Hong Kong-Israel CBDC Project Examines Security, Privacy, Accessibility

Project Sela claims to settle directly on central bank balance sheets without compromising people's data

AccessTimeIconSep 12, 2023 at 8:55 a.m. UTC
  • The Bank for International Settlements’ Project Sela used novel intermediaries to cut liquidity risk for central bank digital currencies.
  • Sela feeds into digital currency projects for Israeli shekel, Hong Kong dollar.

Central bank digital currencies can be set up to be secure and private while allowing transactions to be settled on the central bank’s own ledger, the Bank for International Settlements (BIS) has said as it outlines the results of its Project Sela.

Central banks across the world are looking at whether they can issue digital versions of their fiat currency, and Sela in particular is probing how those systems can be protected from hacks and distributed to people.

“If central bank money is to go digital, cybersecurity is key,” Andrew Abir, Deputy Governor of the Bank of Israel, which is examining whether to issue a digital shekel, said in a statement. “The project proved the feasibility of the model we had in mind.”

In project Sela, transactions were settled directly on the central bank’s balance sheet, but BIS said that privacy was preserved because people’s personal identifiers were “obfuscated.”

While many CBDCs, such as the European Union’s proposed digital euro, would use banks and other payment providers to link between central banks and ordinary users, Project Sela uses what it calls a “novel type of intermediary” to handle customer-facing services without the liquidity risk of holding funds directly.

Previous BIS research has indicated 93% of central banks across the world are examining whether to issue CBDCs. That has raised concerns over citizens’ privacy – not least given fears that China will use its digital yuan as a form of social control.

The project’s outcome “will inform our ongoing exploration” of a possible digital Hong Kong dollar, the e-HKD, said Howard Lee, Deputy Chief Executive of the Hong Kong Monetary Authority, which also took part.

Edited by Parikshit Mishra.

Disclosure

Please note that our privacy policy, terms of use, cookies, and do not sell my personal information has been updated.

CoinDesk is an award-winning media outlet that covers the cryptocurrency industry. Its journalists abide by a strict set of editorial policies. In November 2023, CoinDesk was acquired by the Bullish group, owner of Bullish, a regulated, digital assets exchange. The Bullish group is majority-owned by Block.one; both companies have interests in a variety of blockchain and digital asset businesses and significant holdings of digital assets, including bitcoin. CoinDesk operates as an independent subsidiary with an editorial committee to protect journalistic independence. CoinDesk employees, including journalists, may receive options in the Bullish group as part of their compensation.

Jack Schickler

Jack Schickler was a CoinDesk reporter focused on crypto regulations, based in Brussels, Belgium. He doesn’t own any crypto.