Central bank digital currencies (CBDCs) are one potential avenue to reduce the cost and delays of cross border payments. There have been several multi-CBDC initiatives, but all have focused on interbank or wholesale CBDC. Today Sveriges Riksbank, the Bank of Israel and Norges Bank launched Project Icebreaker, which aims to interlink the test retail CBDC platforms of each central bank.
“By interlinking our current e-krona platform, developed in a test environment, with the other countries we gain valuable lessons regarding cross-border payments using a CBDC,” said Mithra Sundberg, Head of the E-krona Division at Sweden’s Riskbank. “We also gain better understanding of important design and policy choices needed to secure cross-border functionalities if we decide to issue an e-krona.”
Project Icebreaker intends to enable instant retail CBDC international payments without using the correspondent banking system. Technology, architecture and design choices will be explored alongside policy issues. The experiments will run until the end of this year in association with the new Nordic BIS Innovation Hub.
“Efficient and accessible cross border payments are of extreme 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,” said Bank of Israel Deputy Governor, Andrew Abir.
Wholesale cross border CBDC trials have raised some interesting challenges. To avoid using correspondent banking, a central bank would need to allow foreign banks to access its CBDC. That’s a policy challenge raised by Project Dunbar, a project involving the central banks of Singapore, Malaysia, South Africa and Australia.
If the retail CBDCs are interconnected directly, this could potentially support P2P payments and sidestep that tricky issue.
Another major multi-CBDC project is mBridge involving the central banks of Thailand, Hong Kong, China and the UAE. Project Jura is a cross border payment initiative between the central banks France and Switzerland. And the Banque de France conducted a separte international payments project with the Monetary Authority of Singapore.