There is no one-size-fits-all CBDC, and each will inevitably reflect the unique economic, structural, and technical needs of the country in which they are implemented.
Governments wishing to implement digital currency solutions will have to make a number of considerations, not least of all the extent to which a CBDC replaces cash. At minimum, CBDC must record transactions, which represent central bank liabilities, on a ledger.
CBDC functionality & design choices
More sophisticated functionality will depend on the issuing country’s needs but may include, CBDC wallets, custody and exchange systems, national identity systems, monetary policy tools to affect CBDC interest and limits, product and service registers for managing real-time taxation at source and much more.
Some key design choices are:
- Instrument – retail vs wholesale
- Authentication method – account vs token based
- Openness – public vs private blockchain
We give a more detailed overview in each of our blogs, but our analysis finds that a government-issued and controlled private permissioned CBDC running on a public network – the blockchain – is by far the most secure, scalable, and efficient model for both retail and wholesale applications.
At nChain, we are working with central banks to research and design a truly more resilient, trusted and inclusive modern economy, securing the livelihoods and prosperity of citizens for generations to come.
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