• The Bank for International Settlements (BIS) has completed a pilot study of the use of central bank digital currencies (CBDCs) for cross-border payments in collaboration with central banks in Norway, Sweden, and Israel.
• The project showed that CBDCs can be used for cross-border payments without leaving their own systems, reducing costs and lowering settlement and counterparty risks.
• Central banks have almost full autonomy when it comes to the design of their own CBDC, while still making them interoperable with other CBDCs for cross-border transactions.

Project Icebreaker

The Bank for International Settlements (BIS) has completed a pilot study of the use of central bank digital currencies (CBDCs) for cross-border payments in collaboration with central banks in Norway, Sweden, and Israel. This project was called Project Icebreaker and aimed to test the technical feasibility of transfers across borders that involve different CBDCs, as well as to understand key technical and policy choices and trade-offs.

Benefits of CBDCs

The results of the study showed that central banks will have almost full autonomy when it comes to the design of their own CBDC, while still making them interoperable with other CBDCs for cross-border transactions. Additionally, this new system can reduce costs and lower settlement and counterparty risks for users. Moreover, it was found that these transfers can be completed in just seconds compared to several days that are usually needed using SWIFT’s commonly used international transfer system.

Comments from Central Banks

Torbjørn Hægeland from Norway’s central bank commented on how this project contributes to an important global effort to improve cross-border payments by adding significant value to his country’s work on an experimental CBDC. Similarly Aino Bunge from Sweden’s central bank praised how this new system could enable instant cross-currency transactions greatly benefiting end users.

G20 Call For Action

This report came after G20 issued a call for action on how to enhance cross-border payments which is what prompted BIS’ pilot study on Project Icebreaker. With its hub-and-spoke model foreign transfers are broken down into two domestic payments facilitated by a foreign exchange provider active at both ends allowing various CBDCs to interact without having to leave their own system.

Conclusion

In conclusion BIS’ Project Icebreaker successfully demonstrated how various countries’ Central Banks Digital Currencies can be used interchangeably across borders greatly benefitting users by reducing costs whilst simultaneously shortening transfer times significantly compared with traditional methods such as SWIFT international transfers.