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Designing CBDCs for Seamless Integration with External DLTs: Strategies and Solutions

Designing CBDCs for Seamless Integration with External DLTs: Strategies and Solutions

Central Bank Digital Currency (CBDC) is gaining traction as a digital version of cash issued by central banks. Several countries have already implemented a CBDC, and many others are actively investigating or piloting one. What’s clear is that most of these systems run on their dedicated infrastructure, rather than on public and/or existing blockchains. This creates interoperability challenges, such as how to transact with CBDCs from existing smart contract ecosystems. This talk aims to provide an overview of how CBDCs can be designed to address these challenges, and to provide practical examples of how integration with existing systems could be achieved.

Lars Hupel

May 12, 2023
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Transcript

  1. How to integrate
    CBDC with DLTs?
    Strategies and Solutions
    Lars Hupel
    TUM Blockchain Salon
    2023-05-12

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  2. Central
    Bank
    Digital
    Currency
    Distributed
    Ledger
    Technology

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  3. Central Bank Digital Currency
    CBDC
    Banknotes Bank deposits
    and e-money
    Issued by the
    central bank
    Digital money

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  4. CBDC worldwide
    https://cbdctracker.org/

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  5. In 2023, over 20
    countries will
    take significant
    steps towards
    piloting a CBDC.
    https://www.atlanticcouncil.org/cbdctracker/

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  6. distributed ledger:
    append-only store of transactions which is
    distributed across many machines
    Xu et al.: Architecture for Blockchain Applications (2019)

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  7. Will CBDC run on DLT?
    Does it matter?

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  8. Roles & Responsibilities in CBDC

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  9. Central Bank Intermediaries Users

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  10. Validation & Integrity
    Alice
    Bob
    - 10 €
    + 10 €
    Central Bank

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  11. Distribution & Custody
    Intermediaries

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  12. Payments & more …
    Users

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  13. Programmability in CBDC

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  14. Programmable
    Money
    Programmable
    Payments
    (e.g. HTLC) (e.g. ERC-20)

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  15. Programmable
    Money
    Programmable
    Payments

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  18. Central Bank
    Infrastructure
    FSP Integration
    Private Sector
    Innovation

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  19. CBDC & Smart Contracts

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  20. Assumptions
    1 Central Banks do not care about specific DLT implementations.
    2
    Central Banks do not care about end-user operations.
    3 Commercial players know better about customer needs.
    4
    DLTs evolve much faster than currency does.

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  21. Transacting CBDC directly
    Bank A Bank B

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  22. Transacting CBDC in a Smart Contract
    Private
    Ethereum
    Open APIs
    ERC20
    Smart
    Contracts

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  23. Decentralized
    Identifiers
    ERC20
    (or similar)
    Liquidity
    management Open APIs

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  24. What do we gain? What do we need?
    Ability to experiment Stable currency
    Flexibility for new use cases
    Separation of concerns
    Regulatory control
    Standardization

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  27. Questions?
    Answers!
    Lars Hupel
    https://lars.hupel.info
    [email protected]

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