Research Shows That CBDCs Can Operate With Private Stablecoins

According to studies from the Hong Kong Monetary Authority and BIS Innovation Hub, a wholesale CBDC may operate well using private stablecoins.

The partners developed Project Aurum, named after the Latin word for gold, in which they developed a technological stack that included a wholesale interbank system in which the wholesale CBDC is distributed to banks for usage by retail customers.

Then they looked at a retail e-wallet system in which customers may exchange retail CBDC for two different sorts of tokens: intermediated CBDC, or CBDC-tokens, and stablecoins backed by retail CBDC.

The end-users are protected even if a commercial bank fails because to the researchers’ usage of UTXO (Unspent Transaction Output), which enabled the traceability of the tokens to the underpinning assets.

The two-tier design adds further privacy for end users since the interbank system does not keep track of any personal information, according to the paper’s list of advantages of the setup. In the meanwhile, the network segmentation and privilege separation principle-based decoupling of the wholesale and e-wallet systems enhances cyber resilience.

The authors claim “we have no doubt that the Aurum prototype will catalyse and inspire the global quest for the most suitable rCBDC architecture”.