Cryptocurrency NewsProject Sela: A Joint Venture Validates the Viability of Retail-Centric Central Bank...

Project Sela: A Joint Venture Validates the Viability of Retail-Centric Central Bank Digital Currencies

A joint effort known as Project Sela aimed to explore and establish a retail-centric central bank digital currency (CBDC).

The Bank for International Settlements (BIS), Hong Kong’s Monetary Authority (HKMA), and the Bank of Israel have successfully demonstrated the viability of a secure retail CBDC, as reported on Sep. 12.

BIS-coordinated “Project Sela” showcased an rCBDC that brings the benefits of physical currency without compromising on cyber security, user confidentiality, or accessibility.

The project drew insights from the Israeli Central Bank’s exploration of a digital shekel and the HKMA’s research into an electronic Hong Kong dollar.

Bénédicte Nolens, who leads the BIS Innovation Hub in Hong Kong, highlighted the introduction of a novel CBDC intermediary mechanism termed “Access Enabler”. Nolens explained that this system addresses liquidity and settlement challenges by not storing users’ rCBDCs in its reserves. Additionally, this approach could significantly reduce the operational costs of blockchain-driven payment platforms.

Howard Lee, the HKMA’s deputy chief executive, mentioned that Project Sela might accelerate Hong Kong’s endeavors on its state-backed digital currency.

Other global central banks will harness the insights from Sela when shaping their CBDC frameworks, Lee emphasized.

“…this venture validated the approach we envisioned. As central bank funds become digital, cybersecurity becomes paramount, offering us a platform to delve into CBDC’s cybersecurity facets alongside our collaborators,” said Andrew Abir, deputy governor of the Bank of Israel.

CBDCs serve as digital equivalents of traditional currencies, released by nation-states or their central banks. The idea can be traced back to around 1985, initially proposed in a paper by James Tobin.

While some U.S. officials, such as Republican French Hill, express significant reservations about retail CBDCs due to perceived threats to the national financial structure, others like Federal Reserve governor Michelle W. Bowman in April 2023 stressed that potential CBDC risks might overshadow their merits.

Yet, nations like China, Jamaica, and Nigeria have rolled out their CBDCs, even though some argue that these state-regulated virtual currencies negate the core purpose of cryptocurrencies and decentralized finance (defi): facilitating rapid value transfers without centralized intervention.


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