CAPS

Central bank digital currencies (CBDC) - Bank for International Settlements (BIS) - cross-border transactions.

Hub-and-spoke is an approach to cross-border CBDC transactions in which domestic retail CBDCs do not leave their own systems.

Instead, the cross-border transaction is broken down into two domestic payments, facilitated by a foreign exchange provider active in both domestic systems.

Hub-and-spoke could reduce settlement and counterparty risk

"As detailed in the report, Project Icebreaker sets out to explore a specific way to interlink domestic systems (a so-called hub-and-spoke solution).

A cross-border transaction is broken down into two domestic payments, facilitated by a foreign exchange provider active in both domestic systems.

Therefore, retail CBDCs never need to leave their own systems...

The project also demonstrated that the hub-and-spoke model can reduce settlement and counterparty risk by using coordinated payments in central bank money; and complete cross-border transactions within seconds.

For countries considering the development of a domestic CBDC, the project provides a model for extending them and innovative services into cross-border transactions."

Bank for International Settlements - March 2023.

See also

• Bank for International Settlements (BIS)
• Central bank digital currency (CBDC)
• Counterparty risk

• Digital currency
• Fiat currency
• Foreign exchange
• Hub
• Multi-CBDC arrangement
• Project Icebreaker
• Retail central bank digital currency (rCBDC)
• Sand Dollar
• Settlement risk
• Wholesale central bank digital currency (wCBDC)

Other resources

• Project Icebreaker concludes experiment for a new architecture for cross-border retail CBDCs
• BIS Report - Icebreaker - Breaking new paths in cross-border retail CBDC payments - March 2023