Hub-and-spoke
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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
- 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)
