The Bank for International Settlements (BIS) announced on Wednesday that it has formed a partnership with the central banks of Israel, Norway, and Sweden in order to investigate the potential applications of central bank digital currencies (CBDC) for use in international retail and remittance payments.

The world’s central banks have decided to collaborate on creating a new hub that will allow the Central Bank of Norway, the Bank of Israel, and the Sveriges Riksbank to link their proof-of-concept CBDC systems. The purpose of the project will be to investigate the viability of interconnecting various CBDC systems from a technical and operational standpoint by testing specific functionalities.

According to the BIS, the architecture is planned to allow instant retail CBDC payments to be made across borders at a cost that is much lower than that of current systems. Existing systems are often based on payments routed through multiple banks to the end receiver, referred to as the “correspondent banking system.”

Bank of Israel deputy governor, Andrew Abir, said:

Efficient and accessible cross-border payments are of extreme importance for a small and open economy like Israel and this was identified as one of the main motivations for a potential issuance of a digital shekel.

According to Beju Shah, the director of the BIS Innovation Hub Nordic Centre, this experiment will be the first of its type and will delve further into the choices and trade-offs involving technology, architecture, and design. It will also study relevant policy problems. These takeaways will prove to be quite helpful for central banks that are considering using CBDCs for international payment transactions, says Shah.