The Bank for International Settlements (BIS) together with a group of seven central banks published a report titled 'central bank digital currencies: system design' in November 2024. The report first provides some perspectives on overall system design and then focuses on four key issues essential for designing a well-functioning retail CBDC system: privacy, cyber security (including quantum computing), offline functionality and point of sale considerations.
eCurrency digital symmetric core currency cryptography (DSC3) technology was meticulously designed and engineered from the ground up with the specific intent of empowering central banks to create and issue a CBDC that cannot be counterfeited and is safe and secure. The DSC3 technology addresses a multitude of operational and policy requirements, ensuring that CBDC can function effectively as legal tender alongside traditional forms of currency such as notes and coins. Key attributes of this technology include its scalability, which allows the system to handle a large volume of transactions efficiently; interoperability, enabling seamless interaction with existing financial infrastructures; and instant settlement capabilities that facilitate real-time transactions without delays. Furthermore, the DSC3 technology is built to ensure compliance with regulatory standards while fostering an inclusive financial environment that can cater to a diverse range of users, and easily and naturally crosses the offline boundary to be used in situations when network connectivity is unavailable.
The table below highlights how the four issues raised in the BIS report are addressed through the innovative features of eCurrency DSC3 technology. It not only illustrates the effectiveness of DSC3 in tackling the challenges outlined by the BIS but also underscores the commitment to developing a CBDC that meets the highest standards of security, efficiency, and user experience.
Issue raised in BIS report | eCurrency DSC3 approach | |
|---|---|---|
Privacy | Experimental work conducted by several central banks suggests that some of the privacy enhancing techniques (eg homomorphic encryption, differential privacy, secure multi- party computation, confidential computing) may not be feasible to use in real-time or are very complicated, introduce additional latency and raise reliability concerns. Privacy in CBDC is not dependent on PETs or any single PET - more traditional technical and operational methods can be used. | DSC3 enables central banks to issue a secure digital form of their currency that is essentially a digital bearer instrument. This digital currency instrument itself contains all the aspects of its value and does not rely on any information that identifies the holder. DSC3 enables the identity information to be managed by private sector intermediaries, in decentralized and hybrid deployment architectures, without sharing that identity information with the central bank. As such, DSC3 technology provides the flexibility necessary to support the appropriate and necessary policy choices relative to anonymity and privacy. For example, it is possible to set thresholds based on policy to permit anonymity for small and low-volume transactions, but with full visibility for the central bank into the largest and most frequent transactions. |
Cyber security | A new generation of post-quantum cryptography (PQC) is emerging, and all central bank systems, including potential CBDC, would eventually need to use them. However, this is not a simple swap from old to new. Some – but not all – PQC constructs are highly computationally demanding, as the group has found in their respective experimental work. Using a combination of pre- and post-quantum cryptography could maximise cryptographic agility, allowing legacy and new systems to coexist. | DSC3 provides layers of cryptography that can be applied in a decentralized manner to protect CBDC bearer instrument and prevent counterfeiting. DSC3 creates a symmetric key cryptographic core specific to the central authority, along with layers of asymmetric cryptographic and digital security, and then extends that core through currency-specific decentralized hardware security appliances deployed at banks, payment services providers and in the cloud. The appliances secure transactions, and verify the authenticity of the bearer instruments. The symmetric cryptography used does not require quantum-proofing since symmetric algorithms by their nature are already immue to quantum attacks. DSC3 utilizes well-known and standard cryptography functions and technologies that central banks and financial institutions are familiar with to deliver a highly secured yet operational and efficient CBDC system. |
Offline CBDC | New security technologies are emerging that may help, but the timelines for their maturity and availability are difficult to predict. | DSC3 is an incredibly dynamic open system! eCurrency has collaborated with multiple offline security technology providers to enhance the CBDC digital bearer instrument and the symmetric core, bringing them right to end-user devices. With CBDC, a user can effortlessly transfer between offline devices as demonstrated in BI BIS G20 Techsprint and MAS Global CBDC Challenge, and enjoy instant settlement finality, all without needing either one of the two devices to be online. Plus, DSC3 empowers the central bank to set limits on offline transactions, ensuring top-notch compliance and risk management! |
CBDC point of sale | Central banks may need to consider the contactless kernel that should be used to perform the transaction at the merchant terminals, the transaction flow (such as push, pull, or peer-to-peer), the customer verification method (such as online PIN or Face ID), and how consumer wallet balances are updated (value actually transferred at PoS or authorised instruction sent to ledger to update the balance). | As DSC3-enabled CBDC are common universal bearer instruments, they are interoperable with any and all e-wallet or payment systems including those provided by banks, mobile operators and optionally the central bank itself. DSC3 was specifically designed to leverage existing, and future, payment rails built by private sector participants. DSC3 de-couples the wallets and payments from the instruments. As such, existing digital wallet and payment systems are able to store and transact in CBDC instruments while retaining their user interfaces and functionalities. The user experience remains the same, and user authentication, support and KYC continue to be the responsibility of the private sector service providers. Merchants readily accept CBDC using their merchant e-wallet apps or existing PoS terminals with software updates as demonstrated in live pilots and production deployments since 2014 . |
The four key issues raised by the BIS report not only highlight significant concerns within the current financial and digital currency landscape but also serve to validate the foresight and uniqueness of eCurrency DSC3 technology. eCurrency DSC3 technology stands out as a pioneering solution that addresses these critical challenges effectively. Each of the four issues identified in the report underscores the necessity for innovative approaches in the realm of digital currencies, where security, scalability, interoperability, and regulatory compliance are paramount. By leveraging proven cryptographic techniques and a robust CBDC-centric framework, eCurrency DSC3 technology offers a comprehensive answer to these pressing issues, ensuring a secure and efficient transaction environment. Furthermore, the adaptability of this technology positions it as a frontrunner in the rapidly evolving digital currency ecosystem, making it not only relevant but essential for future developments in this field. The BIS report serves as a testament to the strategic vision behind eCurrency DSC3, reinforcing its role as a transformative force in the financial sector.
Check out the exciting eCurrency papers below to discover why DSC3 is the unparalleled technology that fully meets the operational and policy needs of CBDCs!
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