Implementing a CBDC: the challenges and a solution

The concept of a CBDC is not new. Today, CBDCs are close to becoming a reality in many countries and unlocking value and breaking barriers in payment systems. 

A vast majority of central banks surveyed, 85% are now exploring the benefits and drawbacks of CBDCs. Central banks are moving into more advanced stages of CBDC engagement. 60% (up from 42% in 2019) are conducting experiments and proofs-of-concepts, and 14% are moving forward to development and pilot arrangements.

This paper looks at the challenges of implementing different types of CBDCs and describes a solution being piloted in Latin America and the Caribbean to create the Latin American Dollar and CBDC.

This paper explores the use of blockchain and distributed ledger technologies operating in the “semi-decentralised” way as defined by the IMF, enabling a Multi-Ledger Token Solution to be integrated with any DLT or blockchain. This interoperability approach modernises domestic payment systems to work with digital assets and enhances cross-border flows. 

We show how the mandatory requirements of privacy and security, openness, high performance and scalability are built into a platform for innovation that creates the assurance for Financial Institutions and regulated payments providers to integrate CBDCs into their payment flows.

Finally, we demonstrate how interoperability breaks down the walled gardens of siloed payment systems. Giving customers and businesses choice, speed and access to foster a new generation of payments, their funds can roam the world and transact on any payment system underpinned by any DLT or mixture of DLTs, public or private.

Today, CBDCs are close to becoming a reality in many countries. Yet, a number of significant challenges remain before effective implementation is possible. Here, we look at these challenges and describe a solution piloted in Latin America and the Caribbean.

Martin Hargreaves
CPO of Quant

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