BIS Innovation Hub Partners with Bank of Israel and Hong Kong Monetary Authority for Retail CBDC Trial
The BIS Innovation Hub has collaborated with the Bank of Israel and the Hong Kong Monetary Authority (HKMA) to conduct a trial of a retail central bank digital currency (rCBDC) known as Project Sela. The project aimed to demonstrate that an rCBDC can combine accessibility, competition, and preventative cyber security while retaining the advantages of physical cash.
Ensuring Cyber Safety with Preventative Design
Project Sela was coordinated by the BIS Innovation Hub Hong Kong Centre and drew on the cyber security expertise of the Bank of Israel and its work on the digital shekel, as well as insights from previous HKMA projects. The goal was to create an accessible and innovative retail CBDC that could serve various use cases. The project also aimed to establish a digital means of payment that maintained privacy, safety, settlement capabilities, and low operation costs.
Introducing the Access Enabler
A key component of Project Sela is the Access Enabler, a novel type of intermediary that manages customer-facing retail CBDC services without holding users’ funds. This eliminates the need for liquidity maintenance or settlement risk reduction. The Access Enabler also removes complexity and risk compared to current payment service providers.
Positive Feedback from Key Figures
Bénédicte Nolens, Head of the BIS Innovation Hub Hong Kong Centre, stated that Project Sela demonstrated that a CBDC system with a central bank-operated retail ledger and an Access Enabler intermediary could promote competition and innovation without compromising cyber security or user privacy.
Andrew Abir, Deputy Governor of the Bank of Israel, emphasized the importance of competition and innovation in a flourishing ecosystem of service providers. Project Sela provided valuable insights into the feasibility of their proof of concept and allowed for discussions on CBDC cybersecurity.
Howard Lee, Deputy Chief Executive of the HKMA, expressed renewed interest in exploring an electronic version of the Hong Kong Dollar. He highlighted the practical insights gained from Project Sela, which would inform their ongoing exploration of a possible e-HKD and benefit other central banks considering retail CBDC architectures.
Hot Take: Successful Trial Demonstrates Potential of Retail CBDC
The completion of Project Sela by the BIS Innovation Hub, Bank of Israel, and HKMA signifies a significant milestone in the advancement of retail central bank digital currencies. The trial showcased that an rCBDC can achieve accessibility, competition, and cyber security while preserving the benefits of physical cash. By introducing the Access Enabler intermediary, Project Sela also demonstrated a novel approach to managing retail CBDC services without holding funds, reducing complexity and risk. The positive feedback from key figures involved further reinforces the potential for retail CBDCs to foster competition, innovation, and secure digital payment systems.
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