At Tel Aviv FinTech Week 2023, Yoav Soffer, the advisor to the deputy governor at the Bank of Israel, touched on the topic of central bank digital currencies (CBDCs) as an efficient cross-border payment option.
The talk comes after the Bank for International Settlements (BIS) concluded its research on international retail and remittance payments via CBDCs between the central banks of Israel, Norway and Sweden. The BIS project is called “Project Icebreaker.”
Soffer, who is also the project manager for the CBDC program for the Central Bank of Israel, said that while domestic payments in Israel have become “very easy, convenient and cheap,” the same is not true for payments outside of the country.
“Cross-border payments are often perceived to face challenges of high costs, low speed, limited access and insufficient transparency according to the financial stability board.”
Soffer touched on the result of an example transaction that took less than two minutes. Moreover, he stressed that this model would significantly reduce the costs of sending funds internationally and is “much more competitive in terms of the foreign exchange transaction.”
He continued to say that the technological requirements for countries to join the model are very limited and once a prototype is built, onboarding should essentially be a domino effect.
“Once you build it for three countries, you could build it for 180 countries. Therefore, it’s also very scalable.”
However, he did say that in employing such a program, ways to provide liquidity for CBDC providers would need to be considered, as well as the integration of policies. Soffer said privacy is another major consideration that the BIS team was aware of during the project.
Despite over a hundred countries looking into the possibilities of CBDCs, the sentiment around these centralized digital currencies is mixed. They have useful capabilities, such as efficient cross-border transactions, though some say they could threaten consumers’ future.
Former CFTC Chair Christopher Giancarlo recently stressed that CBDCs should protect privacy and not be a surveillance tool as many fear. A congressman in the United States, Tom Emmer, also commented that they could be ‘easily weaponized’ to spy on U.S. citizens.