Retail digital currencies in cross-border deals won't hit central bank autonomy

A project to test cross-border payments using retail central bank digital currencies indicates that the regulators can retain nearly full autonomy, the Bank for International Settlements said in a statement on March 6.

“Project Icebreaker is unique in its proposition. It first allows central banks to have almost full autonomy in designing a domestic retail CBDC. Then it provides a model for that same CBDC to be used for international payments,” said Cecilia Skingsley, Head of the BIS Innovation Hub.

The project was a collaboration between the Bank of Israel, Norges Bank, Sveriges Riksbank and the BIS Innovation Hub Nordic Centre. It tested the technical feasibility of conducting cross-border and cross-currency transactions between different experimental retail CBDC systems.

Many central banks, including India, are exploring retail central bank digital currencies.

The requirements for interlinking these retail CBDC systems to support cross-border payments should be considered at the outset so that cross-border payments can be enabled when appropriate, according to the BIS statement.

Project Icebreaker explores a specific way to interlink retail CBDC systems with several additional features that would allow the model to be readily scaled up.

In addition, these features would promote simplicity and interoperability, reduce settlement risk, and foster competition and transparency for cross-border retail CBDC payments, it added.