Project Icebreaker, by the Swedish Riksbank, Examines Cross-Border Payments

The Bank of International Settlement (BIS), the central banks of Norway and Israel, and the Swedish Central Bank (Sverige Riksbank) announced on Wednesday that they were launching “Project Icebreaker,” a joint investigation into the use of Central Bank Digital Currencies (CBDCs) for international retail and remittance payments. The G20 has started an ambitious project to improve cross-border transactions by making them faster, cheaper, more inclusive, and transparent. One of its workstreams will examine the potential contribution of CBDCs to achieving this goal.

The Need for CBDCs in Societies That Are Becoming More Cashless

Due to the fact that Sweden and its Scandinavian neighbor Norway have among the world’s highest cashless populations, it is not surprise that the Riksbank began discussions on creating a national digital currency as early as 2016. The Riksbank is concerned about avoiding the risk that when society becomes cashless, the general population would no longer be able to access or use state-issued money, which is why it is necessary to look into the prospect of a state-issued digital currency (CBDC) dubbed e-krona. According to the Riksbank, an electronic krona might help make the payment system more resilient. Every e-krona unit would be equivalent to one real krona coin or one krona in a personal bank account.

In early 2021, the Riksbank and its technology partner Accenture launched the second phase of the e-krona pilot project, with the goal of testing a technical solution as well as investigating a potential legal framework for the digital krona. Investigating the functionality of e-krona offline, how well it can be integrated into banks’ internal systems, and how financial institutions can be integrated into the e-krona network are all part of the technical tests carried out in collaboration with Handelsbanken and Tietoevry.

Project Icebreaker is pioneering cross-border transactions for CBDCs.

The first of its kind, Project Icebreaker, is a collaboration between the Bank of Israel, Norges Bank (Norwegian central bank), Sveriges Riksbank, and the BIS Innovation Hub Nordic Centre to create a “hub” to which participants will connect their proof-of-concept CBDC systems, allowing participants to test certain key functions as well as the technical feasibility of connecting different municipal CBDC systems.

Deputy Governor of the Bank of Israel Andrew Abir commented on the project, emphasizing the importance of efficient and accessible cross-border payments to a small and open economy like Israel, as well as the impetus this creates for the potential issuance of a digital Israeli Shekel.

In response to society’s increasingly cashless nature, as well as the need for a more inclusive, secure, reliable, transparent, and efficient cross-border transaction mechanism, the Riksbank, Norges Bank, BIS Innovation Hub Nordic Centre, and the Bank of Israel have collaborated to launch Project Icebreaker. This trailblazing experiment will delve deeper into the technology, design choices, architecture, and policy issues to provide insights for central banks considering using CDBCs in cross-border transactions.