Sweden, Norway and Israel cooperate on the central banks’ digital currencies
A “first-of-a-kind experiment” between several central banks will test the feasibility of digital currencies for cross-border payments.
The central banks of Sweden, Norway and Israel have joined together with the Bank of International Settlements (BIS) to test central bank digital currencies (CBDC) for cross-border remittances and retail payments.
Known as Project Icebreaker, the experiment aims to develop a hub to which participating central banks can connect their proof-of-concept CBDC systems to test key features and the feasibility of the technology.
Sweden’s Sveriges Riksbank collaborates with Norges Bank, Israels Bank and BIS Innovation Hub Nordic Center in the project.
Cross-border payments are often associated with high costs, low speed, limited access and insufficient transparency. Project Icebreaker aims to enable instant cross-border retail and remittance payments using CBDC systems at a significantly lower cost than existing systems, which typically involve making payments through multiple banks.
As Sweden becomes increasingly cashless, Sweden’s Riksbank is currently investigating the possibility of issuing a CBDC called the e-krona.
“Sveriges Riksbank is collaborating in this experiment as part of the e-krona project,” says Mithra Sundberg, head of the e-krona department at Sveriges Riksbank.
“By linking our current e-krona platform, developed in a test environment, with the other countries, we gain valuable lessons about cross-border payments with a CBDC. We also gain a better understanding of key design and policy choices needed to secure cross-border functionality if we decide to issue an e-krona.”
The e-krona is not the only digital currency concept that could benefit from Project Icebreaker.
“The results of the project will be very important in guiding our future work on the digital shekel,” Bank of Israel Deputy Governor Andrew Abir said.
“Efficient and accessible cross-border payments are of utmost importance for a small and open economy like Israel and this was identified as one of the main motivations for a potential issuance of a digital shekel.”
Project Icebreaker will run until the end of the year with a final report expected in the first quarter of 2023.
“This experiment will primarily delve deeper into technology, architecture and design choices and trade-offs, and explore related policy issues,” said Beju Shah, director of the BIS Innovation Hub Nordic Centre.
“These lessons will be invaluable to central banks considering implementing CBDCs for cross-border payments.”
European finance chief Mairead McGuinness said earlier this year that a bill to introduce a digital euro could be tabled in the EU early next year. Meanwhile, US President Joe Biden signed an executive order with a plan for digital assets in the country, including the potential for a digital dollar.
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