A collaborative effort between the Bank for International Settlements (BIS) and the central banks of Israel, Norway, and Sweden. The project aimed to study the potential benefits and challenges of using retail central bank digital currencies (CBDC) in international payments was successfully finalized.
The project tested the technical feasibility of conducting cross-border and cross-currency transactions between different experimental retail CBDC systems. It employed a hub-and-spoke model, breaking down a cross-border transaction into two domestic payments, facilitated by a foreign exchange provider active in both domestic systems. This approach means that retail CBDCs never need to leave their own systems.
Project Icebreaker's model allows multiple foreign exchange providers to submit quotes to the system's hub, which then automatically selects the cheapest option for the end user. This competitive setup reduces the risk of insufficient liquidity in the desired currency pair, which can result in higher fees or transaction delays. The hub-and-spoke model also minimizes settlement and counterparty risk by using coordinated payments in central bank money and completes cross-border transactions within seconds.
The project offers a model for countries considering developing a domestic CBDC and extending it to cross-border transactions. It also provides central banks with a deeper understanding of the technologies and technical and policy choices available for implementing retail CBDCs. The project emphasizes scalability, interoperability, and simplicity, requiring minimal technical requirements to integrate domestic systems running on different technologies.
If you want to know more about how to transfer funds through the RTGS system to your accounts with us, please get in contact with our Head of Central Bank Relations Henry Kofi.