The Bank for International Settlements (BIS), in collaboration with the central banks of Hong Kong and Israel, has initiated Project Sela to experiment with the concept of retail central bank digital currency (rCBDC). This collaborative effort aims to explore the potential of rCBDCs in enhancing digital payments and providing secure and user-friendly alternatives to existing payment systems.
Project Sela: Objectives and Scope
Project Sela seeks to answer fundamental questions related to the feasibility and functionality of rCBDC systems. It aims to determine whether a well-designed rCBDC can retain the desirable attributes of physical cash while delivering user experiences that are as efficient as, or even better than, current payment systems. The project’s objectives are to create a secure and accessible rCBDC proof of concept (PoC) and to investigate the potential benefits of rCBDCs in digital payment services.
Incorporating Global CBDC Developments
Project Sela is not conducted in isolation but is part of the broader investigations into Central Bank Digital Currencies (CBDCs) by central banks worldwide. It acknowledges the ongoing development of CBDCs by institutions such as the Bank of Israel (digital shekel), the Bank of England (digital pound), and the European Central Bank (digital euro). By aligning with these global developments, Project Sela aims to contribute to the growing understanding of the possibilities and challenges associated with rCBDCs.
Embracing Technological Advancements and a Diverse Participant Ecosystem
The report acknowledges the advancements in the Decentralized Finance (DeFi) space, emphasizing the potential of open access to financial data and end-user control over funds. Project Sela recognizes the importance of incorporating a diverse range of participants in the rCBDC ecosystem to ensure its success. This approach involves enabling a vibrant community of private sector intermediaries to provide rCBDC services.
The Four Pillars of Project Sela
The project’s design revolves around four essential pillars:
- Policy: Addressing policy considerations and implications related to rCBDCs.
- Legal Aspects: Ensuring that legal frameworks support the implementation of rCBDCs.
- Cybersecurity: Implementing robust cybersecurity measures to safeguard rCBDC transactions and user data.
- Technology/Proof-of-Concept (PoC) Implementation: Developing the technical infrastructure and conducting PoC tests to demonstrate the functionality of rCBDCs.
Agile Methodology and Collaborative Workstreams
Project Sela adopted an agile methodology throughout its six-month duration, emphasizing collaboration among the participants. The project organized participants into four workstreams that matched the four pillars mentioned above. This collaborative approach allowed for the harnessing of collective expertise to address the multifaceted aspects of rCBDC development and implementation.
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In conclusion, Project Sela represents a collaborative effort to explore the potential of retail central bank digital currency as a secure and user-friendly alternative for digital payments. By incorporating global CBDC developments and embracing technological advancements, the project aims to contribute to the ongoing discussions and research surrounding the future of digital currencies and their role in the financial landscape.
