Central Bank Digital Currencies (CBDCs) are gaining much traction at the macroeconomic scale. Nations have been very keen on adopting this digital financial system, albeit the main motive behind the raid adoption remains unclear.
In the latest news of CBDC adoption, the central banks of Israel, Norway, and Sweden have entered into a partnership to test out the efficacy of this Digital payment system.
This undertaking between the three nations has been code-named Project Icebreaker. Working with the Bank of International Settlements (BIS), the three nations will explore how CBDCs can be used in international retail and remittance payments.
The main goal of BIS is to help central banks achieve “monetary and financial stability through international cooperation.”
According to a press release by the BIS, cross-border payments continue to suffer ‘high costs, low speed, limited access, and insufficient transparency.” The BIS believes CBDCs could play a crucial role in enhancing cross-border payments.
How Does Project Icebreaker Work?
The project, expected to remain active until the end of the year 2022, is a first-of-its-kind experiment. The project’s architecture is designed to be a hub (Icebreaker Hub) to which the participating countries’ central banks will connect their Proof-of-Concept (PoC) CBDC systems.
Through this experiment, the three nations want to test the critical functions and feasibility of CBDCs in interbank communications, such as in the case of the TradFi darling, SWIFT.
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“This first-of-a-kind experiment will dig deeper into the technology, architecture and design choices and trade-offs, and explore related policy questions. These learnings will be invaluable for central banks thinking about implementing CBDCs for cross-border payments.” – Beju Shah – Head of the BIS Innovation Hub Nordic Centre
“We are delighted to be part of one of the first experimental test of cross border retail CBDC together with our partners BIS Innovation Hub, Sveriges Riksbank and Bank of Israel. This will add significant value to our experimental test of domestic retail CBDC payments.” – Torbjørn Hægeland – Norges Bank’s Executive Director for Financial Stability