According to BIS research, 93% of central banks across the world are investigating the feasibility of issuing CBDCs.
The Hong Kong Monetary Authority (HKMA) and the Bank of Israel (BOI) have partnered to address the privacy concerns associated with central bank digital currencies (CBDCs). This is according to a joint report titled “Project Sela – An Accessible and Secure Retail CBDC Ecosystem” released by the two central banks and the Bank for International Settlements Innovation Hub (BISIH) Hong Kong Centre.
Project Sela has reportedly demonstrated that CBDCs have the potential to settle directly on the central bank balance sheet while ensuring that user data remains safe and private. The report outlines the objectives of the Sela proof of concept which included making the onboarding of intermediaries easier while fostering innovation in the private sector and mitigating cyber security threats. Another goal was to preserve the desirable attributes of cash such as wide accessibility, safety, and low credit risk while fusing in the benefits of digitalization which include frictionless and location-independent payment, instant liquidity, and programmability.
According to the report, which was released at a conference hosted by the Bank of Isreal on September 12 in Tel Aviv, the project has successfully proven the feasibility of a retail CBDC architecture that can foster “competition and innovation in digital payments by allowing non-bank payment intermediaries to connect directly to the CBDC ledger of the central bank.”
Mr. Howard Lee, Deputy Chief Executive of the HKMA, said:
“[Project Sela] provided valuable practical insights into the cybersecurity, technical, and policy aspects of a retail CBDC implementation. While the HKMA has not yet made a firm decision on whether and when to introduce an e-HKD in Hong Kong, the outcomes of Project Sela will inform our on-going exploration. We hope that Project Sela will also benefit other central banks in their own evaluations of different retail CBDC architectures.”
Bénédicte Nolens, Head of the BIS Innovation Hub Hong Kong Centre expressed confidence that the project had achieved its objective:
“Project Sela explored the feasibility of a CBDC system where the central bank operates the retail ledger and a new type of intermediary, called an Access Enabler, provides broader access to the CBDC, promoting competition and innovation. It showed that this can be achieved without compromising cybersecurity or the privacy of end users from the central bank.”
According to BIS research, 93% of central banks across the world are investigating the feasibility of issuing CBDCs. Many of the proposed CBDC models suggest using payment providers such as banks to link users to the central bank. Project Sela on the other hand, uses a “novel type of intermediary” to deal with consumer-oriented services without the liquidity risk of holding funds directly.