In a groundbreaking collaboration, the Hong Kong Monetary Authority (HKMA), the Bank for International Settlements (BIS) Hong Kong Centre, and the Bank of Israel (BOI) have come together to embark on a transformative journey. Their mission? To test the feasibility and viability of a Central Bank Digital Currency (CBDC) through the ambitious Project Sela.
Project Sela is more than just an experiment; it represents a vision to construct a robust, decentralized, and trustworthy CBDC (rCBDC) ecosystem that places paramount importance on privacy and security. At its core, this initiative seeks to redefine the way CBDCs operate and promote a new era of innovation, competition, and enhanced service delivery.
One of the central features of Project Sela is the allocation of responsibilities between the private sector and the central bank. In this proposed framework, sector intermediaries would assume the role of handling customer-facing services and regulatory functions. Meanwhile, the central bank would retain control over the ledger and end-user accounts. This innovative arrangement is anticipated to foster creativity, rivalry, and a heightened level of service excellence within the CBDC ecosystem.
To facilitate broader access and participation, Project Sela introduces a novel class of service providers known as “Access Enablers” (AEs). These specialized entities would engage with consumers without directly controlling or holding digital currencies, marking a significant departure from conventional models.
One of the key advantages of this setup is that all transactions are settled on the central bank’s balance sheet, thereby eliminating credit risk. This reduction in requirements for AEs has the potential to expand the pool of available payment processors and stimulate healthy competition within the digital currency landscape.
Addressing cybersecurity concerns is a top priority for Project Sela. The collaborative effort aims to ensure that, despite increasing accessibility, the CBDC ecosystem remains resilient to emerging threats. Leveraging Israel’s expertise in cybersecurity and drawing inspiration from initiatives in Hong Kong, the project seeks to strike a crucial balance between accessibility and security.
Project Sela stands as a testament to the global financial community’s commitment to innovation, privacy, and security in the evolving realm of digital currencies. As this transformative endeavor unfolds, it has the potential to reshape the landscape of CBDCs and set new standards for the future of digital finance.
