The Hong Kong Monetary Authority, the Bank of Israel, and the Bank for International Settlements (BIS) worked together in a ground-breaking way to reveal Project Sela’s transformative outcomes. This innovative project, which was the result of the collaboration of the public and private sectors, has ushered in a new era for digital currencies by opening the door for the innovative union of cash’s benefits and digitalization’s innovations.
The goal of Project Sela, a ground-breaking public-private partnership, is to develop a Retail Central Bank Digital Currency (rCBDC) ecosystem that seamlessly combines the dependable qualities of physical money with the unmatched capacities of digital assets.
Central banks, financial behemoths FIS and M10 Networks, legal stalwart Clifford Chance, and cybersecurity experts Check Point Software Technologies were at the center of this unprecedented endeavor. Together, they set out on a proof-of-concept adventure that promised to change the face of digital currency.
Decoding the Sela Ecosystem
The Sela ecosystem introduces a profound shift in the way we conceptualize and interact with digital currencies. Central to this innovation is the central bank, the custodian of the rCBDC, responsible for maintaining a ledger replete with pseudo-anonymous end-user accounts. Here, a real-time gross settlement (RTGS) system facilitates lightning-fast transactions. However, the ripple effects of Sela extend far beyond this fundamental layer.
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Project Sela proposes a new financial infrastructure, the Access Enabler, which facilitates customer-facing activities without ever holding users’ rCBDC. It removes complexity, costs + risks compared w current payment providers #BISInnovationHub@hkmagovhkhttps://t.co/znVp81gQolpic.twitter.com/hItQamQc0K
— Bank for International Settlements (@BIS_org) September 12, 2023
Funding institutions play a pivotal role by overseeing user accounts and facilitating the seamless conversion of rCBDC into bank deposits and traditional cash. Yet, the true magic of the Sela ecosystem lies in the presence of a key intermediary: the access enabler. This dynamic entity takes center stage in customer-facing services, assuming responsibility for Know Your Customer compliance, endorsements, routing, and more. Remarkably, end users wield unwavering control over their electronic wallets, safeguarded by cryptographic keys.e
Project Sela aspires to democratize the world of digital currencies. By empowering private financial institutions to deliver unbundled financial services, the initiative promises to fuel competition and expand user access. Notably, access enablers, though instrumental in the ecosystem, refrain from creating accounts, managing records, or exercising control over financial assets. This approach significantly alleviates the regulatory obligations placed upon them.
Overcoming Technical Challenges
The benefits of this groundbreaking ecosystem extend to a wide spectrum of entities, including small- and medium-sized enterprises (SMEs), civil society organizations, charitable institutions, e-commerce providers, community centers, and tech enterprises, among others. The vision is clear: to break down entry barriers and democratize rCBDC services, transcending the confines of the traditional payments landscape.
Even in the face of revolutionary innovation, challenges emerge. The report acknowledges that Real-Time Gross Settlement (RTGS) systems, while pivotal, often operate within constraints. They are typically unavailable round the clock and are not ideally suited for frequent, small transactions. Project Sela recognizes the need for technical solutions to address these constraints, ensuring that the rCBDC ecosystem remains robust and resilient.
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In essence, Project Sela represents a quantum leap in the evolution of digital currencies, a testament to the power of collaboration and innovation. By reimagining how we interact with and utilize digital assets, this transformative initiative is poised to redefine the financial landscape, placing accessibility, inclusivity, and efficiency at its core. The digital currency revolution has arrived, and its name is Project Sela.