The BIS agency confirmed that its project will help all the countries to push CBDC adoption among citizens.
On 6 March 2023, The Bank for International Settlements (BIS) published its report on its project Icebreaker.
The BIS agency confirmed that the use of the Central Bank Digital Currency (CBDCs) in the cross border payment with the help of “hub-and-spoke” is a good option for the future of CBDCs.
Under the BIS project, engineers are working on a “hub-and-spoke” based system to connect CBDCs, issued by different countries. This system will be automatic & will convert one country’s CBDC into other countries’ CBDC. In short, cross-border payment services will work perfectly without any multi-step process, which is a common thing in the traditional financial system.
According to the BIS agency, it will help to push the adoption of CBDCs among citizens very easily and also it will improve several factors like efficiency, fees & best fiat conversion rates.
“This competitive setup mitigates the risk of insufficient liquidity in the desired currency pair, which can drive fees up and even delay the transaction,” the BIS said.
Under this CBDC cross-border payment model, the cross-border payments will be done within seconds.
CBDC & challenges
At present around 200 central banks are studying & developing CBDC, a digital form of sovereign fiat currency. The majority of the Central Banks are facing technical challenges to develop CBDC.
Recently San Francisco headquartered fintech company Ripple confirmed that there are 20 Central Banks in its contact for CBDC development guidance.
Around a month ago, the Nigerian Central Bank noted that its CBDC (e-Naira) failed to get adoption. Over the last 12 months, e-Naira saw only 0.5% adoption in the Nigerian population.