CBDCs has been on the radar for most cryptocurrency enthusiasts and you may not know this, but, CBDC are actually a very big thing for financial insitutional globally.
As of today, there are several private companies working round the clock trying to get governments to testrun CBDC projects as a way to digitalize their currency.
But, there is a giant behind the global push for CBDC initiative, that giant is known as the BIS (Bank for International Settlements).
So, What is BIS (Bank for International Settlements)?
The Bank for International Settlements (BIS) is an organization that promotes global monetary and financial stability through international cooperation. It is involved in research related to financial and monetary matters, provides important statistics in these areas, and has a key role in banking supervision worldwide.
Additionally, the BIS Innovation Hub focuses on developing technological solutions to support central banks and enhance the financial system's functioning.
Fun Fact: The man in the middle of the BIS Homepage as shown above is BIS Chief, Agustin Carstens. Who also says 'A technology doesn’t make for trusted money' and also 'My message to young people: stop trying to create money'.
What is BIS (Bank for International Settlements) Take on CBDC?
The Bank for International Settlements (BIS) plays a pivotal role in advancing Central Bank Digital Currency (CBDC) projects globally. It facilitates collaboration among central banks to explore and develop digital currencies.
The BIS Innovation Hub spearheads research and development in this area, focusing on technological innovation in the financial sector. Through these efforts, the BIS aims to enhance the efficiency and security of payment systems worldwide.
The BIS's research focuses on the potential benefits and risks of CBDCs, their impact on the global financial system, and the technological innovations required for their implementation.
The history of BIS's engagement with CBDCs reflects a growing interest in digital currencies by central banks worldwide, driven by the need for secure, efficient, and inclusive payment systems.
G7 and G20 Countries' CBDC Progress
While nearly every G20 country has made significant progress, the G7 nations show varied developments:
- United States: Retail CBDC progress has stalled, but advancing in wholesale (bank-to-bank) CBDC, particularly following Russia’s invasion of Ukraine.
- Other G7 Banks: Including the Bank of England and the Bank of Japan, are developing CBDC prototypes and engaging in consultations on privacy and financial stability.
Wholesale CBDC Developments
Since the geopolitical developments and G7 sanctions in response to Russia's actions, there has been a notable increase in wholesale CBDC projects:
|Number of Projects
|12 cross-border wholesale CBDC projects
|Impact of Geopolitical Developments
|Doubling of wholesale CBDC developments post-G7 sanctions
With all of that being said, most of them are managed or spearheaded by BIS. So, let's get to it.
The Complete List of CBDC Projects under BIS (Bank for International Settlements)
Now that we understand who is BIS and their involvement in driving CBDC initiative globally, here are the projects that are spearheaded or supported by BIS:
#1: Project Dunbar
Project Dunbar is an initiative led by the BIS Innovation Hub in partnership with several central banks. Its objective is to develop prototypes for a shared platform that enables international settlements using digital currencies issued by multiple central banks (multi-CBDCs).
This platform is designed to facilitate direct cross-border transactions between financial institutions in different currencies, potentially reducing costs and increasing speed.
The project addresses challenges in implementing a multi-CBDC platform and proposes practical solutions, contributing to the G20 roadmap for enhancing cross-border payments.
#2: Project Sela
Project Sela, conducted by the Bank for International Settlements (BIS) in collaboration with the central banks of Hong Kong and Israel, explores the feasibility of a retail central bank digital currency (rCBDC) ecosystem.
It aims to combine accessibility, competition, and advanced cybersecurity while retaining the advantages of physical cash. The project introduces a new intermediary, the "Access Enabler," to reduce liquidity and settlement risks, and operating costs, enhancing the rCBDC ecosystem.
This experiment contributes valuable insights into the cyber security, technological, legal, and policy aspects of retail CBDC implementation, helping to inform ongoing CBDC explorations globally.
#3: Project Icebreaker
Project Icebreaker is a collaboration between the BIS Innovation Hub and the central banks of Israel, Norway, and Sweden, focusing on the use of retail CBDCs in international payments.
It explores a hub-and-spoke solution, where a cross-border transaction is split into two domestic payments, facilitated by a foreign exchange provider active in both systems. This model enables competition among foreign exchange providers, potentially reducing fees and transaction times.
Project Icebreaker contributes to understanding the technologies and policy choices for retail CBDCs, emphasizing interoperability, scalability, and simplicity in integrating domestic systems with different technologies.
#4: Project Mariana
Project Mariana, led by the BIS Innovation Hub and the central banks of France, Singapore, and Switzerland, focuses on the use of automated market makers (AMMs) for cross-border wholesale CBDC transactions.
This project explores the potential of DeFi technologies to improve cross-border payments, aiming to enhance efficiency, reduce costs, and increase speed.
The successful testing of AMMs for foreign exchange and cross-border payments in a wholesale CBDC environment underlines its significance in advancing CBDC initiatives.
#5: Project Jura
Project Jura, a collaboration between Banque de France, Swiss National Bank, and the BIS Innovation Hub, explores the potential of wholesale CBDCs (wCBDCs) for cross-border settlements.
It focuses on testing DvP (Delivery versus Payment) and PvP (Payment versus Payment) mechanisms using wCBDCs in euro and Swiss franc.
The project aims to enhance the efficiency and security of cross-border transactions and provides insights into policy, legal, and operational considerations of wCBDCs, contributing significantly to the broader CBDC initiative.
#6: Project Rosalind
Project Rosalind, initiated by the BIS Innovation Hub's London Centre in collaboration with the Bank of England, focuses on developing prototypes for an application programming interface (API) to distribute retail CBDC. It aims to address challenges in public-private sector collaboration, interoperability, competition, and adoption in the context of retail CBDC.
The project explores the integration of central bank and private sector roles in CBDC distribution, contributing to the development of a robust and innovative ecosystem for retail payments.
It's an experimental project and does not reflect the Bank of England's policy or intentions regarding CBDC.
#7: Project Aurum
Project Aurum, developed by the BIS Innovation Hub's Hong Kong Centre in partnership with the Hong Kong Monetary Authority, is a prototype for a two-tier central bank digital currency (CBDC) system.
This project created a technology stack comprising a wholesale interbank system and a retail e-wallet system, setting up two different types of tokens: intermediated CBDC and stablecoins backed by CBDC in the interbank system. This approach is unique in CBDC studies to date.
Project Aurum aims to explore the practical aspects of implementing a retail CBDC system, focusing on safety, flexibility, and privacy. It represents an in-depth exploration of a prototype CBDC system and serves as a public good for further study of retail CBDC by the central banking community.
#8: Project Helvetia
Project Helvetia, conducted by the BIS Innovation Hub, the Swiss National Bank (SNB), and SIX (a financial infrastructure operator), investigates the settlement of tokenized assets in central bank money using distributed ledger technology (DLT). It aims to address operational, legal, and policy questions in a future with more tokenized financial assets.
Phase I: built on the test environments of the Swiss real-time gross settlement system and SIX Digital Exchange, focusing on the trading and settlement of tokenized assets.
Phase II: Expanded by including commercial banks, integrating wholesale central bank digital currency (wCBDC) into central and commercial bank systems, and running end-to-end transactions. The project is experimental and does not indicate an intention to issue wCBDC by the SNB.
#10: Project Polaris
Project Polaris, led by the BIS Innovation Hub Nordic Centre, is dedicated to designing secure and resilient Central Bank Digital Currency (CBDC) systems, both offline and online.
It aims to provide central banks with essential information for decision-making, architecture design, implementation planning, and investments in CBDC systems. The project addresses long-term changes and operational considerations in CBDC development.
The roadmap of Project Polaris includes a handbook for offline payments, a security and resilience framework, and guides for closing cyber-threat modelling gaps in CBDC systems.
#11: Project Tourbillon
Project Tourbillon, developed by the BIS Innovation Hub Swiss Centre, focuses on enhancing privacy in retail Central Bank Digital Currencies (CBDC).
It demonstrates a new paradigm of payer anonymity, aiming to provide cash-like anonymity for users of CBDCs. The project developed two prototypes based on eCash designs, integrating quantum-safe cryptography to future-proof against potential quantum computing threats.
This initiative contributes to the CBDC space by addressing privacy, one of the most challenging and crucial aspects for user adoption of retail CBDCs.
#12: Project mBridge
Project mBridge is an experimental multi-CBDC platform aimed at improving cross-border payments. It addresses key inefficiencies like high costs, low speed, and transparency issues in international transactions.
The project, a collaborative effort led by the BIS Innovation Hub and several central banks, utilizes distributed ledger technology to facilitate real-time, peer-to-peer cross-border payments and foreign exchange transactions using CBDCs.
This initiative contributes significantly to the advancement of the CBDC field by demonstrating the potential for more efficient and accessible international financial transactions.
Quick Summary of the BIS Projects
We created a table in case if you lose track of which individual projects means:
|Develops a platform for international settlements using multi-CBDCs to facilitate cross-border transactions.
|Explores a retail CBDC ecosystem combining accessibility, competition, and advanced cybersecurity.
|Tests cross-border and cross-currency transactions using different experimental retail CBDC systems.
|Uses DeFi technology on a public blockchain for cross-border wholesale CBDC transactions.
|Focuses on DvP and PvP mechanisms using wCBDCs for cross-border settlements.
|Develops API prototypes for distributing retail CBDC, exploring public-private collaboration.
|Creates a two-tier CBDC system with intermediated CBDC and stablecoins backed by CBDC.
|Investigates settlement of tokenized assets in central bank money using DLT.
|Designs secure and resilient CBDC systems, addressing operational considerations for CBDCs.
|Enhances privacy in retail CBDCs, focusing on payer anonymity and quantum-safe cryptography.
|Experiments with a multi-CBDC platform for wholesale cross-border payments using DLT.