The Bank for International Settlements (BIS) has released the findings of Project Sela, a public-private partnership aiming at developing a retail central bank digital currency (rCBDC).
Hong Kong And Israel Have Completed Testing Of Retail Digital Currency
The Bank for International Settlements (BIS) has released the findings of Project Sela, a public-private partnership aiming at developing a retail central bank digital currency (rCBDC) in collaboration with the central banks of Hong Kong and Israel. By using private intermediaries, the concept aimed to combine the desirable characteristics of cash with the benefits of digitalization.
The initiative engaged various participants, including fintech firms FIS and M10 Networks, which provided core products, Clifford Chance for legal analysis, and Check Point Software Technologies for cybersecurity.
Project Sela was carried out as a proof-of-concept, with preset policy, security, technology, and legal characteristics incorporated by drawing on the diverse experience of the central banks involved.
The issuing central bank maintains the ledger for the rCBDC with pseudo-anonymous end-user accounts within the Sela ecosystem, allowing for instantaneous settlement via a real-time gross settlement (RTGS) mechanism.
User accounts are handled by funding institutions, who facilitate conversions between the rCBDC, bank deposits, and cash. An access enabler is an intermediary who maintains customer-facing services such as Know Your Customer compliance, endorsements, and routing. Using cryptographic keys, end users maintain control over their electronic wallets.
While the research underlines the ecosystem's benefits, such as more competition, it also admits its shortcomings, notably with regard to RTGS systems. The systems are often not available 24 hours a day, seven days a week, and are not designed for frequent minor transactions. The research discusses potential technical solutions to these limitations.
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