In an interesting development, a team led by the BIS, or Bank for International Settlements, and the central banks of Hong Kong and Israel, have revealed experimental results indicating the feasibility of central bank digital currencies (CBDCs) settling on centralized ledgers while maintaining privacy. Termed as Project Sela, this joint endeavor aims to mirror the benefits of physical cash in a retail CBDC by combining accessibility, competition, and security.
Cost factors and potential risks were fundamental aspects addressed during the experiment. In terms of cost-efficiency, Project Sela demonstrated a method called “Access Enabler.” The BIS explained, this allows merchants to facilitate network settlement without retaining users’ CBDC, inevitably leading to minimal operating costs. In addressing potential risks, considerations were given towards reducing entry barriers for service providers to accept and use the CBDC, and allocating certain CBDC related activities between public and private sector entities.
The BIS emphasizes that a functional retail CBDC should emulate the “desirable attributes of cash,” – wide accessibility, instant settlement, low-cost usage, and an apt level of privacy. Additionally, they assure that Project Sela addresses privacy concerns effectively by concealing personal identifiers in the CBDC used.
While the enthusiasm about these findings is noteworthy, the Deputy Chief Executive of the HKMA or Hong Kong Monetary Authority, Howard Lee, clearly stated that the HKMA has yet to finalize its decision on the implementation of a retail CBDC in Hong Kong. Though Project Sela’s outcomes offer valuable insights for further exploration of a possible e-Hong Kong dollar, the conclusion of whether and when it will be introduced remains indeterminable.
Overall, the results of Project Sela shed light on a promising pathway to potentially convert digital currencies into a universally accepted form of retail payment. Nevertheless, the lingering skepticism around security, privacy, cost effectiveness, and most importantly, the readiness of central banks and service providers to accept and use CBDCs remains a significant counterpoint. How these existing concerns shape the future of CBDC architectures, only time will tell.
Source: Cryptonews
