• T Skevington and M Bacina

Bank for International Settlements considers CBDC technology requirements


The Bank for International Settlements (BIS) has released a flurry of reports as part of its quarterly review on central bank digital currencies (CBDC) including the following two key reports:

  1. The technology of retail central bank digital currency; and

  2. Taking stock: ongoing retail CBDC projects.

The report 'The technology of retail central bank digital currency' by Raphael Auer and Rainer Boehme considers technological design considerations for a retail CBDC. It explicitly excludes any discussion of the case for or against issuance of a CBDC, as well as the systemic implications of CBDCs and how these might be managed.


The report frames the technological requirements of a CBDC in terms of the underling consumer needs a CBDC should be designed to address. In doing so, the report suggest that "the consumer’s prime need is that the CBDC embodies a cash-like claim on the central bank, ideally transferable in peer-to-peer settings."


The report summaries the overarching relationship between consumer needs and the CBDC design choices in the following CBDC pyramid:


The BIS then considers how the architecture of a CBDC would differ depending on the proposed legal structure of claims against the CBDC and the respective operational roles of the central bank and private institutions in payments.


The BIS acknowledges that each of the above models have vastly different technological requirements. In particular, the report provides that:

the direct CBDC would require massive technological capabilities, as the central bank processes all transactions by itself, handling a volume of payments traffic comparable with that of today’s credit or debit card operators. The hybrid CBDC architecture is more complex to operate than the indirect model, as the central bank does maintain retail balances. Nevertheless, it could be implemented at scale using today’s technology and with a relatively modest infrastructure even in the world’s largest currency areas

In considering the way forward, the report acknowledges that as use of cash declines, and "related developments in the private sector" accelerate (read: Libra), central banks will need to "step up". While early steps are being taken, there is some way to go. The BIS report and research into this exciting space is sure to help many central banks drive further forward with their own CBDC projects.

© Michael Bacina. All rights reserved

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