Design Choices for Central Bank Digital Currency: Policy and Technical Considerations

Sarah Allen, Srdjan Capkun, Ittay Eyal, Giulia Fanti, Bryan Ford, James Grimmelmann, Ari Juels, Kari Kostiainen, Sarah Meiklejohn, Andrew Miller, Eswar Prasad, Karl Wüst and Fan Zhang ()
Additional contact information
Sarah Allen: Initiative for CryptoCurrencies and Contracts (IC3)
Srdjan Capkun: Initiative for CryptoCurrencies and Contracts (IC3)
Ittay Eyal: Initiative for CryptoCurrencies and Contracts (IC3)
Giulia Fanti: Initiative for CryptoCurrencies and Contracts (IC3)
Bryan Ford: Initiative for CryptoCurrencies and Contracts (IC3)
James Grimmelmann: Initiative for CryptoCurrencies and Contracts (IC3)
Ari Juels: Initiative for CryptoCurrencies and Contracts (IC3)
Kari Kostiainen: Initiative for CryptoCurrencies and Contracts (IC3)
Sarah Meiklejohn: Initiative for CryptoCurrencies and Contracts (IC3)
Andrew Miller: Initiative for CryptoCurrencies and Contracts (IC3)
Karl Wüst: Initiative for CryptoCurrencies and Contracts (IC3)
Fan Zhang: affiliation not available

No 13535, IZA Discussion Papers from Institute of Labor Economics (IZA)

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.

Keywords: new financial technologies; digital money; cryptocurrencies; payment systems (search for similar items in EconPapers)
JEL-codes: E42 E52 E58 O31 (search for similar items in EconPapers)
Pages: 110 pages
Date: 2020-07
New Economics Papers: this item is included in nep-mac, nep-mon and nep-pay
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (31)

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Working Paper: Design Choices for Central Bank Digital Currency: Policy and Technical Considerations (2020)
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