From CBDC Concept to a Workable Payment System Design
Many central banks are investing effort in analyzing different concepts for central bank-backed digital currencies and their impact on payments, economy and monetary policy. While central banks are well equipped to do economic and monetary policy analysis it is difficult to envisage the practical impact of implementing a CBDC-based payment system and its technological, security and everyday practical aspects.
For that reason, we at Xenia Solutions are ready to help in translating CBDC concepts in workable payment system designs and prototyping the hardware and software components of such systems providing decision makers with tangible and easy to apprehend embodiment of these concepts.
We provide the following services helping central banks to design, test and evaluate different designs for digital currencies
- Gather and analyze assumptions, requirements, expectations and markets-specific considerations for building CBDC-based payment system
- Assistance in designing a CBDC-based payment system proposing alternative technical approaches based on state-of-the-art technology
- Consulting on choosing technology stack based on design approaches and targets
- Create Payment device prototypes – we can develop as a service payment device prototypes based on a selection of hardware and software features. We can organize production of such devices in limited series for evaluation and field-testing
Supported Payment Device Technologies
Showcase: Botho Solution (South Africa) (patent pending)
Based on interest from SARB (South Africa Reserve Bank) we performed the technical design of the Botho central bank-backed digital currency solution. The solution was designed in the period November 2018 – May 2019 and was submitted to SARB under Expression of Interest procedure MR01/2019-0 on the 5th of June 2019. Patent for the solution was issued in August 2019.
The Botho Solution is a comprehensive central bank-backed digital currency solution tailored for the realities and the needs of South Africa and focused on the main goals of SARB in pursuing a digital currency solution – decrease cash handling costs, decrease greatly electronic payment costs, decrease government costs, financial inclusion and assume control on payment data by SARB.
The Botho Solution includes the following features:
- 24/7 Availability
- Near instantaneous transactions based on SMS
- Three factor authentication security
- Centralized account register
- Peer-to-peer payments
- Digital banknotes
- Botho payment device – personal payment device used for payments and for personal digital ID
- Botho digital machine – digital currency “ATM” performing range of financial operations, public utility account management, public administrative functions, etc.
- Auditability and traceability of transactions
- Realtime centralized payment system monitoring and trend dashboards
- Centralized payment system data warehouse
- Direct secure control interfaces to SARB and commercial banks
- Commercial bank account integration
- Online commerce support
- Direct debit support
- Mass payment support
The Case for Prototyping
There is clearly no wide expert agreement on the most desirable feature mix for a Central Bank-backed digital currency. In this situation it can be a rational and practical approach to design and prototype one or more of the candidates for a digital currency-based payment system. This can be a cost-effective and empowering approach to facilitate analysis and collect feedback from a wider set of stakeholders. And it can be instrumental to identify on an early stage practical issues related to operating a digital currency-based payment system. Even in the case that internal consensus on the design and implementation of a digital currency-based payment system is already formed there are serious advantages to plan for building a prototype as a preliminary milestone in the implementation of the payment system.