BIS’s Project Underlines CBDCs Benefits
The Bank for International Settlements (BIS) has released the findings of Project Icebreaker, a cross-border payment model for central bank digital currency (CBDC) developed in collaboration with Israel, Norway, and Sweden’s central banks. According to a March 6th report, the project demonstrated that the “hub-and-spoke” method could benefit both banks and retail customers.
The system divides a cross-border transaction into two domestic payments and uses competitive quotes to obtain the best exchange rate possible, reducing fees and delays. The BIS described it as a “competitive arrangement” that “minimises the risk of insufficient liquidity.”
While the project demonstrated the potential of CBDCs, the report emphasised that implementing the Icebreaker model in the real world would necessitate addressing several technological, policy, and legal issues. Policy considerations could include governance arrangements, the viability of the business model, liquidity provision, privacy, anti-money laundering compliance, and payment initiation-related standards.
(With inputs from Shikha Singh)
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