Indonesia’s central bank and the Bank for International Settlements (BIS) Innovation Hub have this week launched a global hackathon focused on developing new solutions in three areas of central bank digital currency (CBDC) development.
The competition is part of Indonesia’s G20 presidency and is the third G20 TechSprint after previous versions were co-organised by the BIS alongside Banca d’Italia (for Italy’s G20 presidency in 2021 and focused on green finance) and, before that, the Saudi G20 presidency (in 2020, focused on RegTech and SupTech).
A hackathon is an event during which participants, typically coders and developers, design and present innovative solutions to a particular challenge.
For this TechSprint, BIS Innovation Hub and Bank Indonesia have jointly opted to focus on technology challenges related to the development of retail and wholesale CBDCs. They have invited teams to develop solutions in three areas: issuing, distributing and transferring CBDCs; using CBDCs to help with financial inclusion; and using CBDCs to improve interoperability between countries’ payments systems.
Shortlisted teams will be announced in mid-June 2022 and will be invited to showcase their prototypes in a workshop in July for feedback from national authorities and invited experts. An independent panel of experts will choose the winning solutions, to be announced in October.
CBDCs ‘have potential for promoting the public interest’
In respect of the first challenge area – fully presented as ‘building effective and robust means to issue, distribute and transfer CBDCs’ – the organisers state that there is a ‘need to optimise various processes’. New capabilities, such as programmability of money, could also result in provisioning of new and innovative services to customers, the organisers explain.
For the second challenge of enabling financial inclusion, the organisers state thatCBDCs offer an opportunity to deepen financial inclusionand to overcome barriers facing the unbanked and underbanked. Staff from BIS have just co-authored (alongside staff from the World Bank Group) a paper, ‘Central bank digital currencies: a new tool in the financial inclusion toolkit?’, that interviewed nine central banks at various stages of implementing or exploring retail CBDCs on this topic.
In respect of the third challenge – improving interoperability – the organisers state that CBDCs can help to improve and enable connections and linkages in payment systems, enhancing connectivity and interoperability.
“There is a collective belief that CBDCs have potential for promoting the public interest in this age of digital money. Trust in money is the glue that holds the financial system together. It is for this reason that, as technology advances, central banks must ensure that the monetary system remains fundamentally a public good and preserve its stability,” said BIS general manager Agustín Carstens at the TechSprint’s launch event on 25 April.
“Through the TechSprint, we aim to foster and challenge the international community to propose and deliver the most practical and deployable solutions in designing and implementing CBDC,” said Bank Indonesia’s governor, Perry Warjiyo.
G20 presidency building up to Bali
Indonesia’s G20 presidency – running under the slogan ‘Recover Together, Recover Stronger’ – kicked off last December, with Warjiyo and the country’s finance minister, Sri Mulyani, leading the opening ceremony of G20 finance ministers and central bank governors meeting in Jakarta in February. The 17th G20 Heads of State and Government Summit will take place on 15-16 November in Bali.
The country, which is the largest economy in Southeast Asia and the world’s fourth most populous nation, has had a relatively low profile when it comes to developing its own CBDC. But Warjiyo was quoted by news agency Reuters 11 months ago as saying that BI “plans in the future to issue a central bank digital currency, digital rupiah…as a legal digital payment instrument in Indonesia”.
The hackathon’s launch event included a panel featuring Filianingsih Hendarta, head of Bank Indonesia’s payments system policy department; and Andrew McCormack, head of the BIS Innovation Hub’s Singapore centre.
Teams interested to participate in the hackathon are directed to an online platform that will facilitate registration, as well as prototype-building and online judging of project proposals.
The winners for each of the three categories (problem statements) will receive a prize of IDR 770,000,000 (about £42,000). All shortlisted projects will receive a stipend of IDR 145,000,000 (about £7,900).
WATCH ‘The Launching of TechSprint Central Bank Digital Currency’ (1hr27min15sec)
Credit: Bank Indonesia (via YouTube)
FURTHER READING
=>>> Global Government Fintech’s dedicated ‘Digital Currencies’ section <==
‘Green finance “TechSprint” winners named’ – our news story (25 Oct 2021) on teams from Belgium, Italy and the UK winning the ‘G20 TechSprint 2021’
