Thomas Kudrycki, CTO, eCurrency
Many aspects of our lives continue changing significantly as a result of the digital revolution. The form of many types of content, from books and music to photos and videos, is drastically different today than it was just a decade or two ago. The way we execute payments is not immune to this change. Many new payment systems and solutions have emerged in the past several years and it now seems that money itself is about to drastically change form as many central banks around the world evaluate a possibility of issuing digital cash.
Thomas Kudrycki presents at the 2nd Meeting of ITU FG DFC, New York
A possibility of Central Bank Digital Currency (CBDC) or Digital Fiat Currency (DFC) as many call it, has numerous implications for the central banks, the public and the economy itself (see the article by Dr. Bejoy Das Gupta nearby). The subject is new and is obscured by much confusion stemming from the lack of common definitions of what DFC is, mixing DFC with private cryptocurrencies and conflating specific technological implementations with the fundamental nature of the currency itself. Some efforts have been made to build a taxonomy of various forms of money, most notably the BIS "money flower" (https://www.bis.org/publ/qtrpdf/r_qt1709f.htm), but the standardization process of defining terms has been fragmented to-date.
The International Telecommunication Union (ITU), initially created in 1865 to standardize the telegraph communications, is a specialized UN agency for information and communication technologies. The ITU is leading the efforts to standardize the terminology used to describe digital currencies and to provide analysis of their economic impacts and regulatory requirements, as well as to delve deeper into the possible technologies and system architectures used for implementations of DFC. The ITU Workshop on Standardizing Digital Fiat Currency and its Applications held July 18-20 2018 at the Cornell University New York City Technology Campus was the latest gathering in support of this standardization effort (https://www.itu.int/en/ITU-T/Workshops-and-Seminars/20180718). My company, eCurrency (https://www.ecurrency.net/), has taken an active role in contributing to these efforts.
The ITU Workshop accepted inputs and DFC use cases provided by several central banks, government regulators and private companies and focused on three areas of critical importance to this standardization effort: regulatory requirements, technical architectures, and security. eCurrency actively participated in each of the three workstreams. The technology workstream focuses on the creation of a reference architecture. People's Bank of China (PBOC) presented a two-tier architecture for creating, distributing and transacting DFC. eCurrency also presented multi-tier architecture on which our product is based. Both presentations were detailed and well received.
The eCurrency product is an excellent example of an existing and commercially deployed approach to DFC. Our product is based on requirements from several central banks and uses novel and traditional cryptography, security and transactional scalability approaches to achieve a highly reliable, commercially available solution. Our approach does not disrupt the existing payment systems, banking systems, and payment interoperability switches, but rather augments them by providing an instrument-based DFC which is issued by a sovereign authority and can circulate within the existing payment infrastructure. This instrument-based approach sometimes referred to as a token-based approach, is highly effective as it applies equally well to retail (consumer) and wholesale (bank to bank) payments, and also can be used in both online and offline modes, thus removing the unnecessary distinctions among these payment use cases.
I presented the high-level technical architecture of the eCurrency product during a plenary panel session and then in more detail at the reference architecture working group session. I was also pleased to announce that eCurrency has contributed its API to the ITU effort as an example of a key component of the reference architecture: a way for the existing payment infrastructure to operate using DFC. eCurrency is also ready to assist qualified entities with interfacing and working with the eCurrency DFC implementation, and to provide a test environment to trial its capabilities. The reference architecture working group will continue its efforts: and as the next step task for members will be to review specific DFC use cases submitted by the central banks. This input, together with the eCurrency API and other technology and process contributions, will be used to propose and then verify a reference architecture sought by the ITU. eCurrency will continue playing an active role in the efforts of the working group. We believe that establishing a common language to describe DFC and a framework for applying it to the real-life payment scenarios will benefit the entire payments ecosystem and secure the role of the central banks as custodians of sovereign legal tender in the digital age.