BIS Completes Project Icebreaker for Cross-Border CBDC Implementation

Introduction to Project Icebreaker

The Bank of International Settlements (BIS) has successfully concluded Project Icebreaker, a significant trial aimed at advancing cross-border retail Central Bank Digital Currencies (CBDCs). Collaborating with the central banks of Israel, Norway, and Sweden, this initiative tested the technical feasibility of executing cross-currency transactions across diverse retail CBDC systems.

Redefining Cross-Border Transactions

Project Icebreaker introduces a novel approach to cross-border transactions by splitting them into two domestic payments. This method leverages a foreign exchange provider active in both domestic systems to facilitate transactions without requiring retail CBDCs to exit their systems. This innovative structure is set to redefine how exchange rates are determined in cross-border transactions.

Competitive Exchange Rates and Liquidity

The project's model offers significant advantages by allowing multiple foreign exchange providers to submit competitive quotes, ensuring that the cheapest rates are automatically selected for end users. This approach not only mitigates liquidity risks but also promotes lower transaction fees and faster processing times.

Bridge Currencies for Enhanced Flexibility

To address situations where direct transactions between specific end currencies are unavailable, the project proposes the use of bridge currencies. This flexibility ensures that cross-border transactions remain seamless and efficient, further enhancing the potential of CBDCs in international payments.

Autonomy and International Integration

A key highlight of Project Icebreaker is its unique proposition that allows central banks to maintain autonomy in designing their domestic retail CBDCs while simultaneously providing a framework for these currencies to be used in international payments. This dual approach underscores the project's innovative potential in transforming global financial systems.

In conclusion, Project Icebreaker marks a significant milestone in the exploration of cross-border retail CBDCs, paving the way for more efficient and competitive international payment systems.