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Design choices for central bank digital currency: Policy and technical considerations

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Abstract

Central banks around the world are exploring and in some cases even piloting central bank digital currencies (CBDCs). CBDCs promise to realize a broad range of new capabilities, including direct government disbursements to citizens, frictionless consumer payment and money-transfer systems, and a range of new financial instruments and monetary policy levers.

CBDCs also give rise, however, to a host of challenging technical goals and design questions that are qualitatively and quantitatively different from those in existing government and consumer payment systems. A well-functioning CBDC will require an extremely resilient, secure, and performant new infrastructure, with the ability to onboard, authenticate, and support users on a massive scale. It will necessitate an architecture simple enough to support modular design and rigorous security analysis, but flexible enough to accommodate current and future functional requirements and use cases. A CBDC will also in some way need to address an innate tension between privacy and transparency, protecting user data from abuse while selectively permitting data mining for end-user services, policymakers, and law enforcement investigations and interventions.

In this paper, we enumerate the fundamental technical design challenges facing CBDC designers, with a particular focus on performance, privacy, and security. Through a survey of relevant academic and industry research and deployed systems, we discuss the state of the art in technologies that can address the challenges involved in successful CBDC deployment. We also present a vision of the rich range of functionalities and use cases that a well-designed CBDC platform could ultimately offer users.

Sarah Allen

Community Manager - Initiative for Cryptocurrencies and Contracts

Srdjan Capkun

Professor of Computer Science - Swiss Federal Institute of Technology in Zürich (ETH Zürich)

Director - The Zürich Information Security and Privacy Center

Faculty - Initiative for Cryptocurrencies and Contracts

Ittay Eyal

Senior Lecturer of Electrical Engineering - Israel Institute of Technology

Associate Director - Initiative for Cryptocurrencies and Contracts

Giulia Fanti

Assistant Professor of Electrical and Computer Engineering - Carnegie Mellon University

Faculty - Initiative for Cryptocurrencies and Contracts

Bryan Ford

Associate Professor, Institute of Computer and Communication Sciences - Swiss Federal Institute of Technology in Lausanne

Faculty - Initiative for Cryptocurrencies and Contracts

James Grimmelmann

Tessler Family Professor of Digital and Information Law - Cornell Tech and Cornell Law School

Faculty - Initiative for Cryptocurrencies and Contracts

Ari Juels

Weill Family Foundation and Joan and Sanford I. Weill Professor, Jacobs Technion-Cornell Institute - Cornell Tech

Professor of Computer Science - Cornell University

Co-director - Initiative for Cryptourrencies and Contracts

Kari Kostiainen

Senior Scientist - Swiss Federal Institute of Technology in Zürich

Coordinator - Zürich Information Security Center

Senior Scientist - Initiative for Cryptocurrencies and Contracts

Sarah Meiklejohn

Professor of Computer Science - University College London

Fellow - Alan Turing Institute

Associate Director - Initiative for Cryptocurrencies and Contracts

Andrew Miller

Assistant Professor of Electrical and Computer Engineering - University of Illinois at Urbana-Champaign

Associate Director - Initiative for Cryptocurrencies and Contracts

Karl Wüst

Research Assistant and Ph.D. Student, Department of Computer Science - Swiss Federal Institute of Technology in Zürich

Ph.D. Student - Initiative for Cryptocurrencies and Contracts

Fan Zhang

Ph.D. Student, Department of Computer Science - Cornell University

Ph.D. Student - Initiative for Cryptocurrencies and Contracts

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