The Digital Pound: Technology Working Paper.pdf

The paper sets out the Bank's emerging thinking on CBDC technology and seeks feedback on the potential approach to important technology considerations. The paper does not set out a final design for CBDC, but rather presents one possible approach to CBDC architecture.

1: Introduction
The Bank of England has identified two primary motivations for a UK CBDC: sustaining access to, and promoting the usefulness of, central bank money; and promoting innovation, choice and efficiency in domestic payments. The platform model is currently the preferred model for offering a UK CBDC, where the Bank hosts the core ledger and an application programming interface (API) layer.

2: Functional requirements
The CBDC system should be designed to protect user privacy, while allowing private sector firms access to transaction data needed to provide CBDC services. The system should also be secure, resilient, performant, extensible and energy efficient.

3: Technology design considerations
Privacy: The CBDC system should be designed to protect user privacy, while allowing private sector firms access to transaction data needed to provide CBDC services. The Bank considers that privacy-enhancing technologies (PETs) might assist in meeting these requirements.

Security: The CBDC system should identify and guard against security risks, including cyber threats from a range of threat actors. The system could be designed to support the rapid adoption of new cryptographic algorithms, use secure access management, and incorporate a comprehensive security assurance programme.

Resilience: The CBDC system should be resilient to disruption, with containment and redundancy mechanisms in place. The Bank has established preliminary resilience requirements for a CBDC, including operating 24/7.

Performance: The CBDC system should be able to handle a high number of transactions and confirm and settle these transactions as quickly as possible. The system might utilise certain techniques, including horizontal scaling, multi-destination payments and offline payments.

Extensibility: The CBDC system should have an extensible design, allowing private sector firms to implement additional functionality without affecting user services. The Bank might examine the implications of using open-source components, and any vulnerabilities that may arise due to third-party dependencies.

Energy usage: The CBDC system should be energy efficient and designed in a way which minimises any impact on the environment.