Central banks test over 30 CBDC use cases

2023-06-20 by

Hugues Marty

Central banks around the world are actively exploring the potential of central bank digital currencies (CBDCs) and their use cases. In a recent joint experiment, the Bank for International Settlements (BIS) and the Bank of England tested over 30 CBDC use cases, including offline payments, using an application programming interface (API) layer. The experiment, known as “Project Rosalind“, aimed to explore how an API layer could support a retail CBDC and enable secure payments in various scenarios.

The BIS Innovation Hub London Centre, in collaboration with the Bank of England, developed 33 API functionalities to test different CBDC use cases. The experiment focused on retail digital currency payments and aimed to establish a connection between monetary authorities and the private sector. The use of API software facilitated communication and data sharing between different computer programs involved in the experiment.

Francesca Hopwood Road, the head of the BIS Innovation Hub London Centre, highlighted the significance of Project Rosalind in understanding the potential of CBDCs and the market’s response to them. The Bank of England is currently exploring the development of a digital pound and has proposed hosting the centralized ledger and API for a potential digital currency. This would allow private sector firms to access the ledger and provide services like automated payments.

During the experiment, a wide range of payment options were tested, including online, offline, and in-store payments using QR codes, mobile phones, and smart cards. The project also focused on exploring micropayments and introduced a use case for a child-parent wallet, examining responsible spending and how parents can allocate pocket money to children. The versatility of the API layer was demonstrated by its compatibility with different ledgers, providing flexibility for future implementation.

The BIS has been actively engaging in various experiments, including those related to CBDCs, to contribute to the ongoing discussions surrounding digital currencies. Many jurisdictions are considering the issuance of CBDCs, with some countries like Nigeria and the Bahamas already implementing them. Hopwood Road emphasized that the BIS Innovation Hub aims to explore different dimensions of CBDCs, such as cross-border transactions, offline usability, and security. These aspects are crucial for central banks as they focus their attention on CBDC exploration and adoption.

In addition to the collaboration between the BIS and the Bank of England, blockchain network Quant announced its involvement in Project Rosalind. Quant partnered with digital solutions platform UST to provide the underlying infrastructure and blockchain platform for the project. Their collaboration ensures the security of smart contracts, interoperability of central bank ledgers, and the development of the frontend Rosalind API layer.

The successful testing of over 30 CBDC use cases, including offline payments, through the utilization of an API layer, marks a significant milestone in the development of central bank digital currencies. The experiments conducted by the BIS and the Bank of England demonstrate the potential for CBDCs to revolutionize the way retail payments are made and to enhance financial inclusion. As central banks continue to explore and refine the concept of CBDCs, it is clear that digital currencies are becoming an integral part of the future of finance.