Cross-border payments without the need for currency exchange, BIS international banking clearing initiative bridges retail CBDCs across countries.

The Bank for International Settlements (BIS) has released the latest breakthrough achievement of its project, collaborating with the central banks of Israel, Norway, and Sweden to seek the optimal solution for cross-border transactions. Cross-border transactions will no longer require currency exchange, allowing for easy, fast, and secure payments.

The Bank for International Settlements (BIS) is an international organization dedicated to international monetary and fiscal policy cooperation. Its Innovation Hub brings together central banks and regulatory authorities from various countries to launch a series of initiatives related to Central Bank Digital Currencies (CBDCs), aiming to integrate efforts from different countries to develop a universal platform as a basis for future CBDC developments.

According to the latest report released by BIS, the "Icebreaker Project" has been successfully completed through collaboration between BIS and the central banks of Israel, Norway, and Sweden. The Icebreaker Project seeks solutions for cross-border transactions using distributed ledger technology. By connecting the cross-border systems of central bank digital currencies, it aims to achieve cheaper and more secure global payments.

BIS points out in the report that while digital payments are convenient, they are often limited to domestic use. Cross-border payments are typically expensive and slow due to legislative, technological, and operational differences. The Icebreaker Project by BIS is designed to address these pain points in cross-border payments.

The Icebreaker Project utilizes the Icebreaker Hub to connect the retail CBDC systems of various countries, allowing these systems to communicate with each other despite using different distributed ledger technologies.

For example, if Alice in Sweden wants to transfer funds to Noaa in Israel, the Icebreaker Hub helps Alice find the best available exchange rate calculated based on rates submitted by forex providers to the Icebreaker Hub. Alice's payment is then split into two parts: one paid in SEK by a Swedish service provider and the other paid in ILS by an Israeli service provider. A hash time-locked contract is used to ensure that both payments occur simultaneously, reducing settlement and counterparty default risks.

In central bank digital currencies, by leveraging multiple forex providers and using bridge currencies, costs can be effectively reduced and cross-border coverage increased. Its scalability allows for easy connection to many systems and countries, enabling cross-border transactions to be completed in a matter of seconds. In the future, if cross-border payments can be made without the need to exchange currencies manually and can be done entirely on mobile phones in electronic form, it is believed that many online shoppers and travel enthusiasts will benefit greatly.