What is CBDC? In 2023, that is a question a good majority of the global population knows the answer to. A CBDC or a central bank digital currency is a virtual currency released by the central financial authority of a country, and it is usually backed by the fiat legal tender of the nation.
As of March 2023, around 60 countries across the globe are in an advanced phase of CBDC development, India and China very prominent among them. Big names like the UK and the US are contemplating their central bank digital currencies, while Jamaica, the Bahamas, and Nigeria are the latest countries to join the ranks of nations having launched a CBDC of their own.
However, CBDCs no longer remain just something launched by one particular country for national use. Many cross-border CBDC projects have tried out applications of central bank digital currencies across countries, with a range of use cases. In this post, we find out about a few popular cross-border CBDC projects!
What are cross-border CBDC projects?
Apart from countries with their own digital currency for internal use, these are some fun projects involving CBDC developments! While CBDCs work to enhance domestic payments in respective countries, cross-border payments still experience challenges including high expenses, slower speed, lack of accessibility, and opaque procedures. This is where cross-border CBDC projects come in, for both retail and wholesale use cases.
Several cross-border CBDC projects have been launched over the last few years to test out various use cases; benefits they have looked at providing include:
- Faster and cheaper cross-border payment services
- Better transparency in international transactions
- Cross-country financial inclusion and lowering of barriers in international payments
- Supporting economic growth and international trades
Notable cross-border CBDC projects
As mentioned above, quite a few cross-border CBDC projects have been launched in the past few years in addition to the country-specific central bank virtual currencies. Some include:
CBDC Collaboration between the RBI and the Central Bank of UAE
Both banks are looking towards collaborating on CBDC transactions for smooth international trades and remittances between the nations of India and the United Arab Emirates (UAE). As the RBI stated, the expectations from this project include:
- Reduction of transaction costs
- More efficient cross-border transactions
- Betterment of the economic ties between the nations
The CBUAE and RBI are to collaborate on a proof-of-concept (PoC) and pilots of a bilateral CBDC bridge to facilitate said transactions and test out use cases.
Aside from this, some other previously announced cross-border CBDC projects include:
- Project Sela:
Project Sela is meant to be a partnership between the Bank of Israel and the Hong Kong Monetary Authority.
- Countries involved: Israel, Hong Kong and the BIS
- Announced in: June 2022
- Aim of the project: To find out the cybersecurity prospects of two-tier, retail-based CBDC
- Use case: Retail
- Status: In progress
2. Project Mariana:
Project Mariana was formed as a partnership between the Banque de France, the Monetary Authority of Singapore, the Swiss National Bank, and the Eurosystem BIS Innovation Hub.
- Countries involved: France, Switzerland, Singapore and the BIS
- Announced in: November 2022
- Aim of the project: Using AMMs (automated market makers) to exchange the Swiss franc, euro, and the Singapore dollar
- Use case: Wholesale
- Status: In progress
3. Project Jasper:
Project Jasper was launched by the Bank of Canada, and it has already concluded.
- Countries involved: Canada, Singapore, and the UK
- Announced in: 2017
- Aim of the project: The Bank of Canada launched the project for cross-border testing with the Monetary Authority of Singapore and the Bank of England
- Use case: Wholesale
- Status: Concluded
4. Project Rosalind:
The Bank of England has launched Project Rosalind in partnership with the BIS Innovation Hub in London.
- Countries involved: The UK and the BIS
- Announced in: June 2022
- Aim of the project: The Bank of England and the BIS Innovation Hub in London partnered to create prototypes for a CBDC application program in the context of retail CBDCs, based on a two-tier model.
- Use case: Retail
- Status: In progress
5. Project Icebreaker
This project was launched through a partnership between the Bank of Israel, the Norges Bank, the Sveriges Riksbank and the BIS Innovation Hub Nordic Centre.
- Countries involved: Israel, Norway, Sweden and the BIS
- Announced in: September 2022
- Aim of the project: The project explored a model for retail CBDC payments across borders; Icebreaker tested interlinking and interoperability between various retail CBDCs.
- Use case: Retail
- Status: Concluded
Some more cross-border CBDC projects would include Project Aber (the United Arab Emirates and Saudi Arabia), Project Helvetia (the Swiss National Bank, the BIS, and SIX), and Project Aurum (the Hong Kong monetary authority and the BIS).
Conclusion:
And those were a few of the many cross-border CBDC projects launched so far that have tried out various use cases. While some have concluded their pilots already, some are still in progress, figuring out the viability of their respective use cases. What comes out of these cross-border CBDC projects is yet to be seen; meanwhile, we keep our eyes excitedly trained on the development of national CBDCs worldwide and watch the digital age take over the global economy.
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