Explore the CBDC factor in Israel, Norway and Sweden
The Bank for International Settlements (BIS) and the central banks of Sweden, Norway and Israel have joined forces to explore the potential applications of central bank digital currencies (CBDCs) for international remittances and retail payments.
The BIS, an organization made up of 61 central banks from around the world, has innovation hubs set up around the world to explore how new financial technologies, such as CBDCs, which are virtualized copies of national currencies, can be used.
The icebreaker project
According to a BIS on 28 September releasethe agreement, called Project Icebreaker, would see the bank’s Innovation Hub Nordic Center evaluate key components and the technical viability of integrating local CBDC systems.
The proof-of-concept CBDC systems from Norway’s Central Bank, Israel’s Bank and Sweden’s Riksbank will be able to be connected to a new hub that the central banks will establish.
According to Beju Shah, head of the Innovation Hub Nordic Center, the project will examine CBDC’s concept and design as well as relevant policy issues.
The project aims to improve cross-border payments via CBDC by lowering costs and increasing speed and transparency, with a final report due in the first quarter of 2023.
Bank of Israel Deputy Governor Andrew Abir said,
“Efficient and accessible cross-border payments are of the utmost importance for a small and open economy like Israel and this was identified as one of the main motivations for the potential issuance of a digital shekel. The results of the project will be very important in guiding our future work with the digital shekel.”
According to BIS, problems with cross-border payments still include high costs, slow speeds, limited access and insufficient transparency.
Additionally, earlier this week, the BIS Innovation Hub announced the success of a study involving many Asian CBDCs that enabled the conversion of more than $22 million in foreign currency.
The International Monetary Fund has argued that CBDCs can lower the cost of international payments. Project Icebreaker will explore low-cost, near-instant CBDC payments across borders. The project’s final report is expected to take place during the first quarter of 2023.
The plans for the CBDC were long in the making
Sweden’s Riksbank, Israel’s Bank and Norway’s central bank have all explored the benefits of implementing their various CBDCs, while China is said to have expanded testing of its digital yuan to more of the country in September.
While President Joe Biden’s executive order in March called on government departments and agencies to study the pros and cons of a CBDC, lawmakers and regulators in the United States have used multiple strategies to examine the digital dollar.