How to issue a privacy-preserving central bank digital currency

Many central banks are currently investigating Central Bank Digital Currency (CBDC) and possible designs. A recent survey conducted by the European Central Bank has found that both citizens and professionals consider privacy the most important feature of a CBDC. We show how a central bank could issue a CBDC that would be easily scalable and allow the preservation of a key feature of physical cash: transaction privacy. At the same time the proposed design would meet regulatory requirements and thus offer an appropriate balance between privacy and legal compliance

Design Requirements for Civil Internetworking (Position paper)

International audienceNone

How to Issue a Central Bank Digital Currency

With the emergence of Bitcoin and recently proposed stablecoins from BigTechs, such as Diem (formerly Libra), central banks face growing competition from private actors offering their own digital alternative to physical cash. We do not address the normative question whether a central bank should issue a central bank digital currency (CBDC) or not. Instead, we contribute to the current research debate by showing how a central bank could do so, if desired. We propose a token-based system without distributed ledger technology and show how earlier-deployed, software-only electronic cash can be improved upon to preserve transaction privacy, meet regulatory requirements in a compelling way, and offer a level of quantum-resistant protection against systemic privacy risk. Neither monetary policy nor financial stability would be materially affected because a CBDC with this design would replicate physical cash rather than bank deposits

How to Issue a Central Bank Digital Currency

With the emergence of Bitcoin and recently proposed stablecoins from BigTechs, such as Diem (formerly Libra), central banks face growing competition from private actors offering their own digital alternative to physical cash. We do not address the normative question whether a central bank should issue a central bank digital currency (CBDC) or not. Instead, we contribute to the current research debate by showing how a central bank could do so, if desired. We propose a token-based system without distributed ledger technology and show how earlier-deployed, software-only electronic cash can be improved upon to preserve transaction privacy, meet regulatory requirements in a compelling way, and offer a level of quantum-resistant protection against systemic privacy risk. Neither monetary policy nor financial stability would be materially affected because a CBDC with this design would replicate physical cash rather than bank deposits.Comment: Swiss National Bank Working Paper3/202

Decentralized Identities for Self-sovereign End-users (DISSENS)

This paper describes a comprehensive architecture and reference implementation for privacy-preserving identity management that bucks the trend towards centralization present in contemporary proposals. DISSENS integrates a technology stack which combines privacy-friendly online payments with self-sovereign personal data management using a decentralized directory service. This enables users to be in complete control of their digital identity and personal information while at the same time being able to selectively share information necessary to easily use commercial services. Our pilot demonstrates the viability of a sustainable, user-centric, standards-compliant and accessible use case for public service employees and students in the domain of retail e-commerce. We leverage innovative technologies including self-sovereign identity, privacy credentials, and privacy-friendly digital payments in combination with established standards to provide easy-to-adapt templates for the integration of various scenarios and use cases

Practical Offline Payments Using One-Time Passcodes

Modern buyers enjoy the convenience of digital payments, but not all points of sale always have an Internet connection. Trusting the buyer’s device to honestly report that a payment was definitively made puts merchant’s revenue at risk. We present an inexpensive and usable solution for merchants to verify that a buyer correctly completed a payment even when the point of sale is offline

Who comes after us? The correct mindset for designing a Central Bank Digital Currency

In December 2021 the European Central Bank (ECB) published a report on "Central Bank Digital Currency: functional scope, pricing and controls" in its Occasional Paper Series [BPT21], detailing various challenges for the Digital Euro. While the authors peripherally acknowledge the existence of token-based payment systems, the notion that a Digital Euro will somehow require citizens to have some kind of central bank account is pervasive in the paper. We argue that an account-based design cannot meet the ECB’s stated design goals and that the ECB needs to fundamentally change its mindset when thinking about its role in the context of the Digital Euro if it wants the project to succeed. Along the same lines, the French National Council for Digitalization published a report on "Notes and Tokens, The New Competition of Currencies" [DGTV21]. Here, the authors make related incorrect claims about inevitable properties of Central Bank Digital Currencies (CBDCs), going as far as stating that a CBDC is not possible without an eID system. Our paper sets the record straight