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Project

IcebreakerBreaking

new

paths

in

cross-border

retail

CBDC

paymentsMarch2023BankofIsraelSveriges

Riksbank1ProjectIcebreaker-BreakingnewpathsincrossborderretailCBDCpaymentsContentForeword461.

Executivesummary2.

Definitions,acronyms,and

abbreviations3.

Introduction911111112121314141718202122232324252525262728282929323434354.

Overviewof

themodel

usedforProjectIcebreaker4.1DomesticrCBDC

systems4.2FXproviders4.3TheIcebreakerhub4.3.1Ahub-and-spokesolution4.3.2FXmarketplace4.4Thepaymentprocess5.

Theexperiment

and

solutiondesign5.1TheFX

conversionmechanism5.2Communicationandconnectivity5.3CoordinatedsettlementinPvPand

PvPvPstyle5.3.1TheHTLCmechanism5.3.2Interactivity5.3.3Bridge

currencyextension5.4Testscenarios6.

Policyconsiderations6.1Governance6.2Resilience6.3TheFX

mechanism6.4LiquidityprovisionforFXproviders6.5Pricingof

services6.6PrivacyandAML/CFT6.7Addressingandpaymentinitiation7.

ConcludingdiscussionReferencesAppendix

A:Descriptionof

thethree

PoC

rCBDCsBankof

Israel–thedigital

shekel

prototypeCBDCplatform

–basedon

DLT2ProjectIcebreaker-BreakingnewpathsincrossborderretailCBDCpaymentsValidationof

tokens3535363637373839404040404141NorgesBank

–theNOK-CBDCprototypeUnderlyingtechnology–HyperledgerBesuValidationof

tokens,settlement,andfinalitySverigesRiksbank

–thee-kronatestprototypeCBDC-platform–basedonDLT

andUTXOValidationof

tokens,settlementandfinalityAppendixB:

PaymentdatainIcebreakerAppendixC:ProjectparticipantsandacknowledgementsBankof

IsraelBIS

InnovationHubNorgesBankSverigesRiksbankAcknowledgements3ProjectIcebreaker-BreakingnewpathsincrossborderretailCBDCpaymentsForewordProjectIcebreaker

exploresthepotentialbenefitsand

challenges

of

usingretailCBDC

incross-borderpayments.It

testedthe

technical

feasibilityof

conductingcross-border/cross-currencytransactions

betweendifferentDLT-based

CBDCproofsof

concept.Theaimwasto

gainadeeperunderstandingof

thetechnologiesused,and

to

identify

thekeytechnicalandpolicychoices

and

trade-offsthatcentral

bankswould

needto

considerindesigningCBDC

implementationsthatfacilitatecross-borderpayments.The

projectwas

acollaborationbetweentheBankof

Israel,NorgesBank,SverigesRiksbank

andtheBIS

InnovationHub.“IfIsrael

istoissueadigitalshekel,itwouldbe

very

importantthatwedoitaccordingtotheevolvingglobalstandards,so

thatIsraeliscoulduseitfor

efficientandaccessiblecrossborder

payments.

Whilethereisstillmuchwork

aheadof

usfortheIcebreakermodeltobecomeaglobalstandard,thelearningsfrom

thissuccessfulprojecthavebeen

very

importantforusandforthe

centralbankingcommunity.IthanktheBISInnovationHub,the

colleaguesfrom

theRiksbank

andNorgesBank,andourdevotedprofessionalstaff

here

attheBankofIsraelfortheeffectivecollaborationand

theprofessionalwork.”AndrewAbir,Deputy

Governor,

BankofIsrael“We

aredelighted

tohavebeen

partofone

ofthefirstexperimentaltestsofcross-borderretailCBDC

payments,togetherwithourpartnerstheBISInnovationHub,SverigesRiksbank

andBankofIsrael.Thisprojectcontributestotheimportantglobalefforttoimprovecross-borderpayments.Inaddition,ithas

addedsignificantvaluetoNorgesBank’sexperimentaltestof

adomestic

system

forretailCBDCpayments.”Torbj?rnH?geland,Executivedirectorfor

Financial

Stability,NorgesBank“Althoughdomesticpaymentshavebecomelessexpensive,safer

andmore

efficient,paymentsacrosscurrenciesare

stillassociatedwithhighcosts,slowspeedand

risk.When

exploringCBDCsitis

importanttoincludecross-currencyopportunitiesfromthestart.ProjectIcebreakershowshowdifferentCBDCsolutionsindifferentcountriescouldenable

instantcross-currencytransactionsin

awaythatwouldgreatly

benefittheendusers.The

projecthas

alsobeenagreatexampleof

collaboration

andsharingofknowledgebetweentheparticipatingcentralbanksandBIS.Althoughtherearealotofquestionsthatneedto

beinvestigatedfurther,ProjectIcebreakeris

avaluableinitiativeandcontribution

tothediscussiononhowwe

canimprovecross-currencypayments.”Aino

Bunge,

DeputyGovernor,

Sveriges

Riksbank“ProjectIcebreaker

isyetanotherexampleofthevalueofthepracticaland

quickexperimentationneededtoadvancethe

learningsandthinkingrequired

forimplementationsofretailCBDCsystemssothatkey

functionality,such

as

enablingcross-border

andcross-currency

payments,canbe

designed

from

the

outset.Theprojectdemonstratedhow

suchfunctionalitycouldbe

achievedwith

minimalrequirementsonnationalCBDCsystemsaswellasenablingeasierintegrationandinteroperabilitybetweenthem.The

Icebreaker

model

alsodemonstratedother

benefitsforeverydayusers

suchasincreasedtransparency,lowercosts,increasedcompetition4ProjectIcebreaker-BreakingnewpathsincrossborderretailCBDCpaymentsandlowerrisks.Moreworkisstillrequired

forretailCBDCbutthelearningsfrom

thisprojectare

invaluableforcentralbanks.The

fastpaced,focusedandcollaborativespiritacrosstheRiksbank,

NorgesBank,Bankof

Israelandthe

BISInnovationHub

issomethingtheteamsinvolvedshouldbe

proudof.”BejuShah,

Headof

the

BISInnovationHubNordicCentre.5ProjectIcebreaker-BreakingnewpathsincrossborderretailCBDCpayments1.

ExecutivesummaryWhiledomesticpayments

haveseensignificantimprovementin

manyjurisdictionsinrecentyears,cross-borderpaymentsstillfacechallengessuch

as

highcosts,lowspeed,limited

access

andinsufficienttransparency.

TheG20hasmadeitapriority

toenhance

cross-borderpaymentsand,inresponsetothiscallforaction,theBISInnovationHubis

coordinatingexperimentson

howthismightbedone.1,

2Manycentralbanksareexploringretailcentral

bankdigital

currencies(rCBDCs).Some

of

theseprojectsare

attheproof-of-concept(PoC)stage,whileothersareinpilottrials

andahandfulhavereachedmore

mature

phases.3

Therequirementsforinterlinkingthese

(domestic)rCBDC

systems

tosupportcross-borderpaymentsshouldbe

consideredattheoutset

sothatcross-borderpaymentscanbe

enabledwhenappropriate.ProjectIcebreaker

exploresaspecificwaytointerlink

rCBDC

systems(thehub-and-spokesolution)withseveraladditional

featuresthatwould

allow

theIcebreakermodeltobereadilyscaledup.Inaddition,these

features

would

promote

simplicityandinteroperability,reducesettlementrisk,andfoster

competitionandtransparencyforcross-borderrCBDCpayments.4Settlementriskand

speed.IntheIcebreakermodel,a

cross-bordertransactionisbrokenup

into

twodomesticpayments,onein

eachdomesticsystem.An

rCBDCthereforeneverleavesits

owndomesticsystem.Thisisbecause

FXproviders

buyone

currency

inonesystemandselltheothercurrency

intheothersystem.

An

FXproviderthereforeholds

rCBDC

supportingwalletsin

twoor

more

systems.Settlementisviaan

atomicpayment-versus-payment(PvP)arrangementusingHashTimeLockedContracts(HTLC),whichcanbethoughtofassimilar

toadigitalescrow.

This

eliminatesthetimegapbetweenpaymentinitiationandsettlement,goingalongwaytowardseliminatingcounterpartyriskintheFX

transaction.Competitionand

transparency.Inmostexistingcross-borderpaymentsystems,theenduserisboundtoits

paymentserviceprovider(PSP)forFXservice.In

theIcebreakermodel,theFX

serviceandpricingaredecoupledfrom1Cross-borderpaymentshavebeenon

theagendaof

internationalbodiesandstandardsettersforseveralyears.

The

G20

Roadmap

lays

out

a

comprehensive

set

of

actions

covering

19

building

blocks.

TheCommitteefor

PaymentsandFinancialInfrastructure(CPMI)leadstheimplementationsof

buildingblocks11–19,

where

building

block

19

explores

the

use

of

CBDC

for

cross-border

payments.

For

more

information,seeCPMICross-border

payments

programme

().23FortheBISInnovation

Hubcoordinatingexperiments,seeBISInnovationHub(2022).CBDC

is

central

bank-issued

digitalmoney

denominated

in

the

national

unit

of

accountand

constituting

aliability

of

the

central

bank.

A

retail

CBDC

is

available

to

the

public

for

use

in

payments.

See

Kosse

andMattei(2022)foranoverviewofcentralbankactivityinCBDC.).4Beside

the

features

of

the

Icebreaker

model,

the

use

of

risk-free

money

central

bank

money

held

directlyby

end

users

reduces

credit

risks

and

the

need

for

some

financial

intermediaries

therefore

reducingcounterparty

risks.

For

more

on

interoperability

between

CBDC

systems

in

a

cross-border

context,

see

CPMIetal(2022).6ProjectIcebreaker-BreakingnewpathsincrossborderretailCBDCpaymentsthe

provision

ofrCBDC

paymentservices.FX

providerssubmitFX

ratestotheIcebreaker

hub,

whichselectsthebestrateto

be

presentedto

thepayerforeachpaymentrequest.

Thisletsthe

payeraccesscompetitiveFX

ratesindependentlyof

thePSP

providingtheenduserwithadigital

rCBDC-supportingwallet.

Additionally,

theriskof

insufficient

liquidityinthe

desiredbilateral

currencypairismitigatednotonlybythepresenceofmultipleFXproviders,

butalsobyusingbridgecurrencies.Thiscouldhavepotentialinpromotingcompetition

betweenFXprovidersandmakingFXfees

moretransparentforendusers.Interoperabilityand

scalability.

Thenumberof

connections

betweenrCBDCsystemsarekeptto

aminimumby

thehub-and-spokeapproachused

fortheIcebreakermodel.TheIcebreakerhubonlyroutespaymentmessagesand

doesnotactuponthem.Theonlyinformationitacts

uponisthedatafromFXproviders,

whichare

used

whenidentifyingandselectingthebestFX

rates

forthe

payer.TheIcebreaker

modelmakesaminimalsetoftechnicalrequirementsabouttherCBDC

systems

thatconnectto

it,namely

that:?Each

must

be

a

functioningpayment

system

and

operateinreal

time,

ornearrealtime,ideally

24/7/365.??Eachcanimplementandsupportthe

use

of

HTLC.There

are

participants

in

each

rCBDC

system

that

can

act

as

FX

providers.TheIcebreaker

hubprovidesastandardsetof

applicationprogramminginterfaces

(API),enablingdifferentdomesticsystemstocommunicatewithitseamlessly.

The

technologicalrequirementon

domesticsystems

isdeliberatelykeptto

aminimum,thus

promotingscalability,

interoperability

and

simplicity.Theprojectfocusedoncorefeaturesonly,includingthetechnicalsolutionfortheIcebreaker

hub,

theintegrationof

the

three

PoC

rCBDC

systemsofIsrael(EthereumQuorum),Norway(HyperledgerBesu),

andSweden(Corda),andthe

technicalvalidationof

alimitedsetof

key

use

cases,

togetherwithrelatedpolicyconsiderations.5

Functional

aspectssuchasAML/CFT,

orlonger-termconsiderationssuchasthebusiness

modelorschemerulebookweredeemedoutof

scopebutcouldbeconsideredin

future

experimentation.ProjectIcebreaker

showsthatcentralbankscanhavealmostfullautonomywhendesigningtheir

domesticrCBDC

systemwhilestillbeingableto

participatein

aformalisedinterlinkingarrangementtoenable

cross-borderpayments.Thekeyrecommendationsforacentral

bankconsideringenablingcross-borderpaymentsin

an

implementationof

arCBDC

systemare

to:5See

Appendix

A

for

a

high-level

description

of

the

three

rCBDC

PoCs.

They

were

built

for

the

purpose

ofconducting

experimental

tests

and

should

not

be

taken

as

indicative

of

any

future

rCBDCdesign

decisionsonthepartoftheparticipatingcentralbanks.7ProjectIcebreaker-BreakingnewpathsincrossborderretailCBDCpaymentsooConsiderwaysto

incorporateconditionalsettlement,eg

HTLC.Considerwaysto

ensuresystemavailability

and

shortresponsetimes24/7/365tomaximisespeedandminimisefailedpayments.oooConsideradoptingcurrentmessagingandaddressingstandardsandensure

flexibility

in

adoptingfuturestandards.Considerwaysto

provideinstantrCBDC

liquidity

forFXproviders24/7/365.Promotetransparentandcompetitiveincentives

forFXproviders.Implementingthe

Icebreakermodelin

thereal

worldwouldrequirearangeoftechnology,policyand

legalconsiderationsto

be

addressed.Policyconsiderationscouldincludethegovernance

arrangement,the

viability

of

the

business

model,liquidityprovision,

privacy,

AML/CFTcomplianceandmonitoring,

andpaymentinitiation-relatedstandards.Legalconsiderations

wouldincludeasound

legal

basisfortheIcebreaker

hubtypeapproach,as

wellasthepotentialfor

conflictof

lawsand

regulationsbetweenconnectedrCBDC

systems,

and

conflictresolution.Technicalconsiderationscouldinclude

resiliencerequirementsfor

theIcebreakerhubandparticipantsintherCBDC

systems.Central

banksshouldfactorinsuchcross-borderaspectsintothe

designof

theirrCBDCsystemsto

avoidcreatingunintendedbarriers

forcross-borderfunctionality.TheIcebreakermodelcouldserveasaplatformfor

introducingpaymentsinnovations(suchasdelivery

versuspaymentandprogrammablemoneyuse

cases)thatcountries

couldconsiderin

thecontextof

developingthecross-bordercapabilities

of

theirCBDC

systems.8ProjectIcebreaker-BreakingnewpathsincrossborderretailCBDCpayments2.

Definitions,acronyms,andabbreviations2.1

DefinitionsBridgecurrency:Acurrency

thatis

usedasan

intermediatestepinanexchangebetweentwo

currenciesfor

whichthereisno

directFX

rate,or

theFX

rateisunfavourable.Foreignexchange(FX)provider:

Entitiesthatprovidetheserviceof

exchangingrCBDC

inone

currency

into

rCBDC

in

anothercurrency.They

buy

onecurrencyusingtheirrCBDCwalletin

one

rCBDC

systemandselltheothercurrency

usingthewalletinthe

otherrCBDC

system.Hashfunction:Theprocessof

usingamathematicalalgorithmagainst

datatoproduceanumericvaluethatis

representative

of

thatdata.Thevaluesreturnedby

ahashfunctionarecalled

hashvalues,hashcodes,

digests

orsimplyhashes.HTLC:

Ahashtime-lockedcontract(HTLC)isatypeofsmartcontractusedinDLTapplicationsto

reducecounterpartyriskbycreatingatime-basedescrow

thatrequires

acryptographicpassphrase

to

unlockit.Interoperability:Thetechnical,semantic

andbusinesscompatibilitythatenablesasystemormechanismtobe

usedin

conjunctionwithothersystems.Interoperabilityallowsparticipantsin

differentsystems

toconduct,

clearandsettle

paymentsorfinancialtransactionsacrosssystems

withoutparticipatinginmultiplesystems.Payment-versus-payment(PvP):Asettlementmechanismthatensures

thatthefinal

transferof

apaymentinonecurrencyoccursifand

onlyif

thefinaltransferof

apaymentin

anothercurrency

orcurrenciestakes

place.Ifmore

thantwocurrenciesareinvolvedin

aPvPchain,itiscalledPvPvPinthecontextof

thisstudy.Retailcentral

bank

digitalcurrency

(rCBDC):Adigitalpaymentinstrument,denominatedin

thenationalunitof

account,thatisadirectliability

of

thecentralbankand

availabletothe

public.rCBDC

system:An

rCBDCecosystemwould

comprisemultipleelementsandfunctions.Acoreledgerwithsupportinginfrastructureandrules

wouldunderpinabroaderecosystemof

processinginfrastructure,walletprovidersand

userserviceswithbusinessand

technicalrules.SHA-256:

SHAstandsfor

SecureHash

Algorithmand

256isthenumberofbitsinthe

outputof

the

cryptographic

process.SHA-256is

amemberof

theSHA-2familyconsistingof

sixhashfunctions

createdbytheUSNational

SecurityAgency.Wallet:

Electronicwalletsare

paymentarrangementsthatenable

enduserstosecurelyaccess,

manageand

useavarietyof

paymentinstrumentsissuedbyoneormore

paymentserviceprovidersviaanapplicationor

awebsite.Theelectronicwallet

mayresideonadeviceownedby

theholder,

egasmartphoneor

apersonal9ProjectIcebreaker-BreakingnewpathsincrossborderretailCBDCpaymentscomputer,

or

mayberemotely

hostedon

aserverbutstillunderthecontrol

of

theholder.Walletprovider:An

entity

thatprovideselectronicwallets

tothegeneralpublic

andtypicallyhasalicencetoprovidepaymentservicesandcaninclude

bothbanksandnon-bankssuchasfintechcompanies.2.2

Other

acronyms

and

abbreviationsAMLAPIBISanti-moneylaunderingapplicationprogramminginterfaceBankforInternational

Settlementscombatingthefinancingof

terrorismCommittee

onPaymentsand

MarketInfrastructuresdecentralisedidentifiersdistributedledgertechnologyforeignexchangeCFTCPMIDIDDLTFXKYCPFMIPSPPoCRTGSknowyourcustomerPrinciplesfor

financial

market

infrastructurespaymentserviceproviderproofof

conceptreal-timegrosssettlement10ProjectIcebreaker-BreakingnewpathsincrossborderretailCBDCpayments3.

IntroductionProjectIcebreakermakes

apracticalcontribution

tothe

debate

on

theuse

ofrCBDCsin

cross-borderpayments

(which,

forthepurposes

of

this

project,

alsoincludecross-currencypayments).Thisexperimenthelpsto

identifythekeytechnicalandpolicychoicesthatcentralbanks

may

needto

considerin

theirrCBDCexploration.Todate,

theBIS

InnovationHubcross-borderCBDCprojectshaveexploredavarietyof

approachesto

improvingcross-borderpayments.

ProjectJura,Dunbar,andmBridgeexplored

multilateral

platformsonwhichseveral

wholesaleCBDCsareissued.6

ProjectIcebreakerexploresan

alternativeapproachusingahub-and-spokesolutiontointerlinkdifferentrCBDC

DLT-basedsystems.WhileProjectIcebreakerhassomesimilaritieswithProjectNexus,whichinterlinksdomesticinstantpaymentsystems,itisdistinctinitssettlementmethod,

the

choiceof

FX

provider,theuseofbridgecurrenciesand

thetechnologiesusedineachdomestic

system.7Thisreportdescribesthemodelusedin

thisproject,the

paymentprocess

(Section4),theIcebreakerhub’ssolutiondesign,technicalarchitectureandtheexperimentsconducted,

as

wellasthekeyfindingsandlessonslearned(Section

5).Policyconsiderationsarepresentedin

Section

6andSection7concludes.4.

OverviewofthemodelusedforProjectIcebreakerThissectionprovidesan

overviewof

themodel

usedinProjectIcebreaker,

whichconsistsof

thedomesticrCBDC

systems,theFXproviders,theIcebreaker

hubandthe

paymentprocess,

(see

Graph

1).Technical

considerations,

designchoices

andpolicyconsiderationsaredetailedinlater

sections.4.1

Domestic

rCBDC

systemsrCBDC

systems,

attheir

simplest,consistof

different

layers

and

participanttypes.Assuch,

theyareevolvingecosystems.

An

rCBDC

systemisconsequently

abroaderconceptthanthe

technical

coreinfrastructureprovidedby

acentral

bank.8Atthe

system’scentrewouldbe

thecentral

bankprovidingthecoretechnicalinfrastructure

for,

at

aminimum,issuingandredeemingrCBDC.Thecoreinfrastructurewouldtypically

be

complementedbyaschemeandarulebookthatspecifiesrights

andresponsibilitiesas

wellastherelevanttechnical,securityand678SeeBISInnovation

Hub(2022)andCPMIetal(2023).SeeBISInnovation

Hub(2021)forProjectNexus.Foramoredetaileddiscussionof

thedesignofCBDCsystems,see

egBISetal(2021a).11ProjectIcebreaker-BreakingnewpathsincrossborderretailCBDCpaymentsdatamessagingstandards

and

otheroperational

andlegal

requirements

forsystemparticipants

(outofscopeforthisproject).In

the

nextlayerare

the

walletproviders.As

banks

or

non-bankssuch

as

fintechcompanieslicensedtoprovidepaymentservices,

theyprovideenduserswithwalletssupportingrCBDC.They

serveasadistributionlayerbetweenthecentralbankandtheendusers

throughwhichtheenduserscanreceive,hold,andtransactusingtheirrCBDCs.Inthe

outerlayerare

theend

users,

whichcanbeindividualsor

privateorpublicsectorentities.Theyparticipateaspayers

andpayeesusingrCBDC

services.4.2

FX

providersTheIcebreaker

modelfacilitates

cross-borderpaymentsby

interconnectingrCBDCsystems.FXproviders,

who

aremembers

of

multiplerCBDC

systems,wouldexchangerCBDC

inone

currencyforrCBDC

inanothercurrency.

Inessence,theywouldbuyone

currency

inonerCBDC

system

payingwiththeothercurrencyinthesecondsystem.IfAlicein

Swedenwantedto

pay

Bob

inIsrael,theFX

providerwouldbuySwedishkronaandsellIsraelishekel.An

FXprovidercouldbeanyentity,eg

afinancialinstitutionholdingwalletsintwoor

morerCBDC

systems,

thatis

willingtotakeon

FXrisktofacilitatepayments.9

The

costof

holdingandmanagingliquiditywould,

togetherwiththe

FX

risk,

bereflectedinthespreadbetween

the

buyandsellratesofferedforeachspecificcurrency.104.3

The

Icebreaker

hubTheIcebreaker

hubperformstwomainfunctions:??Routingcross-borderpaymentmessagesbetweendomesticsystems.Providinga“marketplace”

matchingpayerswith

FX

quotesfromFXproviders.Tofulfilits

role,

theIcebreaker

hubmakes

aminimumsetof

requirementsforeachdomesticsystem:??thatitmustbeafunctioningpaymentsystemand

operatein

realtime,ornearrealtime,ideally

24/7/365,thatitcan

implementHTLC

(seeSection

5.3.1),and9An

entity

that

acts

as

wallet

provider

could

also

act

as

FX

provider.

However,

this

is

not

necessarily

the

case,andfortheremainderofthereport,FX

andwalletprovidersare

referredtoas

separatefunctions.10One

simplifying

assumption

in

Project

Icebreaker

is

that

the

FX

provider

has

adequate

liquidity

at

the

givenrate.12ProjectIcebreaker-BreakingnewpathsincrossborderretailCBDCpayments?thatithasparticipantswho

areservingasFX

providers.4.3.1

A

hub-and-spoke

solutionThereareseveralways

of

interlinkingdisparatesystems.Singleaccess,bilaterallinkingand“hub-and-spoke”solutionsareallalternativesto

singlecommonplatformmodels.11ProjectIcebreakerexploredahub-and-spokesolutioninterlinkingdomesticsystemsthroughatechnicalplatformthatfacilitatescommunication

betweenrCBDC

systems.EachrCBDC

systemneedsonlytointegratewithoneexternalsystem(theIcebreaker

hub),ratherthan

integratingwitheveryotherindividual

rCBDCsystem.

Theadvantageof

this

modelisthatitcanscaleupto

supportmany

participatingsystemswithoutincreasingthecomplexityof

thedesign,

giventhetotal

numberof

connectionsbetweenrCBDC

systems

thatwouldneedto

be

configuredoncethenetworkstarts

growing.12EachdomesticrCBDC

systemcanconnectto

thehubintwoways,eachhavingdifferenteffects,someofwhichare

outofthe

project’sscope.Thefirstisto

let

thesystemparticipants,suchaswalletandFXproviders,

communicatewiththehubdirectly.Thesecondisthat

the

domesticrCBDC

systemprovides

agateway

toserveasasinglecommunicationchannel

betweenthedomesticrCBDC

systemandthehub.1112SeeCPMIet

al(2022).With

n

rCBDC

systems,

n

connections

are

sufficient

in

the

hub-and-spoke

model,

while

solutions

withouta

central

hub

require

at

least

n(n-1)/2

such

connections.

For

15

countries,

105

connections

are

neededwithout

a

hub-and-spoke

solution

(making

the

network

topology

very

complex

and

error-prone,

as

well

asincreasingcybersecurityrisks)butthis

comes

downto15withthehub-and-spokemodel.13ProjectIcebreaker-BreakingnewpathsincrossborderretailCBDCpaymentsGraph1.

Ahigh-levelviewof

theIcebreaker

model.Note:ThedomesticrCBDCsystemsinthegraphhavedifferentdistributionmodelsto

illustratethatdesignandtechnologychoices

candifferbetweenrCBDCsystems

intheIcebreakermodel.TheillustrationisinspiredbythethreePoCsintheexperiment.

Moreover,theFXproviderishereassumedto

useawalletproviderforitsFXwallet.

Thismaynotalwaysbethecase,and

anFXprovidermaybeits

ownwallet

provider.4.3.2

FX

marketplaceAsdescribedearlier,FX

providers

wouldholdandmanagerCBDC

liquidity

intheiroperatingcurrencies.

EachFXproviderwouldsubmitbuy

and

sell

ratesforthosecurrenciesto

the

Icebreaker

hub.

TheIcebreakerhubthereforemaintains

alivedatabase

of

thesubmittedFXrates

andreturns

the

bestavailablerate

alongwiththeidentityof

theFX

provider

tothe

payeruponrequest.Thisfunctionof

theIcebreaker

hubissimilarbutnotidenticalto

themodelin

ProjectNexus

and

couldbedescribedas

aFX“marketplace”(seeSection5.1

formore

details).4.4

The

payment

processAcross-borderpaymentisdividedinto

two

domestic