Project Icebreaker proposes a new architecture for cross-border retail CBDCs

The Central Bank of Sweden, Riksbank, recently published a press statement to inform of the conclusion of its project Icebreaker, The project is / was a joint cooperation between the Bank for International Settlements (BIS) and the central banks of Israel, Norway, and Sweden to analyze the „potential benefits and challenges of using retail central bank digital currencies (rCBDC) in international payments“.
In a corresponding report published by the participants, BIS and the central banks present the approach they took to interlinking rCBDCs via a single „hub-and-spoke” platform, the Icebreaker hub, to facilitate payments in digital currencies via various countries. The benefit of this approach, so the participants, lays in its architecture which requires each rCBDC system to only connect to the hub, rather than to each individual payment system.
The key advantage of this solution, as outlined in the document, is that multiple foreign exchange providers (FX providers) „can submit quotes to the system’s Hub, which automatically selects the cheaper one“ resulting in cross-border payments with the smallest possible transaction costs. Additionally, the existence of multiple foreign exchange providers also increases liquidity in the currencies involved.
Finally, the participants note that such an rCBDC interconnection system is easily scalable as it only involves the processing of a payment request via the hub, which then matches it with the cheapest FX-rate from a payer’s perspective, and routes it to the corresponding local rCBDC payment system. Furthermore, each local rCBDC system would be independent from the others, keeping it autonomous and subject to local oversight.