According to reports, three major financial firms have partnered together to execute a joint Central bank digital currency project.
The three financial institutions are the Bank of Israel, the Bank for International Settlements Innovation Hub, and the Honk Kong Monetary Authority.
The joint project which was slated to be launched later this year would use the two-tier protocol. This implies that once the central bank issues the CBDC, it would be sent to users via financial middlemen.
As such, the BISIH center in Hong Kong has authorized Project Sela to test the new CBDC project for cybersecurity weaknesses. The test would be based on the groundwork created by project Aurum.
CBDC Project Reduced Intermediaries’ Exposure
Furthermore, the Bank of Israel revealed that the investigation would be thoroughly protected. Also, the procedures would ensure no middlemen interfere with the financial privacy of customers.
This means users can store or send digital funds without an intermediary, hence reducing risk and fees.
Traditionally, money flows from central banks to commercial banks rather than to the public. This briefly exposes the middlemen, and commercial banks, participating in the transaction to risks. This occurs too in the case of digital assets.
The new project tends to test the feasibility of a two-tier system where middlemen are risk-free. Hong Kong and Israel planned to test this project whether it would mitigate cyber hacks in their countries.
Israel Forges Ahead
For years now, Israel has been trying to launch digital Shekel but to no avail. In 2018, her first attempt was halted by a central bank committee. Finally, Israel is close to achieving its dream of issuing a CBDC for a shekel.
The IMF described Israel as one of the top countries considering the idea of issuing a digital currency.
Through a post, Andrew Abir commented that Israel is focused on creating an efficient payment system that is viable in the payment sector. That was the main reason Israel joined the league of countries trying to create CBDC.
Hong Kong has been testing the two-tier model whereby commercial banks and payment platforms would distribute issued CBDC to the public.
Many Countries Bought The Idea Of CBDC
Currently, many countries seem to buy the idea of digital currency. As such, most of them are trying hard to issue their CBDC as soon as they can.
However, some countries are already making headways. For instance, the digital yuan launched in China witnessed wide adoption as close to 140M people are using it.
Also, The Bank of Jamaica has authorized the use of CBDC as legal tender recently. Hence, Jamaica is the first and only country on the globe to execute such a system.