The Bank for International Settlements (BIS) and Hong Kong Monetary Authority said they’ve conducted an experiment showing central bank digital currencies (CBDCs) can work in tandem with private stablecoins.
The study — dubbed Project Aurum, or “gold” in Latin — shows how the two digital currencies can work together to ensure privacy and safety, according to a report released Friday (Oct. 21).
“Project Aurum has made a number of ground-breaking achievements,” the study stated, adding “we have no doubt that the Aurum prototype will catalyze and inspire the global quest for the most suitable rCBDC [retail CBDC] architecture.”
The study — conducted with the Hong Kong Applied Science and Technology Research Institute — said the project created a “two-tier rCBDC system” made up of a wholesale interbank system and an eWallet system, in which the “validator mechanism helps prevent over-issuance and double-spending.”
The Project Aurum report also stated that bringing CBDC-backed stablecoins to life is something that has not happened before and that the system developed for these coins can be useful as central banks look to create regulations for private stablecoins.
This study comes 10 days after the European Central Bank (ECB) released research showing that rCBDCs will likely face challenges in terms of being accepted.
Read more: ECB Study Notes Challenges for Stablecoin Acceptance
The ECB said central banks could face difficult choices for rCBDCs in terms of balancing the three aspects: “keeping the current order of priority for policy goals,” “opting for designs and strategies that could increase the likelihood of adoption” and picking “designs that avoid negative economic effects.”
Last month, the central banks of Sweden and Israel — along with the Bank of Norway and BIS — began a study of how CBDCs could be used for international retail and remittance payments.
See more: Sweden, Norway and Israel Central Banks Test Cross-Border CBDC Payments
Project Icebreaker will see the banks develop a “hub” connecting their domestic proof-of-concept CBDC systems, so they can test specific key functions and the technological feasibility of interlinking different national CBDC systems.
The project is scheduled to run through the end of the year, with a final report expected in the first quarter of next year.
For all PYMNTS crypto and EMEA coverage, subscribe to the daily Crypto and EMEA Newsletters.