Project Sela, a joint experiment by the Bank for International Settlements and the central banks of Hong Kong SAR and Israel, has proven the simplicity of a retail central bank digital currency (rCBDC) ecosystem.
The test project proved that the rCBDC system could combine accessibility, competition and preventative cyber security, while retaining key advantages of physical cash.
Coordinated by the BIS Innovation Hub Hong Kong Centre, Project Sela leverages the Bank of Israel’s cyber security expertise and ongoing work on the digital shekel and the Hong Kong Monetary Authority’s (HKMA) learnings, as well as other Innovation Hub experiments on rCBDCs.
A policy of the associations involved in the experiment was to promote an accessible, competitive and innovative rCBDC ecosystem that can serve a wide range of use cases. As such, they aimed to lower the barriers to entry for service providers and unbundle and redistribute the activities related to rCBDC accounts among public and private actors.
Bénédicte Nolens, head of the BIS Innovation Hub at the Hong Kong Centre says: “Project Sela explored the feasibility of a CBDC system where the central bank operates the retail ledger and a new type of intermediary.”
Howard Lee, deputy chief executive of the HKMA, comments: “While the HKMA has not yet made a decision on whether and when to introduce a retail CBDC in Hong Kong, Project Sela’s outcomes will inform our ongoing exploration of a possible e-HKD. We hope Project Sela will also benefit other central banks in their own evaluations of different retail CBDC architectures.”
Andrew Abir, deputy governor of the Bank of Israel, adds: "Competition and innovation require a flourishing and open ecosystem with many different types of service providers. This was our initial goal in Project Sela as a proof of concept, and the project proved the feasibility of the model we had in mind.
“If central bank money is to go digital, cybersecurity is key, and the project provided an opportunity to discuss and study cybersecurity elements of CBDC with our partners of the Bank of Israel.”
