The Hong Kong and Israel central banks along with the Bank for International Settlements Innovation Hub (BISIH) Hong Kong Centre have published a report on building a more secure and accessible retail central bank digital currency (CBDC) ecosystem.

Dubbed as Project Sela, the report outlined the technical feasibility of a retail CBDC architecture that can promote competition and innovation in digital payments by allowing non-bank payment intermediaries to connect directly to the CBDC ledger of the central bank.

Leveraging distributed ledger technology (DLT), a proof-of-concept prototype was developed to showcase how the technical implementation of the proposed architecture can incorporate strict cybersecurity, legal and policy requirements.

Project Sela is the first collaborative project between the Hong Kong Monetary Authority (HKMA) and Bank of Israel (BOI).

Howard Lee, Deputy Chief Executive of the HKMA said,

“We are pleased to have successfully completed this project with the BOI and BISIH Hong Kong Centre. This project 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 said,

“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.”

Featured image: Howard Lee (first from right), Deputy Chief Executive of the Hong Kong Monetary Authority; Andrew Abir (second from right), Deputy Governor of the Bank of Israel; and Bénédicte Nolens (first from left), Head of the Bank for International Settlements Innovation Hub Hong Kong Centre, attend the report launch conference of Project Sela in Tel Aviv, Israel.