand, China and the United Arab Emirates after a month-long test facilitated $22 million worth of cross-border transactions.
In 2020, the Central Bank of the Bahamas became the first bank in the world to offer a central bank-issued CBDC (Sand Dollar) to all residents of the island nation. Other countries, including China, have been pushing ahead with large-scale trials of digital currencies, with China's central bank reportedly handing out millions of yuan worth of digital currency over the Lunar New Year holiday.
