Swedish Central Bank Pilots Instant Payments With Retail CBDC

Sweden’s central bank has partnered with the Bank for International Settlements (BIS) in a project that aims to test out instant payments for its central bank digital currency (CBDC). The project also involves cross-border facilitation, in partnership with two other countries, Israel and Norway.

Dubbed as “Project Icebreaker” this pilot testing phase will operate until within this year, with a finalized report set for Q1 2023. According to Beju Shah, Head of the BIS Innovation Hub Nordic Center, the project will “dig deeper” and experiment with the technology, architecture, and design of CBDCs, in relation to the corollary quandaries that these present in terms of existing policy.

This program is a notable and marks a turn in the crypto and blockchain industry’s sphere of adoption, given that Sveriges Riksbank is the world’s oldest central bank, having been established in 1668. The bank believes that the project’s findings could help inform other central banks as they grapple with their own CBDC strategies. The bank has been studying and actively researching blockchain technology since at least 2016, when it first announced its prospects of an “e-krona” CBDC.

“These learnings will be invaluable for central banks thinking about implementing CBDCs for cross-border payments,” Shah notes.

This project is the BIS’ fourth collaborative work, having done a previous engagement with Hongkong, China, Thailand, and the United Arab Emirates for another cross-border CBDC project dubbed mBridge. The mBridge pilot test run accounted for roughly $22 million in transactions processed. To date, the BIS is joined by 61 associated central banks from across the world.

Before the advent of blockchain-based CBDC technologies, cross-border payments have become a significant concern for banks and sovereign currencies due to heightened costs, low-speed transaction finality, and the limited access to its ledgers making transparency difficult and insufficient. These barriers to cross-border payments are counteracted and solved by CBDC technology, which is one of the reasons why the International Monetary Fund has suggested that CBDCs would help ease out costs for international payment settlements.

According to data from the Atlantic Council, a U.S.-based think tank studying international affairs, there are 105 countries already exploring the use of CBDCs, all of which account for 95% of the global GDP. The Atlantic Council also believes that interoperability among national CBDCs represent the next frontier for the global adoption of seamless cross-border payments.

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