CBDC Public Comments 8 20220624

Name or Organization
Jamie Jankowski
Industry
Individual
Country
United States of America
State
Michigan
Email
1. What additional potential benefits, policy considerations, or risks of a CBDC may exist that
have not been raised in this paper?
No comment
2. Could some or all of the potential benefits of a CBDC be better achieved in a different way?
Does the Fed need to create/manage the CBDC? Could a partnership be a better approach?
3. Could a CBDC affect financial inclusion? Would the net effect be positive or negative for
inclusion?
Yes, it could and likely will. The answer to this question depends on how it's structured.
4. How might a U.S. CBDC affect the Federal Reserve’s ability to effectively implement
monetary policy in the pursuit of its maximum-employment and price-stability goals?
I think it could be a more efficient way to inject/remove liquidity into the markets.
5. How could a CBDC affect financial stability? Would the net effect be positive or negative for
stability?
If the CBDC is weaponized. Meaning, if it's used to restrict people from spending,
transferring, or using money.
6. Could a CBDC adversely affect the financial sector? How might a CBDC affect the financial
sector differently from stablecoins or other nonbank money?
Yes, it could adversely affect the financial sector.
7. What tools could be considered to mitigate any adverse impact of CBDC on the financial
sector? Would some of these tools diminish the potential benefits of a CBDC?
The Fed (or any government institution) should not be allowed to freeze account without
going through legal due process.
8. If cash usage declines, is it important to preserve the general public’s access to a form of
central bank money that can be used widely for payments?
Cash usage is declining. Younger people (millennials) don't want to carry cash or use it.
However, this factor does not justify the creation of a CBDC.
9. How might domestic and cross-border digital payments evolve in the absence of a U.S.
CBDC?
Through use of stablecoins - USDC, GUSD, etc.
10. How should decisions by other large economy nations to issue CBDCs influence the
decision whether the United States should do so?
We need to do what's right for the US, not follow the heard. The US became the center of
innovation for the internet because foolish restrictions were not placed on top of the industry.
The EU placed these foolish restrictions around the internet in the early days and missed out
big time. Blockchain is the next big innovation and the US needs to allow it to flourish.
CBDCs could be a part of this, but it needs to be thoughtful and not restrict other innovation
within the blockchain space.
11. Are there additional ways to manage potential risks associated with CBDC that were not
raised in this paper?
Don't issue one.
12. How could a CBDC provide privacy to consumers without providing complete anonymity
and facilitating illicit financial activity?
I don't know, but if a CBDC is issued, these things better be figured out. They must be in
place.
13. How could a CBDC be designed to foster operational and cyber resiliency? What
operational or cyber risks might be unavoidable?
14. Should a CBDC be legal tender?
Perhaps, but it should NEVER be the only legal tender. Cash must always remain an option.
15. Should a CBDC pay interest? If so, why and how? If not, why not?
16. Should the amount of CBDC held by a single end-user be subject to quantity limits?
Why? I don't understand this thinking at all. People are limited on the # of USD they can
earn/hold. Either CBDCs are issued or they are not. The fact this question is being asked
scares me to some extend.
17. What types of firms should serve as intermediaries for CBDC? What should be the role
and regulatory structure for these intermediaries?
18. Should a CBDC have "offline" capabilities? If so, how might that be achieved?
19. Should a CBDC be designed to maximize ease of use and acceptance at the point of
sale? If so, how?
20. How could a CBDC be designed to achieve transferability across multiple payment
platforms? Would new technology or technical standards be needed?
21. How might future technological innovations affect design and policy choices related to
CBDC?
22. Are there additional design principles that should be considered? Are there tradeoffs
around any of the identified design principles, especially in trying to achieve the potential
benefits of a CBDC?
It is critical that CBDCs:1. Do not negatively impact privacy2. Are never used to freeze assets
without due process through the US court systems3. Do not restrict or limit blockchain
innovation in anyway.
_________________________________________________________________________
Brent Wall
Industry
Individual
Country
State
Michigan
Email
Privacy must be maintained and prioritized
inclusion?
stability?
CBDC?
sale? If so, how?
CBDC?
benefits of a CBDC?
Privacy must be maintained and prioritizedCBDCs should not limit the development of other
cryptos within the USAssets should not be freezable without due processLaws and
regulations around crypto need to be updated and quickly. Currently, it's a hodge podge
across the SEC, CFTC, and other institutions. Often these laws were created before the
internet was even around.
_________________________________________________________________________
LAWRENCE C. MARSH
Industry
Academia
Country
State
Indiana
Email
Due to its limited scope, the paper does not address the fundamental nature of the economic
forces that distort the money flow in our economy and cause recurring economic instability,
which a CBDC could help solve if structured properly. If carefully designed, a CBDC could
give the Federal Reserve direct and immediate control over consumer demand. In recent
decades the money flow in our economy has become very distorted with a larger and larger
portion of the money flowing to Wall Street, such that the people on Main Street can no longer
buy back the value of the goods and services that they can produce at full employment. The
low interest rates have discouraged savings and encourageddebt. Consequently, the people
on Main Street go deep into debt. But even this is not enough to enable them to purchase our
national GDP at full employment, so the government goes into debt to make up the
difference. In this last round, the stimulus payments went too far, and when combined with
supply shortages have resulted in excessive inflation. To stop inflation without causing a
recession, CBDC bank accounts could offer a high interest rate on the first $10,000 of
savings to get those with the highest marginal propensity to consume (poor and middle-class
people) to save more and spend less to reduce consumer demand. This would provide an
alternative to raising interest rates on Wall Street, which just makes it harder for suppliers to
borrow money to expand their production operations to meet the excess consumer demand.
Structuring CBDC accounts to be very attractive to poor and middle-class people could give
the Federal Reserve a much-needed tool to directly control consumer demand. Note that
I-Bonds have not worked because they are not structured properly for poor and middle-class
people whose fragile economic circumstances require that they have immediate access to
their savings to deal with unexpected events such as a medical emergency or automobile
accident. Also, the vast majority of middle-class people don't even know that I-Bonds exist,
and, instead put their limited savings into certificates of deposit which typically pay less than
one percent interest.
In theory this is possible but could be problematic in practice. Private banks could be given
asubsidy to offer higher interest rates on savings than they charge on borrowing. However,
this introduces an intermediary that just adds cost and complexity to what would otherwise be
offering direct individual CBDC accounts for everyone, but only those with a Social Security
number could earn interest and the interest rate on savings would only apply to amounts up
to $10,000.
inclusion?
A fundamental problem for the poor and financially disadvantaged is their lack ofsavings.
Without savings they are unable to deal with unexpected events such as an automobile
accident or a medical emergency. Consequently, any financial disruption can put them at the
mercy of pawn shops, loan sharks, payday loan dealers, and “cash now” businesses that
charge exorbitant rates of interest. If the poor had savings, their savings would serve as an
automatic stabilizer for our economic system as a whole to keep consumer demand steady
even in the face of economic downturns, which would make such downturns shorter and less
severe. The most important asset that poor and middle-class families typically have is their
home. High interest rates discourage home ownership. On the other hand, low interest rates
discourage savings. A bank cannot afford to offer a higher interest rate on savings than it
charges on loans. But a Federal Reserve CBDC digital currency account could, especially if
the high savings rate only applied to some relatively small amount of savings such as the first
$10,000 in savings, which would impact the poorest people without enabling wealthy people
to transfer much from their private bank accounts and investments. Encourage poor people to
invest in a home by not raising mortgage rates too high so when they get old and need to
move into a retirement residential community, they have the value of their home to pay for
their retirement. At the same time, they could have a savings account with up to $10,000 to
pay for unexpected emergencies. A Federal Reserve digital currency account could be open
to everyone but with the right to earn interest on the money deposited in the account limited
to one account per Social Security number and no more than $10,000. In other words, an
entity without a Social Security number would not be allowed to earn any interest on any
money they might have in their CBDC account. With these restrictions which targets the
Americans with the highest marginal propensities to consume (poor and middle-class people)
the Federal Reserve could afford to offer a high enough return-on-savings interest rate to
control consumer demand for goods and services.
If the Federal Reserve created a central bank digital currency (CBDC) account for every
America, the Fed could have a return-on-savings tool, which it currently lacks, to directly
reduce demand pressure to stop inflation without throwing the economy into recession.
Demand could be tamped down, and supply encouraged, by creating Federal Reserve CBDC
savings accounts that offer high interest rates during inflationary periods on balances up to
some specified limit, such as $10,000 (with no interest earned on amounts above that limit).
Interest on the first $10,000 in the account would only apply to accounts with a Social
Security number and only one account per Social Security number. Meanwhile, rates in the
New York financial markets could remain relatively low to stimulate, not suppress, supply.
Higher interest rates will encourage savings. Saving more and spending less is obviously
what is needed when too much money is chasing too few goods. If the Fed were to offer high
enough interest rates, excess demand could be reduced enough to stop inflation without
forcing the economy into an unnecessary recession. This approach would withdraw money
from the economy by offering a return on investment, not by taxation. People still would be
able to purchase their necessities but would be motivated to delay or cut back on luxuries
until the economy cools off and the CBDC account (“FedAccount”) interest rates return to
normal. Everyone with a Social Security number would automatically get a CBDC account
and Internal Revenue (IRS) tax refunds could be deposited into these accounts. This would
especially benefit the elderly who need a good return on their savings to help finance their
retirement. CBDC accounts offering high interest rates also could attract savings from people
with high marginal propensities to consume (poor and middle-class people) who tend to
spend most of their income. Encouraging more people to save more money would also serve
as an automatic stabilizer by providing people with the savings they need to ride out
economic downturns, which, in turn, would make such downturns shorter and less extreme --
protecting profits and tax revenues. Currently, when the Federal Reserve raises interest
rates on Wall Street, it suppresses supply for seasonal, cyclical and other businesses that
depend on short-term liquidity tomaintain and establish inventory and cash flow. It suppresses
business. Farmers borrow money to sow their crops in the spring, then pay back the loan
after the harvest is sold. Retailers borrow to cover costs until the holiday season revenues
enable them to pay off loans. However, production is cut back when borrowing costs
increase. High interest rates in the New York financial markets (Wall Street) also cause
businesses to put off long-term investments in plant and equipment that would increase
supply. This traditional approach suppresses both supply and demand as workers find less
work and their incomes fall. The economy slides into recession. When the opposite conditions
develop with low demand, high unemployment, and thestart of a deflationary cycle, these
CBDC accounts could offer small loans at relatively lowinterest rates to individuals and small
businesses or could make direct stimulus payments. The mechanism for creating these
accounts could take a page from our past. Under thePostal Savings Act of 1910, our post
offices served as banks for more than 50 years from 1911 to 1966. You could go to any of our
post offices (currently numbering 31,000) to cash a check or set up a savings account. Such
a loan program already has been proposed in bills formulated in both the U.S.Senate and the
House of Representatives in the last few years such as Senator KirstenGillibrand's Postal
Banking Act as Senate bill S.2755 or Representative Rashida Tlaib's Public Banking Act as
House bill H.R.8721. These bills are aimed at helping unbanked and underbanked people
who live paycheck to paycheck and suddenly face job loss, a medical emergency, an
automobile accident, or some other event that forces them to go to loan sharks, pawn shops,
payday loan dealers or "cash now" providers who charge exorbitant interest rates. The Public
Banking Act, which was recently introduced in the Congress to create postal savings
accounts, could be modified to provide the Federal Reserve with a return-on-savings tool to
curb excessive inflation without throwing our economy into a recession. The Federal Reserve,
not the taxpayers, can pay for setting up and operating the postalbanks. (Note that the
Federal Reserve is independently financed from its bank fees andinvestments, which produce
enough revenue such that the Federal Reserve donates about $80 billion to the U.S Treasury
each year.) The Federal Reserve also could help pay for postal employee pensions. This
would reduce, not increase, the overall tax burden.
stability?
Yes. A CBDC could increase stability if the Federal Reserve controls the interest rateon savings in
these CBDC accounts. Interest rates in the New York financial markets have been too low for too long
but simply raising them in the financial markets is naïve in not recognizing the distorted money flow
that has developed in recent decades in our economy and the underlining cause of the forces driving up
stock and bond prices and driving down interest rates, which is the diversion of money from Main
Street to Wall Street. Under ZIRP, investors have taken more and more risk making the economy
increasingly less stable. The Federal Reserve has been handicapped by having tools that work primarily
through the financial markets and the largest corporations with little direct impact on consumer
demand. Our financial economy has become more of a gambling casino than an arena for investing in
the real economy where actual products are produced and consumed. Offering high interest rates on
savings in CBDC accounts that are limited to $10,000 would enable the Federal Reserve to directly and
immediately control consumer demand. In addition, changes in financial regulations are needed to
discourage stock buybacks and other financial manipulations that detract from real productivity
improvements in making new and better-quality products at lower prices in the real economy.
A CBDC would divert some money from the financial sector. However, this could be limited by
limiting the amount of money that would earn interest in a CBDC account (e.g., $10,000).
Also, interest could only be earned on accounts with a Social Security number with one
account per Social Security number. Other entities could have CBDC accounts but could earn
no interest.
The primary way of mitigating the adverse impact on the financial sector of creating CBDC
accounts would be to limit the size of the CBDC savings accounts and the CBDC loan
amounts to keep them relatively small (e.g., $10,000) and to only allow interest to be earned
on one account per Social Security number. Accounts without a Social Security number
would earn no interest. To have a real impact on consumer demand in the real economy, the
Federal Reserve needs to target the real people on Main Street and not the wealthy people
and corporations on Wall Street.
Yes. Originally, private banks created money in the United States, but that money was not
always accepted in all regions of the U.S. Without a CBDC, the Federal Reserve will
eventually lose dominance and influence over the use of money as private entities create a
wider variety of various forms of money and different ways of accessing money. This
development can only lead to less economic stability and more financial disruption.
CBDC?
To the extent that people put their money into a wide variety of digital currencies and
symbolic coinage, the stability of the overall financial system will become less reliable and
less stable. We are already burdened by too much financial gambling and not enough prudent
investing in real products and actual production. The absence of a U.S. CBDC only
encourages the use of private, unreliable payment systems and internet gambling in
alternative digital currencies that will just add to overall economic instability. Private
anonymous digital currencies facilitate money laundering to avoid taxes and conceal criminal
transactions, including illegal drug trafficking.
China and several other countries have already started the process of issuing CBDCs. This
will enhance China’s ability to more efficiently and effectively convert all U.S. dollar inflows
into Yuan with the Chinese government acquiring the U.S. dollars for its sovereign wealth
funds. This will further enable China to keep U.S. dollars out of the foreign exchange markets
and possibly invest such funds directly into U.S. financial markets. This is designed to keep
U.S. products expensive and Chinese products relatively inexpensive in world markets. This
could be countered to some degree if citizens throughout the world have some degree of
direct access to U.S. CBDCs. The Federal Reserve could then indirectly play a role in how
many U.S. dollars flowed into the foreign exchange markets to make the U.S. dollar relatively
more or less valuable and, therefore, U.S. exports more or less expensive in world markets.
Yes. Limit the base amount in a CBDC account that could earn interest. For example, interest
might be earned on only the first $10,000 in the account so that additional money beyond the
first $10,000 would earn no interest. This base amount, along with the interest rate paid on
savings in each CBDC account, could be adjusted according to the prevailing economic
conditions to give the Federal Reserve a new policy tool. There could evenbe a limit on how
much additional money could be added to an individual’s CBDC account each year just as
individual retirement accounts (IRAs) limit the amount of earned income that can be added to
such accounts each year.
Access to the identity of CBDC account holders should be restricted. However, the
information in the accounts, without the identity of the account holder included, should be
readily available to government law enforcement. When law enforcement notices a potential
criminal behavior pattern, they should be required to present the evidence of such criminal
behavior before a judge who will rule as to whether the individual’s identity is to be revealed
to law enforcement.
The Colonial Pipeline shutdown and the threat of foreign governments or domestic terrorists
shutting down digital currency operations is a real possibility. To allow for flexibility in
responding to the public’s need to be able to tap the value of their CBDC accounts, the post
office must be able to serve as an access point for physical access to cash or credit (small
loans) in the case of a partial or complete Internet shutdown. The Federal Reserve could take
over responsibility and assume the cost of postal banking to avoid burdening taxpayers.
Yes. A CBDC should be in terms of U.S. dollars. It should essentially be a digital currency
bank account. Large banks already have such accounts with the Federal Reserve. Private
banks create digital currency accounts when they make loans out of money created out of
thin air but backed by some portion of overall deposits in our fractional reserve system. A unit
of a CBDC would always be equal to one U.S. dollar.
Yes, definitely. It is the most important aspect of creating a CBDC. The stabilization tools
currently available to the Federal Reserve operate primarily through the financial markets.
Some exceptions were made under TARP and the CARES Act, but the Fed does not
currently possess a tool that directly interfaces with low-income and middle-income
Americans who have the highest marginal propensities to consume and, therefore, the most
cost-effective impact on consumer demand. To stop inflation without causing a recession
requires interfacing directly with consumers who must be discouraged from spending and
encouraged to save with the offer of a high interest rate on savings. The traditional approach
of raising interest rates in the financial markets just makes it harder for businesses to get the
funds to increase supply in the face of excess demand. Cyclical and seasonal businesses
who borrow money to operate each year cut back work hours, employment and close outlets
in the face of the higher borrowing costs. Poor and middle-class people who are trying to pay
off their mortgage are hurt when the cost of borrowing increases. Home ownership is a form
of saving so it is counterproductive to make it harder to achieve. It is not necessary to slam on
the brakes and trash the economy to stop inflation. A Federal Reserve CBDC digital currency
bank account for every American would enable the Fed to interface directly with the
consumer and adjust consumer demand as needed to stabilize prices. It would be much more
effective and cost a lot less than the current policy tools that operate primarily through the
New York financial markets.
Yes. The first point is obvious, that a CBDC should minimize the interference with the private
banking system so limiting the amount (e.g., $10,000) in the account (as was done in the
1910 Postal Savings Act) or at least the amount that can earn interest makes sense.
However, there is another important reason for limiting the amount per user. For policy
purposes in controlling consumer demand most effectively and in getting the most bang for
the buck in controlling consumer demand, it makes sense to target those with the highest
marginal propensities to consume, which are 40 percent of Americans who currently would
have difficulty coming up with $400 in an emergency, instead of targeting wealthy individuals
and large wealthy multinational corporations which have a very low marginal propensities to
consume, especially within the United States. The large multinationals often use extra money
to increase dividends, buy back their stock, or invest in the production facility in another
country. These CBDC digital currency accounts should strictly focus on poor and middle-class
Americans to effectively control consumer demand within the United States.
If a CBDC account were created for everyone, then the primary use of intermediaries would
be for local, physical access to one’s CBDC account when internet access was not readily
available for that individual or entity. Otherwise, such CBDC accounts could be accessed
directly by any number of devices, such as one’s smartphone or computer. For physical
access, a logical candidate for intermediary would be the local post office, with the
reconstitution of the postal banking system that existed when I was a child, where anyone
could go to the post office to cash a check or set up a savings account. That would be ideal.
However, politically it may be necessary to include private banks including ATM machines as
intermediaries. In that case, the private banks could charge a fee for acting as an
intermediary for local, physical access to one’s CBDC account. The Federal Reserve would
control the return-on-savings CBDC interest rate and the interest rate on CBDC loans (which
would be limited to small loans).
Yes. This can be achieved by allowing people to access their CBDC account via their local
post office. Under the Postal Savings Act of 1910 anyone could go to their neighborhood post
office to cash a check or set up a savings account for fifty years from 1911 to 1966. This is
very important for two reasons. (1) The United States could be subject to a cybersecurity
attack which might disable our digital currency banking system. (2) Poor, disadvantaged, and
elderly people are much more likely to feel more comfortable going to their neighborhood post
office to access their Federal Reserve bank account than making transactions over the
internet or going to a private, for-profit bank.
sale? If so, how?
Yes. This is very important for gaining acceptance and encouraging the use of the
CBDCdigital currency accounts. Make it possible for smartphone-to-smartphone CBDC digital
currency transfers from one account to another. If someone rakes my leaves, cuts my grass,
or shovels my snow, I want to be able to pay him or her immediately with a simple
smartphone-to-smartphone transfer. By default, have the Internal Revenue Service (IRS) put
each taxpayer’s tax return refund into his or her CBDC account. To focus attention and get
widespread use of these accounts, initially put $1,000 into each CBDC account where that
$1,000 could not be withdrawn until after age 70. But any interest on that $1,000 could be
withdrawn and any additional money or interest earned in the individual’s CBDC account
could be withdrawn at any time. The interest earned in CBDC accounts should be exempt
from taxation.
A digital connection or linkage (miniblockchain) would be created using an algorithm that was
unique to each user across all their devices and their Federal Reserve CBDC digital currency
account. Ledgers distributed over an extensive blockchain are only needed for unsupervised
digital currencies, but not needed for a CBDC under the authority of the Federal Reserve.
When a CBDC digital currency account is set up, the account holder must identify and
register the devices that they will use to access the account. Transactions would be verified
both with device identification and a user-selected password as well as fingerprint and/or face
or eye/iris recognition using their device’s camera. In addition, for each transaction there
would be a 60-digit alphanumeric security code generated by an algorithm for that account at
the Federal Reserve. After each transaction, the 60-digit security code would change on all
the user’s devices as well as in the corresponding Federal Reserve account so that no
60-digit security code would be used more than once. A linkage across all the account
holder’s devices (smartphone, laptop computer, desktop computer, etc.) would record each
verified transaction in sync with their Federal Reserve CBDC digital currency account. The
user would not need to know about the 60-digit codes as they would all be transmitted in the
background and not shown. This would be in addition to encrypting all CBDC account
communications.
CBDC?
Use a system dynamics model to avoid violating the scientific method in developing a model
of the economy that reveals the relationship between the financial economy and the real
economy and how Federal Reserve policies influence these two economies. Too often
economists run dynamic stochastic general equilibrium (DSGE) models to see how they fit
the data and then adjust their models. The problem is that in any sample there are two kinds
of relationships. The relationships that we want to identify are the population relationships that
show up in sample after sample and avoid the relationships that are unique to that particular
sample and do not exist in the population. System dynamic models as available in Vensim
and other system dynamics software can first be run as simulations without using sample
data to develop the model adequately to avoid violating the scientific method which requires
first developing the model to be tested before looking at or using the sample data. On the
other hand, artificial intelligence models intentionally violate the scientific method but
compensate by using enormous amounts of data and develop the structure of the model
using those data. Out-of-sample prediction can be used to determine whether system
dynamics models developed using the researcher’s knowledge and intuition will perform
better or worse than artificial intelligence models developed using enormous amounts of data
to search for the structure that might best represent the population relationships.
benefits of a CBDC?
In designing policy tools, the benefits must be clearly understood, but those benefits cannot
be adequately understood and appreciated without first understanding the fundamental
nature of the problem our economy faces both within our own borders and globally. Adam
Smith revealed two invisible hands: one, explicitly in the form of competition that resulted in
better quality products at lower prices as competitors pursued their own profit maximization;
and a second Adam Smith invisible hand, implicitly in the form of oligopolists conspiring with
one another to fix prices and restrict supply (e.g., OPEC). But this second invisible hand of
market power exists within companies and not just between companies as employees have
lost power relative to employers since the decades after World War II when power was
shared equally. Today virtually all the economic and political power (lobbyists and “Citizens
United” donations) is in the hands of upper management. At least Germany has recognized
the need to have rank-and-file employees represented on corporate boards. The result of all
this power and inadequate competition is a distorted money flow which makes the Federal
Reserve’s job much more difficult requiring more nuanced and targeted policy tools. The
problem is that the United States economy has broken into two separate and distinct parts.
One part inhabited by wealthy millionaires is focused on Wall Street, while the other part
consists of the people on Main Street who have relatively very little money but play a major
role in both production and consumption. I came to realize this when I discovered that I had
gotten a 7,000 percent return on some Adobe stock that I had purchased back in the 1990s. I
did nothing to help the company, but I got a tremendous amount of money, most of which
should have gone to the employees, but was instead given to me as a shareholder. The idea
that I should be rewarded for taking a “big” risk is bogus since I could easily afford to lose that
money. When Marie-Antoinette has more cake than she can possibly eat, offering a little cake
to the peasants hardly seems like much of a sacrifice. By concentrating economic and
political power in the hands of the upper management of our largest companies who are
focused on maximizing shareholder value, we have created a distorted money flow that
makes it much harder for the Federal Reserve to do its job of maintaining stable prices and
full employment.
_________________________________________________________________________
Mike Serfas
Industry
Individual
Country
State
Pennsylvania
Email
Reparations for Stolen Cryptocurrency: Independently of any other CBDC plan, I think the
U.S. government should work to issue a cryptocurrency to provide restitution to victims of
theft, ransom, blackmail, and comparable major crimes, in those cases where the stolen
cryptocurrency remains publicly visible and potentially subject to embargo. I'll suggest a
"ReparationCoin" would remain formally a fiat currency, with its value based on
"proof-of-theft" and the potential for future restitution. Its value might well fall short of an
actual dollar, but it would express the intent that the value one day reaches that dollar. For
example, a recent report described the theft of $600 million from Axie by what may be a
sanctioned nation. The current status quo assumes they have simply lost the money. But the
whole world sees the currency is "there" in a blockchain ledger, and belongs to the company,
and common sense should tell us that they have a right to make use of its value. The U.S.
could already plausibly threaten to prosecute any exchange dealing further in the stolen
currency, or "mixing" the stolen currency, or dealing in the "mixed" coins if they come to
market. However, the Federal Reserve can also ensure here that there is a *compensatory*
action available -- the victims could request that they be issued ReparationCoins with a face
value equal to the provable value of the cryptocurrency in the ledger. Realizing the full value of
the ReparationCoin later on is the hard part. Distastefully, the US might find a way to recruit
or negotiate with the thieves, or their government. More desirably, the U.S. might hack the
hackers to recover the key, or negotiate with those processing the cryptocurrency to
persuade them to alter their ledger in a way ordinarily forbidden by their rules. Issuing
ReparationCoin could, and probably should, be tied to an insurance mechanism. Today a
company that is robbed can go it alone and hope that law enforcement will hand back their
coins. But ReparationCoin could exchange all confiscated coins equitably among all
registered holders as they are obtained (rather than to one specific victim), until all
outstanding ReparationCoins have been paid off at dollar value. In this way, persons whose
large stolen holdings of another cryptocurrency have been replaced by ReparationCoin might
reasonably expect to see a steady return of those assets to equal dollar values of "harder"
cryptocurrencies or cash. Provided that this process is ongoing and reliable, the perception
should take root that a ReparationCoin really is worth about the same as its face value. The
desired outcome is that immediately after a cryptocurrency theft, people who are robbed will
report the crime, obtain ReparationCoins, and be able to spend them with relatively little
loss. There are limits to the scenarios in which ReparationCoins could be issued. A small
ransom paid to an individual in a non-sanctioned country may be harder to track than a large
theft by a sanctioned state. The ransom would at least need to be reported to police in
advance of payment, so that the ransomed coins can be tracked and exchanges warned from
doing business with them. The prohibition on commerce with these coins needs to be strong
enough to ensure that ReparationCoins are not issued for spent currency the government is
realistically unable or unwilling to recover. One means to increase the specificity and reach of
such a scheme would be to collaborate internationally, requiring sign-offs of multiple countries
to issue ReparationCoins and redeem them all as a single pool.
inclusion?
CBDC could allow a monetary policy of direct assistance or loans into the hands of every
American during pandemics and recessions, as opposed to the remarkably unjust and
destructive structure of the Paycheck Protection Program
stability?
The CBDC should focus on relatively small sums per person. You can use it to make sure
every poor person has a basic bank account like mechanism available to them. You can use
it to issue thousand-dollar checks during a pandemic or unemployment benefits during a
recession without so much of the money being stolen. You can offer small loans that
transform the lives of students and homeless people, without worrying very much about timely
repayment. Let the banks focus on people who have to (and can) prove how much their
collateral is worth and what their yearly income is. And let the check-cashers and payday
lenders howl in rage -- they've dragged down the reputation of your industry too long, and
nothing would be better than making sure everyone can do without them.
We have no desire whatever to give up cash. We also know that cash is largely a fiction
already - the bills are trackable serial numbers little different from a CBDC except in form,
often cross-indexed with facial recognition and many other sorts of tracking. Despite that
knowledge, those capabilities stay unobtrusive, and the public loves cash because it does not
intrude itself into the transaction. It is an object, Legal Tender for All Debts Public And
Private, usable anywhere by anyone regardless of credit history or any objectionable
statements they once made on Twitter. Cash is worth preserving - and it is also an example
worth following very closely.
CBDC?
If a CBDC is worth a dollar, then by definition anyone can exchange it for an actual cash
dollar. That dollar can then be used with such anonymity as it is said to offer.
From a layman's point of view it is very hard to see how any "currency" would not be legal
tender. If you can exchange it for dollars, and dollars are legal tender, then it should be also.
If the CBDC decides it doesn't want to pay for disfavored internet content (or any other
exclusion), then it becomes a payment expedient, like a credit card, to be used only when
absolutely necessary, but never to be trusted. That's not a "currency" the way the euro or
ruble is.
sale? If so, how?
CBDC?
benefits of a CBDC?
_________________________________________________________________________
Industry
Country
State
Texas
Email
I see absolutely NO benefits from having the CBDC get their hands on our accounts. We
need to stop this insanity!
inclusion?
stability?
CBDC?
sale? If so, how?
CBDC?
benefits of a CBDC?
_________________________________________________________________________
Timothy
Industry
Individual
Country
State
New York
Email
It jeopardizes the supremacy of the dollar and also usurps Treasury and Congress's role.��It is
a solution in search of a problem. The dollar works just fine. If we want something more, a
direct Treasury note could solve it. Perhaps like the old silver certificates.
Yes. Fed Now direct exchanges with commercial banks and perhaps even international
settlements at the bank level with BIS or with a counterparty nation state might make sense
via a CBDC.��There is zero need at the consumer level and much risk for mischief. Even if not
intended by central banks now, consider how it could be abused with by unfriendly
government.
inclusion?
Yes it could. �I like cash. The homeless people I give money to like cash. The garage sales I
stop by like cash. The lemonade stand that children set up like cash.��A CBDC is a net
negative for inclusion.
It would be instant and there would be little leakage. That certainly makes policy
implementation more speedy, but please consider at what cost.
stability?
In my humble opinion, centralization leads to fragility.��Assume an EMP or a quantum

computer hack, or a nuclear weapon. One large event could basically wreak havoc on the
United States' entire monetary system. Right now, cash and bonds and commercial money,
etc. have some play in the joints. Any one event is unlikely to result in monetary anarchy.
I don't know.
I don't know.
Yes. Cash is useful. Cash doesn't require electricity or a telephone.

CBDC?
Commercial innovation like credit cards, venmo, paypal, defi, etc. You needn't solve this
problem. The market is doing so just fine.
Don't bow to peer pressure here. The dollar is still king. Tweaking the dollar could jeopardize
it.��I believe that other nations switching to a CBDC jeopardizes dollar supremacy. It doesn't
strengthen the case for a digital dollar.
Do not pursue it.
I suppose you could have a CBDC peg. Like 1 FedCBDC is equal to one ounce of silver, like
the old silver certificates. To redeem, you bring to a bank branch. Amounts exceeding 100
oz, must fill out some form.��
I worry about this and think that having physical money is a good way to go. Consider a peg
to precious metals, and make it convertible?
No.
No.
Maybe.
Commercial banks, perhaps.
Yes. Make them convertible to precious metals and vice versa.
sale? If so, how?
I like case and commercial bank money. I'm not sure that a CBDC should directly compete
there. Best way may be to have a parallel system to fed notes like the old silver certificates.
Old school is best. 100 CBDCs to the oz of silver or 5,000 to the oz of gold.
CBDC?
i don't know.
benefits of a CBDC?
Be very careful here. You're flirting with opening Pandora's box.��
_________________________________________________________________________
Chitose Nakamoto (pen name)
Industry
Individual
Country
State
Minnesota
Email
Yes, rather than issuing an entirely centralized digital currency, the US Federal Reserve
ought to consider taking an approach to digital currency similar to the one it currently uses for
its fiat money—that is, one that is collaborative with the private sector. The Federal Reserve
currently allows banks to effectively issue legal tender. By being so focused on the idea of a
Central Bank Digital Currency, the US Fed is ultimately limiting the scope and resilience of
America’s future digital currency. The full nature of the alternative proposal is not able to fit in
this comment, so I refer you to the full white paper of the Digital Universal Drachma (as
published on the Internet Archive and Hackernoon).
inclusion?
stability?
As previously mentioned, if the digital currency the US Federal Reserve decides on is strictly
in control of the central bank, the financial sector would be left in a place of limbo. If banks
create legal digital money, and the central bank does the same, this will result in effectively
recreating the economic disunity that existed before the Coinage Act of 1792. Banks currently
use digital currency through account balances of broad money backed by a ratio of narrow
fiat money—that is, M0 and M1/M2 money have distinct forms and functions. The introduction
of a CBDC would make M0 currency to have the same form and enable the same functional
advantages of current M1/M2 money. Thus, currency created by the financial sector would be
at risk of being perceived as far less valuable since its guarantee of value is less strict, its
ease of use for everyday transactions the same, and its convertibility less than that of a
CBDC. This can be avoided, however, by including the financial sector in issuing digital
currency to ensure a unified and stable method of transacting. I once again refer to the Digital
Universal Drachma white paper for further discussion.
Yes, the public must always have easy access to a form of central bank money. As the 2008
financial crisis demonstrated, it is unnervingly likely for the financial sector—and thus the
currency they issue—to completely collapse upon itself without government intervention.
Thus, it is the responsibility of the central bank to ensure the common person has access to
money it guarantees itself to prevent the complete decimation of the lower and middle classes
in the event of an economic crisis.
CBDC?
The most likely scenario is that another global economic power’s currency will eventually be
phased in to become the new international reserve currency. That means the Bank of
International Settlements, foreign debt, even the backing of a nation’s fiat currency will all be
reliant upon a digital currency from the likes of China to conduct business. International
economics is a game of hedging bets on trust in a currency’s stability and enabling efficient
and cost-effective transferring of assets. Without a digital currency sponsored by the US
government, the USD would first lose to other currencies in terms of ease and efficiency, and
then in trust as it becomes apparent the American economy refuses to modernize.
Ideally, the decisions of other large economies regarding CBDCs should not at all influence
the decision of the United States. We should be the leader in this economic frontier. That
being said, decisions by other economies should be engaged with diplomacy to seek a unified
digital currency among the nations—with each nation’s economic authority able to continue to
make economic policies—with the goal of creating a more inclusive and resilient global
economy.
Digital currencies should have the trait of auditability, not anonymity. That is, through
cryptographic protocols such as hashing, the true identity of a user is made entirely opaque in
normal circumstances. However, since transactions are not private, end-to-end encrypted,
nor obfuscated through Tor or Monero-like methods, the government would be able to use its
extensive computing resources to uncover the identities behind suspicious transactions. A
more detailed account of the specifics of this can be found in the Digital Universal Drachma
white paper.
Yes. If a CBDC isn’t legal tender, it is just a symbolic gesture of engaging in the crypto
economy without actually endorsing the benefits it can bring to society.
No, a CBDC should be a functional form of transactional currency, not an investment.

Investments can already be made in private digital assets; what the economy needs is a
government guaranteed transactional digital currency. If the idea is just to offer a flashy new
form of bonds, the general public is left out of the digital economy, and the US Fed risks
becoming obsolete in daily cryptocurrency usage.
In a sense, but not a direct quantity cap. Instead, as further explained in the Digital Universal
Drachma white paper, the ratio of assets backing the digital currency should be a function of
the Herfindahl–Hirschman Index of a given sector that the end user belongs to. Thus, while
not punishing competition, it discourages stagnation and inequitable consolidation of wealth.
Yes, offline capability is essential to ensuring economic inclusion. As digital currencies are
dependent upon verification online to prevent double-spending, the question becomes: how
does one prevent double spending when offline? My suggestion is to borrow the concept of
endorsement from Directed Acyclic Graphs. In short, a unit of currency’s most recent
transaction must be verified by a specified number of trusted financial institutions before
being spent. That way, a user can store the public key of said institutions offline to verify their
endorsements of its ownership, but that unit cannot be further spent until it syncs with the
online network and is verified.
sale? If so, how?
CBDC?
benefits of a CBDC?
For a full discussion of other design principles, please see the Digital Universal Drachma
white paper. The following, though, are two key concepts to consider:1)Interpolation-based
ownership history rather than traditional blockchain provides substantial benefits when it
comes to the size of the ledger.2)Panmetallism (a further development of bimetallism) would
provide trust and stability in the currency’s value, just as Hamilton argued when laying the
foundations for the American economy.
_________________________________________________________________________
Matthew D
Industry
Individual
Country
State
Illinois
Email
A centralized digital currency controlled by a single private institution that has never been
publicly audited? I would rather see Dogecoin take the place of USD.
Yes, through decentralized efforts which the Fed is barred from participating in.
inclusion?
Well, considering the Federal Reserve's current *ahem* "success" in stabilizing prices, I'd say
that no one is more unqualified to implement monetary policy in general than the current
board at the Fed. If CBDC makes it "easier" for the Fed to accomplish its goals, then it's
certainly a horrible idea.
stability?
Negative.
Not even slightly. "A form of central bank money" is a misnomer, because USD is no longer
technically "money." It's a FIAT currency, and a digitalized, centralized version of that, is the
only possible worse system I can imagine than the current one.
CBDC?
The international digital payment ecosystem would evolve organically. Crazy, right? Can't
have that.
They shouldn't.
Don't implement CBDC. I won't use it. How's that?
Seems to me there is plenty of illicit financial activity happening right now anyway, and most
of it is being perpetrated by white-collar criminals who think they're above the law. CBDC
would make it easier for them to keep manipulating money.
NO.
sale? If so, how?
CBDC?
benefits of a CBDC?
_________________________________________________________________________
Industry
Bank, Small or Midsize
Country
State
Wyoming
Email
I fear our government will politicize the digital currency in the future in order to completely
control individuals let alone know everything they purchase and deem what is allowed and
how much can be purchased. This country will be just like communist China. Total control by
the party in power.
Most people use credit or debit cards for everyday purchases and the current system seems
to work. Something may have to be modified for very low income people.
inclusion?
Who knows? Ask China.
The FED has failed at both goals so far so why would the CBDC be a different outcome.
stability?
Neither in my view.
The government in power could set and direct economic investment ie, central planning vs
free enterprise. We saw how central planning failed in Russia.
You tell me. You have been studying this for sometime
Yes.
CBDC?
Swift seems to have worked well for decades.

Let’s let them try it first. We can learn from their mistakes.
Unknown to me.
How? You tell me and everyone else in the USA.
Look how successful the hackers have been stealing crypto’s.
If it replaces the dollar, it would have to legal tinder.
If everyone has to use it, they should get interest on it.
Where else would they put excess CBDC?
Banks must be a significant player in any CBDC scheme. What would do? Go out of
business? I want someone local to solve my problems not the FRB.
You tell me.
sale? If so, how?
Ask China.
You tell me.
CBDC?
Forget this scheme for government control.
benefits of a CBDC?
I am having a hard time seeing any worthwhile benefits given the losing control of my privacy.
_________________________________________________________________________
Kyle Steele
Industry
Individual
Country
State
North Carolina
Email
The Federal Reserve are not answerable to the American People and yet hold the power over
the currency. That risk needs to be addressed.
Yes, completely decentralized and no need for trust as it is all in the open and verified.
inclusion?
Yes, it would be negative. If you aren't on the "team", you are not included.
Your goals seem to align with the one percent and taking your cut. Maximum employment at
these rates are grease for the rich and not for the enrichment of the American People.
stability?
Change from centralized to decentralized and the effect would be positive. As it stands going
to centralized based is just painting the same wagon a different color. Cutting out the
middleman and making the individual thier own bank would be the ultimate stability. Being
able to stake your own assets to raise capital for yourself with out begging a bank based on
arbitrary made up reasons is all upside.
As long as it is behind the closed doors of the institution with no auditing of business then
there wouldn't be adverse effects for the financial sector. "Trust me bro", right?
Decentralize it and make it viewable and verifiable by all.
If everyone is thier own bank, I do not see this as an issue.
CBDC?
Again everyone thier own bank, non issue.

The United States isn't issuing this. The Federal Reserve is. You have shown on multiple
occasions how you are not answerable to the United States or the American People.
Yes. Decentralized Access
The current system doesn't solve this so I don't see why you care now. You can't be audited.
We only see what you report. Organic Hardware NFT tied to a person's wallet would be my
answer though.
The human will always be the weak point. Awareness and training. Maybe actually require
financial literacy and security be apart of general education rather than have to wait until we
are on our own to figure it out.
This seems a redundant question.
Yes. If I stake my assets to facilitate operations I should get a return. If born a citizen a small
amount should be granted and staked at birth to grow. Upon grant of citizenship through any
other means you should have to buy into it to stake. If a person is vested in the register they
will want to see it prosper.
Should be limited to whatever amount prevents hostile takeover.
No intermediaries. Full decentralized access
Would have to have a preload capability that off loaded funds to a secondary address that
would essentially tie it up until back online and any transactions would then be verified and
sent. A lot like a hold when you use a credit card at a gas pump.
sale? If so, how?
Once again decentralized and this is a non issue as everybody would be on the same
register.
Loopring L2 is already solving this. Take notes
CBDC?
Decentralize it.
benefits of a CBDC?
Decentralize it
_________________________________________________________________________
Joseph Polito
Industry
Other:
Country
Canada
State
Email
a) In attending presentations to the House and Senate committees related to CBDCs, and
reading the submissions of the presenters; in following other experts on CBDCs, I have
concluded CBDCs would be a considerable technological improvement to our financial
system and the economy. The result would be a progressive trend of improvements to
productivity, efficiency, profits, and economic stability. The benefit to the people would be, a
higher standard of living, more investment in people and infrastructure etc. and less
inequality. �b) CBDC’s would ensure that Cryptos would not be a threat to the constitutional
responsibility and control over money creation, and the efforts to have a stable low inflation
economy. �Bank Money is convertible to Central Bank Money. There is a real threat that the
personal choice of adopting cryptos as money would lead to conversion privileges too as that
choice became widespread. And there are many many cryptos to choose from. It would be
chaotic�
Yes. Digital currency could be issued by the Treasury Department instead of by the Fed. �New
money could then be spent into circulation, as Lincoln’s greenbacks were, rather than lent
into circulation. The level of personal debt we currently experience is associated with greater
risks to recessions and financial crises.�
inclusion?
Yes, it could have a positive effect, because it lowers the cost of banking. Numerous objective
experts have said the cost savings could be staggering!! Banks should also create
means-tested cost free accounts, and costless transactions. The poor should have access to
the public utility of banking.
Assuming the first phase of CBDC is a complement to cash, there would be little impact. If
CBDC’s became popular and banks borrowed them from the Fed to accommodate
creditworthy profitable loans, the borrowing rate would give precise control over non-market
and short term rates.
stability?
The banks do have the privilege of expanding the amount of credit and thereby the broad
money supply, which has been associated with the boom bust cycle. Other fintech and crypto
systems could expand credit too – further complicating this historical problem. CBDCs could
keep the expansion of the money supply under national sovereign control – which is a
stabilizing effect. This could change for the better the historic relationship to credit expansion
and contraction caused instability.
In the Risks section there was a reference to potential risks to increasing bank funding
expenses, but if banks pay interest on deposits, why would borrowing CBDC at something
equivalent to the fed funds rate be any different for banks? Why would it be any different from
banks raising money with bonds, preferred shares and common stock? In addition there
might be a reduced need for deposit insurance as the volume of CBDC grows. But assuming
there was an added cost, then the savers would benefit a modest amount.
The financial sector should be able to borrow CBDCs if they have more creditworthy
profitable loans. Banks should be able to function as they have as careful lenders to the most
worthy recipient of loans, helping the most efficient business people make the economy more
productive.
Yes
CBDC?
Many forms of fintech will be involved to reduce the costs of payments, including using other
trusted nations’ CBDCs – that would be an unwise development and a type of needless
off-shoring of the industry. This would means a staggering loss of profits, and a loss of the
benefits of the enormous cost savings predicted by objective experts.
American citizens would not benefit from the far less costly payment system, and other
nations would fill the gap and earn more revenues as our financial sector lost business. Our
financial institutions would want to adopt CBDCs because they would lose business for
foreign competition.
The risk is not having CBDCs. If fintech becomes far more cost efficient, we have to have
CBDCs to ensure we maintain constitutional control of the money supply. We can’t have
private tokens being the money. If consumers choose more than one legal tender, there could
be financial and economic chaos. It was not that long ago that banks issued their own bills.
We evolved away from that for good reasons.
The vast majority of money transactions are transparent; we write checks, use credit cards,
bank transfers, etc. That private information is protected and regulated and subject to normal
legal accountability and due process. A relatively small amount of money is in the form of
cash which does provide near anonymity, though each bill has identifiable serial numbers. It
should be noted that law enforcers call cash the oxygen of crime. The same level of legal
protections should be provided to CBDCs as is provided for our current form of digital money.
The same level of accountability by users of the public utility, legal tender, should also be
expected.
That is a growing challenge for CBDCs to share with all levels of industry.
Yes, what else could it be?
If it is legal tender, it should be depositable or borrowable for interest. If I deposit cash at a
bank, it earns interest. If I borrow money and take it out in cash, it earns interest. CBDCs are
digital cash.
The rules should apply equally to all forms of money.
The pattern for those whose business is money, is strict regulation and protection of
consumers. The payments system of Banks, Savings and Loans, Credit Card providers, etc.
has to be regulated and so should any fintech competitors to those systems.
I understand there are offline capabilities, just as we have gift cards.
sale? If so, how?
Yes so the fintech industry will compete with traditional financial sector, with much lower costs
according to objective experts.
These are very technical questions, but currently our digital money works across platforms.
Fintech will keep it considerably less costly, and CBDCs will maintain the payments made in
legal tender, and protect the control of the money supply.
CBDC?
Like computers, Fintech will become progressively more powerful and cost efficient, which
benefits customers and the industry financial industry progressively for years to come.
benefits of a CBDC?
Amongst the highest principles is that the constitutional right of creating money (legal tender)
must be preserved. Inflation and deflation can destroy an economy and hence the money
supply must be controlled. CBDCs permit private sector innovation in the payments system
while preserving that control.
_________________________________________________________________________
Douglas Jacobson
Industry
Technology Company
Country
State
New Hampshire
Email
There are no additional "benifits" for a CBDC for the citizens of this country. I can see plenty
for a tyrannical government including full power to nationalize/confiscate as deemed
appropriate, implantation of social scores and spending limitations. None of these are good
for the people.
No. The only benefit of proposing this idea is to shed light on how bad of an idea it is, and to
educate people on this subject matter.
inclusion?
Inclusion's opposite, exclusion comes to mind when we propose such an idea. What if a
small cabal of unelected officials decide they want to include only certain caste of person, or a
group of people based on some sort of social score? There are no net positives for the
people, only tyrants.
Like all other forms of monetary control, it will not assist in these ends. In fact, it would likely
make things worse, just as quantitative easing has not assisted in these areas either. For
example, the most recent round of QE, as well as the repo markets back in 2019 have
proceeded the largest spike in inflation since the 80s. Its amusing to think that giving you
guys MORE power will give is ANYTHING but the same results.
stability?
No. No currency or policy enacted by the central bank will affect financial stability for the
better, in the long term. One only needs to look at the destruction of the purchasing power for
the US dollar over the past 100 years to understand this point.
Yes. CBDC would be controlled by a small number of stakeholders, leading our managed
economy ( see QE etc) to become more managed. Leave markets alone.
Quit meddling with the financial system. Stop bailing out financial institutions. The only tools
that your organization has is the ability to print money via QE - stop using those tools.
No. your form of central bank money has proven itself to be unreliable since your
establishment in 1913
CBDC?
No. It seems foolish to follow the decisions of other large economies, including China who
already utilize a social credit system to restrict freedom.
Send every single coder home and stop developing a CBDC.
Not possible. This is a complete betrayal of the original design patterns of the first crypto
currency.
Do your own research.
Not a chance. This proposal for legal tender goes against everything our founding fathers
thought about central banking organizations. I will fight any movement to make something
like a CBDC legal tender.
no
This proves my previous point, namely the restrictions you would impose on people. �You
guys didn't even try to beta test this thing before proposing the idea of limits.
None.
I have to appreciate your attempts at mining for information from the larger crypto community
here. a CBDC should be offline...for all time.
sale? If so, how?
No. Make the barrier to entry as high as possible so that the people who unaware of your
true intentions can not use it.
Do your own homework.
CBDC?
benefits of a CBDC?
This technology was designed with the sole intent of providing the people with an alternative
to the central banking system. The only other additional design that should be considered is
to not design it in the first place. Without coercion, no one with half a mind would use this
product.
_________________________________________________________________________
Daniel
Industry
Individual
Country
State
Indiana
Email
Well, the federal reserve is a private corporation that regularly chooses to help its member
parties over the common good of the people who uses its currency, so I don't see how this
would be any different, and in fact be more of a liability seeing as there would be not physical
asset, and hence with losing faith with the public, asking them to switch over to a digital
currency, being even less tangible, it would seem hard to get the citizenry to believe it wasn't
even less of value.
Seeing as there are already more established cryptocurrencies, that already have a user
base, a continual growth, and a history of increasing in value, it would be hard to see why
anyone would want to switch to a system that already ruined the currency it was responsible
of in the first place. How would you convince people to switch, when there is already a
alternative in place that already has a better track record, and isn't controlled by government?
Why would anyone switch?
inclusion?
Seeing as the userbase has already been disenfranchised by mismanagement of the one
currency the federal reserve is responsible of, shouldn't it work on propping up people's
opinion and the security of it, instead of giving credence to the idea that it is so weakened it
needs a new one? And if that is the statement, why would individuals trust that the federal
reserve could handle management of two currencies, or one new one, when the policies
currently governing the one already in existence has been placed in such a position of
weakness?
Many might take it as a admittance it does not have control over the current fiscal situation,
pushing individuals to seek to find other safe havens to place their assets like foreign
currencies or already decentralized cryptocurrencies.
stability?
Based on a rising distrust in the federal reserve, and the recent negative news articles that
have risen over the last two years, it might come off as a wave of desperation.
Yes, it seems it would cause more avenues for a mistrust in a private entity, the federal
reserve, being perceived as a overreach in privacy, with additional ways to track citizens,
hence once again driving them away from the official currency.
How about don't do it?
Yes. With already a disproportionate amount of people without accounts or access to

services, if further cut off from a currency, what would the overall cost be of the resultant
action. Such examples as those who are homeless, or those who unfamiliar or unwilling to
migrate to technology.
CBDC?
There are already several more attractive currencies. You'd spend several times the amount
in marketing trying to convince people to switch over to a centralized currency, with one of the
main marketing points for cryptocurrencies at the moment being decentralization. A marketing
hurdle I'm unsure how the federal reserve would overcome.
It shouldn't. Instead it should focus on boosting the worlds opinion of its current currency,
bolstering world view by running the federal reserve as less as a lackey scheme for private
banks that have already displayed a negligent record of financial negligence.
I'm sure.
Banks already facilitate such, as does much of other components of our current system, and
one of the reasons why it would be a hard sell to individuals to choose any digital currency
put out by the federal reserve, because what would the selling point be when it is actively
attempting to make a less secure, more moderated product compared to its peers?
Yet another reason why not to make the switch. In the ever evolving technology space, the
amount of trust people would need to feel in order to switch to this currency seems nigh
insurmountable.
No.
No.
Yes. As should it be with regular currency, actually now that you mention it.
No intermediaries should exist, once again showing that you are a step behind.
Yes. Otherwise what good is a conditional currency?

sale? If so, how?
It should be printed out on physical, tangible assets, perhaps, as paper?
How much money would it cost to switch over to such a system? And would the new access
points of attack be worth the vulnerabilities?
CBDC?
This is a ridiculous question, much like asking a five year old to draw what their favorite
superhero's outfit would look like if they shit their pants and needed to go home and change.
benefits of a CBDC?
Yes, see above.
_________________________________________________________________________
Robert Perkins
Industry
Individual
Country
State
Texas
Email
The Federal Reserve unfortunately cannot be trusted to issue currency as they are unwilling
to submit them to public audit. The federal reserve is not affiliated with the US government
and is controlled by major investment banks whom generally make money by illicit financial
transactions that are detrimental to the American Dream. Such as rampant naked short
selling and running unregulated dark pools. The federal reserve should be abolished and all
US currency should be handled by the Treasury which is a regulated entity.
There are already digital currencies available to this day on public blockchains - I fail to see
the advantage of a privately owned (fed) digital coin. Whom is not subject to regulatory
controls. If there’s desire to use digital coins as currency we can simply leverage the existing
crypto space. The Fed has no place in digital coins.
inclusion?
A CBDC will have the negative affect of financial exclusion not inclusion as the central entities
have abused their powers of currency printing to devalue the dollar and drive large
populations into poverty. They additionally could control whom can transact and who cannot
transact.
The Federal Reserve Mandate is never followed anyways so the question is irrelevant.
Inflation has been growing at an unprecedented rate for the last 1 year and its directly related
to the massive currency printing the federal reserve has done. Unfortunately they have lost all
trust and cannot be trusted any further with any matters in regards to monetary policy. Again
the federal reserve is owned by banks whom deal with risky derivatives and bet the entire
financial security of the US on their risky bets until they need a bailout. Which was done by
the fed in 2020 when they provided trillions of dollars in repo loans for failing banks in secret
stability?
CBDC?
sale? If so, how?
CBDC?
benefits of a CBDC?
_________________________________________________________________________
Laurel
Industry
Country
State
Utah
Email
There should be no discussion of a CBDC before a thorough audit of the federal reserve is
completed. Why should a private entity control the finances and economy of an entire nation
with virtually no oversight?
It already has been achieved. Decentralized finance does everything a CBDC can do while
protecting the rights, and voice, of the common people.
inclusion?
The net effect will be negative. Why should a private entity have the authority to put quantity
or time limits on the amount of currency a human person is allowed to possess?
Arguably, by printing 80% of the amount of currency in the past two years and then blaming it
on Russia after the fact, while doing nothing to stop rampant inflation, the Federal Reserve is
already failing in its goals.
stability?
The net effect will be negative.
A CBDC is a dangerous step on a slippery slope to infringing even further on people’s rights.
Stable coins or non bank money provide people with security, privacy, and agency.
Decentralized finance does this. Which, incidentally, is antithetical to a CBDC.
We already have this with electronic banking, app payment, etc. there is no need whatsoever
for a CBDC.
CBDC?
Via decentralized finance.
No nation should issue a CBDC.
By utilizing decentralized finance.
It can’t.
Using zero knowledge roll ups built on top of a blockchain with existing supierior security.
Such a solution already exists, it’s called Loopring.
No. It shouldn’t exist.
No. It shouldn’t exist.
Absolutely not. This is completely unethical.
A CBDC should not exist.
sale? If so, how?
A CBDC should not exist,
CBDC?
benefits of a CBDC?
_________________________________________________________________________
joe walde
Industry
Individual
Country
State
California
Email
How will the American citizens keep track of what you do with this? we have had to bail out
banks before because of callousness. this seems to give more lee way into bad happenings.
it should not be done
this should not be implemented
inclusion?
CBDC is a bad idea
it would give the ability to create infinite amounts of this without being held accountable for
the bill the tax payers will have to pay
stability?
inflation would go through the roof.
no without being abused the current system is fine.
CBDC?
sale? If so, how?
CBDC?
benefits of a CBDC?
CBDC is a bad idea
_________________________________________________________________________
joe walde
Industry
Individual
Country
State
California
Email
How will the American citizens keep track of what you do with this? we have had to bail out
banks before because of callousness. this seems to give more lee way into bad happenings.
it should not be done
this should not be implemented
inclusion?
CBDC is a bad idea
it would give the ability to create infinite amounts of this without being held accountable for
the bill the tax payers will have to pay
stability?
inflation would go through the roof.
no without being abused the current system is fine.
CBDC?
sale? If so, how?
CBDC?
benefits of a CBDC?
CBDC is a bad idea
_________________________________________________________________________
Maria Rivero, MD
Industry
Individual
Country
State
California
Email
NO PRIVACY LEAVE CASH ALONE
LEAVE THIS ALONE IT WILL DESTROY PRIVACY
inclusion?
NEGATIVE MORE MINORITIES DEPEND ON CASH. I AM LATINA AND SEE THIS WITH
MY FRIENDS AND FAMILY> LEAVE CASH ALONE> LEAVE US OUR PRIVACY> THIS IS
A TERRIBLE IDEA
IT WON"T AT ALL. The free market is more efficiency
stability?
IT WON'T at all.
WILL AFFECT THE POOR AND MINORITIES VERY NEGATIVELY
LET US KEEP OUR CASH!
CBDC?
This should be left up to the free market without manipulation by central planners
This should be left up to the free market without manipulation by central planners
This should be left up to the free market without manipulation by central planners. Risks are
better managed by free market than FED and other central planners
CBCDs can obliterate privacy they should NOT be adopted
Don't use it less us keep our cash
I disagree with CBDCs don't adopt them!
Do not adopt CBCDs leave cash alone and allow free market to function
Don't adopt CBDCs!!!!
Don't adopt CBDCs they are a huge mistake
sale? If so, how?
Don't adopt CBDCs leave cash alone leave privacy alone
CBDC?
benefits of a CBDC?
_________________________________________________________________________
Lslyo Metodiev Metodiev
Industry
Trade Organization
Country
Bulgaria
State
Email
Turgoviq sus stoki styoitelstvo na zgradi,turgoviq sus stroitelni materialo,intirioren dizain,

turgoviq sus mebeli,obzavejdane,turgogoviq na imoti oddavanena nedvijimi imoti,vsichk in
deinost in, koito nesa,zabraneni sus zakona"
Nqkoi mogat nqkoi ne mogatne ,
inclusion?
Nemislq che shte e negativa namesatan
Ne vsichki sa 3dnakvi
stability?
Ne
Kogato nee stabelns,
Mojebi
Nemislq che shte e nqkakuv problem
CBDC?
Da
Ne
Ne znam
Ne
Ne
Zashto to e ne,ne
Ne
Da torqnva dasa kombini
Ne mislqnq
sale? If so, how?
Ne moje da namalee�,
Ne ne mislq
CBDC?
Nie horata nqmame granica
benefits of a CBDC?
Da vinagi trqbva daima
_________________________________________________________________________
D. Bruce Woll
Industry
Consumer Interest Group
Country
State
Illinois
Email
Any plan to implement CBDC by the Fed must start by recognizing that government has �lost
control of finance as a whole to private institutions even as the financial sector proper has
swollen in size and now feeds on the public resources of society and the earth. Decades of
runaway wealth concentration in fewer and fewer hands has been accompanied by a parallel
exponential decrease in transparency and public understanding of the most basic principles
of money and finance. The failures of government to take back public control of finance in the
face of this nakedly destructive course of events demands a public conversation about
finance as a whole. �CBDC offers a perfect occasion for such a conversation. As Saule
Omarova has shown in her article on The Public Ledger, CBDC could cut the Gordian knot of
financial technological obfuscation and make technology, for once, a tool to bring public
transparency to finance, and therefore public control. But, as she also shows, this requires
that CBDC be implemented as part of a comprehensive understanding of the whole body of
finance, from its banking core to its latest technological fringes. That, in turn, as Omarova
also makes clear, requires, unequivocally, “the issuance of general-purpose CBDC (the
‘digital dollar’) and concurrent migration of all transaction deposit accounts from private banks
to the Federal Reserve.” “Central bank accounts [would] fully replace – rather than uneasily
coexist with – private bank deposits” (p. 1257, cf. 1265 “full migration of demand deposits
onto the Feds balance sheet,” and 1299 “eliminating private banks’ deposit-taking function”).
�More generally. Omarova has explicitly based her specific policy recommendations on a
“franchise” model of finance as a whole. The value of this model is that it represents an
attempt to comprehend all of finance as it has exploded in the last half century under a
working sense of the role of the parts. Whether or not this is the most useful design, and
whether her specific proposals are adopted, they can be judged in terms of their
interrelationships and interacting potential consequences. Alternative ideas need to be
similarly placed within some satisfactory alternative context. Answering the individual
questions regarding CBDC listed in the request for comment, in the absence of a discussion
of overall design principles feels inadequate. �
inclusion?
stability?
CBDC?
sale? If so, how?
CBDC?
benefits of a CBDC?
_________________________________________________________________________
Marc Ward,
Industry
Bank, Large ($90 Billion or More in Assets)
Country
State
California
Email
The risk of liability money is it is a liability of the issuer. If the issuer unconstitutional, then the
liability of the issuer is illegal and void. The risk is the Federal Reserve District Banks subvert
the US Constitution by enabling Congress to borrow and emit Bills of Credit. Liability Money is
a Bill of Credit, a promise for a promise.
There will be no benefits of a CBDC, only costs and death.
inclusion?
What is “financial inclusion.” The Federal Reserve is owned by its member banks. There is no
way for a citizen to acquire ownership of the Federal Reserve… that is extremely exclusive.
How is it possible that a federally chartered corporation is so exclusive they claim to want
inclusion? No, the Federal Reserve just wants everyone to desire it’s liabilities. Illogical.
Those goals were never delegated to Congress to set. “Maximum employment” requires
everyone working for liabilities. “Price-stability” can only be achieved with fake future price
announcements to trick the individuals to give up their energy for debt. If prices are increasing
at an increasing rate (% growth) how is that stable??? Crazy wrong math.
stability?
CBDC would only pursue financial control.
The Federal Reserve subverts the US Constitution by enabling Congress to borrow and emit
bills of credit.
Destroy the Federal Reserve District Banks and use electronic claims for vaulted Dollars of
Silver and Dollars of Gold as medium for exchange.
Central bank money is not money but debt and is not legal but illegal and void given the 14th
Amendment Section 4. Given the active subversion and violence, “all such debts, obligations
and claims shall be held illegal and void.”
CBDC?
They already occur, thank you Bitcoin and Litecoin.
Congress can only regulate the “Value” of “Money.” Congress cannot define what is “Money.”
Since the States can only make gold and silver coin a tender in payment of debt, the
Constitution directly implies only gold and silver coin are money. This is confirmed by
SCOTUS in Bronson v Rodes… “this court recognizes the fact, accepted by all men
throughout the world, that value is inherent in the precious metals, that gold and silver are in
themselves value” and the only proper measures of value based on weight and purity.��If no
value then it is not Money.��
Yes, Destroy the Federal Reserve and then the Bank for International Settlement.
The Federal Reserve is illicit financial activity designed to enslave the minds of the
population.
The CBDC being unconstitutional is the great risk.
Question: Take the limit as time goes to zero, how many promises can acquire energy?
�Answer: the limit does not exist! Never exchange your finite energy for an unlimited promise.
No, interest growth is exponential growth and that requires an infinite number of units.
This is crazy. Limit the end user but not the issuer??
Illegal firms.
Never create this unconstitutional currency.
sale? If so, how?
Are the federal reserve district banks Constitutional?
CBDC?
benefits of a CBDC?
_________________________________________________________________________
Fluency Technologies Inc.
Industry
Technology Company
Country
State
New York
Email
inga@fluencytech.com
There are a number of potential benefits of retail CBDCs for international payments, monetary
policy and financial inclusion. CBDCs could facilitate faster and more efficient cross-border
payments. As cross-border payments are more complex than domestic ones, CBDCs would
help ease international payments by offering cheaper—lower transaction and storage
costs—and more transparent and resilient payment solutions. CBDCs could also increase
safety in payment infrastructures, enhance systemic efficiency and offer increased protection
against money-laundering processes.��The potential financial stability related risks through the
introduction of CBDCs arises primarily from a significant substitution away from private
money, whereas central bank cash-to-CBDC substitution is generally regarded as having no
implication for financial stability. CBDCs (like other forms of digital money) could lead to
higher volatility in bank deposits and/or a significant, long-term reduction in the volume of
customer bank deposits. This could, under certain circumstances, affect bank profitability,
lending and the overall provision of financial services. Customer bank deposit related funding
is at the heart of the commercial banking business of maturity transformation and
intermediation services. Any material loss in customer deposit funding would require banks to
consider additional initiatives to maintain regulatory ratios and risk-adjusted profitability.
CBDCs have arisen on the back of significant advancements in enabling technologies in

recent years. It is crucial for the banking sector to now “catch-up” with the internet era and
provide faster, cheaper and programmable payments for everyone everywhere. CBDC is by
far the most advanced form of money and currently the best approach to achieve this. All
other current forms of money have not been able to provide the potential benefits that CBDC
offers.
inclusion?
Due primarily to its architecture, CBDC is able to support offline payments, shielded transfers,
automation throughout the programmability layer, and possess cash-like properties. All of
these features when taken together will improve financial inclusion of the user by providing
them with a digital alternative to cash, the possibility to access their money even in remote
areas, and also provide options for those that are currently unbanked.
The introduction of a U.S. CBDC would have a wide range of potential benefits but also some
risks, which is common with the introduction of any new technologies. However, a careful and
measured implementation protocol can address many of these risk considerations and would
benefit the Federal Reserve in its ability to effectively implement monetary policies and
stability goals. Careful implementation and considerations for risk contingencies along with
optimal utilization of new and available technologies would go a long way in maintaining
price-stability and generate maximum-employment.
stability?
The overall net effect would be positive for financial stability. The surge of various
cryptocurrencies have brought various risks along with them. For instance, cryptocurrency
volatility impacts financial markets and hence stability making it harder for central banks to
fulfill its monetary and financial stability mandate. The successful introduction of a CBDC will
address the need in the marketplace for a reliable and trusted form of money that also
enhances the operation and resilience of the financial system as a whole (particularly in
payment services). Careful CBDC design and implementation programs coupled with
sufficient time for existing financial systems to adjust and adapt plus additional flexibility to
apply safeguards would enable a smooth introduction and adoption of CBDC and contribute
to financial stability. Central bank cash-to-CBDC substitution is generally regarded as having
no financial stability related risks. The one potential financial stability related risk from the
introduction of CBDC arises primarily from a significant substitution effect from private money.
This is why a thoughtful and measured roll-out and introduction program is essential.
As long as CBDC is managed correctly and doesn't immediately and abruptly disintermediate
commercial banks, a CBDC is unlikely to negatively impact the financial sector. Adopting a
CBDC will have positive benefits and will offer greater security, in addition to providing faster,
cheaper and a more efficient method of payment versus stablecoins and other forms of
non-bank money.
The tools to mitigate any adverse impact of CBDC on the financial sector, including the ability
to stabilize the financial sector, would be: modifiable remuneration on held CBDCs, quantity
ceiling for the amount of CBDCs held at any one time and limited convertibility to different
types of assets.
CBDC are unlikely to fully replace cash but rather serve as a supplement to cash. This would
create an ecosystem where both cash and CBDC would co-exist. This however, would
reduce the absolute volume and usage of cash but not drastically from a general public’s
point of view and would be supplemented by CBDC, further creating opportunities for
innovation. Offline and cross-border transfer facilities of CBDC would make it easier to use
and provide further access of central bank money to the general public. However, this would
also help a central bank to manage the cash flow within the financial market by streamlining
and easier process implementation for the cash flow market since there would be CBDC to
cover for any blocker that arises during any such implementation.
CBDC?
Cross-border payments require a double-ended solution. If the necessary technology is not

yet functional in the United States due to absence of a U.S. CBDC, the status quo of legacy
systems will remain the only usable option. This is costly not only for the sender and recipient,
but also to the economy. This lag slows the entire pace of international commerce, causing
ripple effects throughout the process, impacting businesses and the economy. The desired
outcome is one in which users can send money anywhere in the world instantly through a
safe, secure, and convenient ecosystem. This can be accomplished with the implementation
of U.S. CBDC.��Customer expectations are shifting rapidly as consumer habits change and the
access to new technologies become available. Individuals and corporations alike have grown
accustomed to the ease and convenience of holding an entire banking ecosystem in their
hands, enabling them to complete various financial transactions with the push of a button. As
such, it is not unreasonable that they also demand the same functionality for international
remittances. Improved cross-border payment capabilities can also help businesses and the
economy grow by expanding their scale, while decreasing costs associated with transaction
fees and exchange rates. Fortunately, it doesn’t have to be an ‘either/or’ proposition. While
various large economies are working towards building their own CBDC, leveraging Fluency’s
already existing CBDC solution can help the U.S. Federal System to keep up with the
inevitable changes.�
The United States should always be on watch as to how other large economies are
implementing CBDC and should spearhead the implementation of a U.S. CBDC. Since
CBDCs will offer an expansive platform for innovation and enhance the ease of use of central
bank money, it will also preserve key decision making capabilities within the federal
government, unlike the current suite of cryptocurrencies. It would also ensure a safe and
smooth implementation of a new financial system that would also help the U.S. maintain its
status as the financial cornerstone of the world and leadership position of the next phase in
the advancement of the world’s financial ecosystem. Appropriate risk mitigation techniques
along with careful design and implementation of U.S. CBDC should always be the end goal
for the U.S. federal government irrespective of what other large economies decide on
implementation of CBDC, in order to remain ahead of the curve.
The potential for the introduction of a CBDC to affect financial stability risks arises primarily from a
significant substitution effect from private money. Any material loss in customer bank deposit funding
would require banks to consider combinations of actions to maintain regulatory ratios and risk-adjusted
profitability, e.g.:●Switching to alternative market-based funding sources which could be more
expensive and potentially less reliable ●Reduction in assets/deleveraging●Increased risk taking
to mitigate near-term margin compression●Increased lending rates●New products and
customer offerings to offset any lost fees and commissions on activities associated with customer
deposits, e.g., ancillary payment services. These could include actions that improve competition for
customer deposits or leverage a role as CBDC intermediary●Cost efficiencies (e.g., lower cost of
cash handling)
CBDC is able to provide privacy to consumers through the implementation of shielded

payments at the core level of protocol. CBDC payments would be able to preserve
consumers' privacy and keep their data confidential to everyone except the parties directly
engaged in a transaction or authority such as the central bank or government. This could be
achieved by shielded payments limiting the data carried inside transactions only to the
minimal amount of information required for a settlement, encrypt that data using both
hardware and software encryption, allow AML procedures and compliance checks to be run
only inside secure elements without exposing that information anywhere and the use of
verifiable cryptography in order to prove compliance of any transaction without exposing plain
data through verifiable claims.
By designing CBDC around a shared ledger maintained by the commercial sector and
according to consensus that was configured by authorities, it is possible to achieve top level
resiliency and fault-tolerance of the network. The performance of the network may degrade to
some degree as nodes are going offline, but so long as any of the nodes are operational, the
network would be functional as a whole. This kind of setup naturally provides replication
meaning that data would be safe and secured throughout multiple machines and possibly
geographical localizations.
Yes. �The financial system will need to be overhauled in order to meet current / future needs
and demand for improved payment services. Private digital money poses risks to both users
and the financial system, however a CBDC as legal tender would offer citizens broad access
to digital money that is free from credit risk and liquidity risk, while providing cheaper, faster
payments and supporting future innovation. �
�CBDC should be designed in such a way that it is possible to set up any interest rate linked to
its holdings and to modify that value by authorities as needed. Remuneration would prevent a
situation in which CBDC undermines monetary policy and avoids structural bank
disintermediation. It would also allow the Federal Reserve to act in a crisis (e.g. a bank run)
by, if needed, lowering the remuneration to a point where it is uneconomic for a consumer to
migrate to CBDC from a bank deposit.�
A possible way to mitigate the issue of excessive stock of CBDCs would be to implement soft-
limits with waterfalls to designated accounts. Any payment that would create an overbalance
of CBDC holdings relative to a limit set up by network authority would be accepted in order to
meet guarantee requirements of the settlement protocol, but would trigger an automatic
transfer of the excess from the CBDC account to a designated account which may be an
account held within a commercial bank, another intermediary or network consensus itself.
Each registered holder of a CBDC account would have to designate such a “waterfall”
account, also implying that CBDC users should maintain commercial relationships with
intermediaries.
Firms that would serve as intermediaries are those that provide privacy and
identity-management frameworks (AML/KYC/CFT), commercial banks and FinTech firms that
provide services to issue and manage the CBDC.
CBDC should have offline capabilities. One of the most prominent features of a CBDC should
be to possess cash-like properties when compared to current digital banking systems which
are not able to provide such a feature to a full degree. In order to have this functionality in a
CBDC it should be designed to be decentralized across certified institutions (intermediaries),
rely on a shared core ledger and be implemented on a settlement system in which
transactions carry only desired state change without assumption on state before or after, and
possess a mechanism to guarantee settlement of any offline transaction.
sale? If so, how?
CBDC should follow all inclusivity recommendations for implementing any client applications
and devices, meaning the use of clean, UI/UX, providing options for people with disabilities,
and providing simple flows that are understandable to people regardless of their
understanding of the finance/tech world. All technical details and intricacies connected to the
innovation should be presented in the most simplified manner possible.
Inter-CBDC and cross-CBDC transfers would be possible solely throughout the CBDC
platform, meaning both domestic and cross-border transfers are possible to be implemented
seamlessly providing high performance, near-instant finalization time and low costs in the
transfer of money. Completing an exchange to other means of payment - for example cash or
digital bank stored money or any other non-CBDC protocol would require support from
intermediaries that could run such a bridge service in which anyone can exchange CBDC to
non-CBDCs and the other way around.
CBDC?
With many of the world’s central banks focusing their efforts towards bringing about CBDC, it is
evident that CBDCs are the way of the future. Hence, consumer behavior and new technological
innovations will directly or indirectly impact the design choices as well as policy implementation
around CBDC. The goal is to create a synergy between technological innovation, design, and policy
making which would ideally result in optimal implementation, widespread adoption, and financial
stability. Some of the key future innovations that could potentially impact design of CBDC
are:●Future technological choices like the approach for chain monitoring can have impact in
design privacy policy in terms of the balance between privacy and transaction monitoring reg AML
procedures. ●Strong programmability abilities may impact monetary policy with additional rules
(i.e. ability to configure the term of validity of digital assets or similar possibilities). ●Abilities to
interoperate with any other digital assets may force the design of different privacy policy rules based
on specific digital assets (i.e. different rules for stablecoins, synthetic CBDC or cryptocurrencies).
benefits of a CBDC?
There are several trade-offs which are being actively discussed through CBDC-focused
organizations.��1.�Accounts vs Tokens��The first debate is whether tokens or accounts are the
best settlement structure for implementing CBDCs. Older systems use tokens as it had the
most market share in enterprise platforms, but with emergence of specialized CBDCs
platforms more and more organizations have concluded that accounts are better suited for
the purpose especially when considering the possibility of having programmability, offline and
shielded payments, and other desirable features which have proven problematic with tokens.
�2.�Programmability vs Non-Programmability��The second one is whether CBDC should focus on
simplicity, thus limiting its features to the most basic payments only, or to have
programmability options capable of bringing innovation to the financial sector. It's worth
mentioning that most of the features that make CBDC unique and enable it to meet
requirements allowing it to improve upon the state of digital banking requires a degree of
flexibility that comes only from programmability.��3.�Cash-like vs Non-cash-like��The third tradeoff
would be whether CBDCs should have cash-like properties. This is indirectly connected to the
previous two mentioned tradeoffs, but ultimately, assuming CBDCs would need
programmability, which is achievable within such an environment.�
_________________________________________________________________________
Industry
Merchant
Country
State
Utah
Email
Umm yes is this paper blank with white CheezZe or p1nk and dotted in space spot
ffr/rezze flocks??
Umm yes send the third party payment handlers back down to the sender to request a more
slender loan closing approach before the dump up to node/GG.oldd
inclusion?
Umm I think inclusion is best kept in exo-carrat deep bends because of the fax on fun and
find dings funnel nesting has reserved for late state write ups old tax recoil scatters that we'll
never get back so maybe no net is best intent for this incident.
Two words Rodent Relief ! Here's why job opportunities multiplied, increased travel expenses
for immediate economical sanctuaries where every working man has a leg to stand and get
paid better than an American before taxes.
stability?
I feel like the roads with less travel we can unravel just opens up a new avenue for another
corporate venue for luncheons with policy makers to keep the bankers potential extermination
incubators on constant watch with news crews movie producers sponsored merchandise
vendors and soda fountains for the kids so I guess my outlook is geared toward positive with
possibilities!
Well first I think really the only difference we will see in the financial sector is the reduced
need for plastic products in check out lines which in turn frees up more time and space at the
recycle factories so with being a reality it only opens more windows and shuts a few more
doors. ya know?
Well I believe like any honest hard working business man the tools in your bucket are all you
need to make mustache last so the tools in your bucket the money in your financial hands
eh?
Most definitely in the days of modern slavery and warfare we used underwear and it worked
just as great as the paper stuff did before we flushed it all away
CBDC?
We won't have to potentially subject our health care plans to possibilities of dirty money
exchanging hand to infectious rodent hand we can safely keep our distance as the focus and
not the exchanging act in itself
Well clearly they should all follow along as we show them the truth about possibilities for there
budget planners too.
In dealing with paper and backsided paper I feel a second roll and wrap is a good new
experience safety precaution always especially when restructuring began with potted plant
chunks I mean most of the filtration process probably greened things back up butt just
because when it come to public place meetings I always believe in safety first!
Maybe a little tap on the shoulder by an unarmed gun man or woman in a mask every now
then just to say hey good job your really making this work they noticed and they wanted us to
tell you or a smack to the wake up boot satin hey ya know you could do better dude come on
the financial committee is here to help you!
Because you can't flush virtual money down the shitter like we could in the old days it literally
will not float on gray
What's tender about legalities really? I mean honestly ?
If they services and goods are of inferior performance then yes! Double the taxes, because
for one waste would be a concern getting rid of stuff no one has ever heard of or if your not
recycling enough plastic stuff to keep up cost for back up increase for that kind of junk so
yeah that's tuff I guess yes and no then huh. If your marketing and performance sales are
adding up isn't that enough?
There's no cap on infinite quantities so for a single user to hold that much is outrageous and
who has a wallet big enough ?
Mattress
No going off script ! I though we went over this?
sale? If so, how?
Yes get rid of the humans willing to make the sacrifice to error favor of an immediate score
and let the payment exchanges happen at the merchants exchange counter
Uhhh didn't I make this clear with the one abstract concept that would glue the loop back to
cash scoop no matter what calculator you choose ?
CBDC?
Um everyone will want to buy my awesome supplies and that's really all I'm working on.
benefits of a CBDC?
Yes I'm very insistent that if you broke it where you bent it you don't get to spend dip so if
everyone could just follow that tip the possibilities are endless
_________________________________________________________________________
Industry
Merchant
Country
State
Utah
Email
ffr/rezze flocks??
inclusion?
stability?
possibilities!
doors. ya know?
eh?
CBDC?
Mattress
sale? If so, how?
CBDC?
benefits of a CBDC?
_________________________________________________________________________
Industry
Merchant
Country
State
Utah
Email
ffr/rezze flocks??
inclusion?
stability?
possibilities!
doors. ya know?
eh?
CBDC?
Mattress
sale? If so, how?
CBDC?
benefits of a CBDC?
_________________________________________________________________________
Industry
Academia
Country
Canada
State
Email
In the paper, there's a worry about CBDC competing with private sector payments. That
competition could be a good thing. CBDC could discipline the private financial system.
Yes, by not having CBDC "intermediated." If the central bank is going to issue CBDC, do it
directly.
inclusion?
Yes, but having it offered through private financial institutions won't accomplish that. The
problem seems to be that private financial institutions are not sufficiently inclusive.
CBDC presents no problems in this respect.
stability?
This should not be a problem. Traditional central bank crisis intervention works to solve the
issue of flight to safety. If depositors are fleeing from the liabilities of solvent but illiquid private
financial institutions, the job of the central bank is to lend to those institutions.
In the paper, there's an idea that we need to make CBDC less useful - by not paying interest
on it, or putting caps on holdings of the stuff - to prevent it from competing effectively with
private sector means of payment. What a terrible idea!
If cash usage declines, that might indicate that central banks need to update their provision of
payments mechanisms to the general public, right?
CBDC?
That's pretty obvious. It's useful to watch and learn from the effects of experiments in other
jurisdictions.
I'm not sure this is possible. This is the key tradeoff involved. Privacy is an important public
good. Privacy also lowers the cost of crime.
Yes.
Yes. For standard efficiency reasons.
Yes, this might mitigate the issues with criminal activity.
I don't think CBDC should be intermediated. Bad idea.
Yes, but no idea how you do it.
sale? If so, how?
This should be transparent from the user's perspective.
CBDC?
benefits of a CBDC?
_________________________________________________________________________
Shawn Taylor
Industry
Individual
Country
State
Virginia
Email
This will give too much power to the government over our money this is a terrible idea
no
inclusion?
The effect will be negative for inclusion
This will infringe upon our right to chose what we do with our money
stability?
The only thing that will mitigate the adverse impact of the CBDC is to not create it.
No, this take away democracy
CBDC?
There are still regulations set to regulate illegal cross-border transactions
The US is a pioneer we should not be influenced by other nations especially if it's not in the
people's best interest.
The only thing that will manage potential risks associated with CBDC is to not create it.
By not issuing the CBDC
There is always the potential to have digital information compromised and this is too
dangerous to implement. If someone was to exploit the CBDC they will have access to all
American citzens.
NO
NO
NO
CBDC should not be implemented
sale? If so, how?
CBDC?
benefits of a CBDC?
_________________________________________________________________________
Industry
Academia
Country
State
Colorado
Email
Proposal is an unconstitutional intrusion into the persons and papers of individuals.
The proposal provides no benefit to to any private entity.
inclusion?
Any effect would be negative.
CBDC would result in employment and price instability.
stability?
Negative.
Yes ! Both CBDC and 'stablecoin' would adversely impact the financial sector.
Drop the plan to issue any CBDC.
No !
CBDC?
Domestic and cross-border digital payments will evolve in accord with free enterprise
principles.
Decisions by other large economy nations to issue CBDCs must not nfluence the decision
whether the United States should do so.
Risks associated with CBDC are unmanageable..
CBDC cannot provide privacy to consumers.
CBDC cannot be designed to foster operational and cyber resiliency.
No !
CBDC should never be issued.
No amount of CBDC should be held by a single end-user.
No CBDC should be issued by any entitiy.
No CBDC should ever exist.
sale? If so, how?
CBDC?
benefits of a CBDC?
_________________________________________________________________________
Industry
Individual
Country
State
Maryland
Email
The risk of "Scams" especially on the elderly still has not been resolved, I fear that this will
make maters worse and much more costly to the population by making it easier to run the
scams and allow larger amounts to be stolen. A large portion of these monies go abroad and
can not be retrieved making it a loss for those that can least afford it. This is one problem
that needs to be corrected first.
inclusion?
A lot of people that tend not to use the banking system don’t understand and or don’t trust
them. These people are usually older or under educated and don’t understand the workings
of the financial systems that are in use and will be unable to understand the changes. The
will need access to there monies by Bank tellers or checks that they receive in order to
survive on a regular basses.
stability?
It is very important to keep money flowing as many people keep money on hand for
unexpected problems and it also gives people a since of security to have cash on hand. To
limit their cash or ability to get cash could be devastating to them.
CBDC?
The system in place now is not perfect but has improved over the years, it should not be
abandon but should continue to be improved an any changes should be done in small steps
as most of us are not affluent or big business peoples. Small changes are best as they allow
finding mistakes and adjusting of the system easier.
sale? If so, how?
CBDC?
benefits of a CBDC?
_________________________________________________________________________
Industry
Country
State
Oregon
Email
The ability for compute performance to improve will allow it to scale better with energy
consumption negating concerns of environmental impacts. The move to renewable & nuclear
energy will allow CBDC infrastructure to meet demand while avoiding an exacerbated carbon
footprint, whether that would be ‘mining’ via supercomputer conducted internally or all other
systems needed to access a hypothetical CBDC platform. The primary "gas" costs of current
blockchains can almost be negated entirely if operated by the government; this will improve
transfer times, validation times, and be an overall improvement over ACH transfers.
Additionally, global transfers would theoretically transact with the same speed as domestic
transfers (this doesn't include international validation that I would assume to be required for
payments entering and leaving the U.S.)��If a Proof of Work (PoW) system were to me
implemented, the ‘miners’ could be limited to U.S Banks, nationally or state chartered. That
way, it can be another form of decentralization that can increase security and allow banks to
have skin in the game. Credits could be given to those that participate, and the more that
participate, the more effective and secure the CBDC could operate.�
The primary thing to take into consideration is blockchain technology as a whole. There are
over 10,000 different cryptocurrencies that offer a wide array of different features and
functions. However, they all operate on the same fundamental blockchain technology of the
ever growing 'public ledger'. There is almost infinite possibilities of features and benefits that
could be achieved within the blockchain technological space. That is why Bitcoin, Ethereum,
and all other major players have increased in popularity; individuals see the potential, but the
adoption is lagging because of volatility and uncertainty. However, uncertainty and volatility
can be eliminated with a CBDC since it would be backed by the Federal Reserve and give
individuals an entry point into the blockchain space.
inclusion?
A CBDC would greatly increase financial inclusion. The ability for public and private entities to
implement ways to hold and move a CBDC is limitless. Linking bank accounts to payment
services like healthcare, investment intermediaries etc.; with existing requirements, one would
need to be a part of a banking institution. Allowing such easy ways to open a CBDC 'wallet'
and start getting transfers whether that would be wages from employment or personal gifts
would greatly reduce the 7 million Americans that remain unbanked.��A lot of online transfer
systems like PayPal, Venmo, CashApp all have proprietary systems, but all operate on top of
the banking system. If all operate on the same CBDC system, these secondary transfer
systems could work better together and allow even more people to transfer money between
businesses and other individuals.�
This would be a slow process in the beginning of the program but has the potential to offer
much more insight to steps needed to achieve price stability and maximum employment. �As
more individuals use a CBDC, the more data that could be collected and reviewed; this gives
the Federal Reserve real-time view of what money is going where and allow the Federal
Reserve to better allocate monetary policy. Imagine reviewing meta-data about consumer
money transfers and observing that money transfers to grocery has increased more than
luxury goods, government spending and aid could be directed to food assistance since it’s a
growing concern of public spending. Transfer IDs could be flagged by employers using the
system as 'wages' so it would show real time wage payments across the CBDC blockchain
ledger, and one could extrapolate wage growth/employment growth. This system offers
incentives of quicker transfers and an easier time fulfilling reporting requirements at the
‘expense’ of less privacy regarding money transfers.�
stability?
Per my response above, the ability to track and analyze real-time data will allow for more
informed responses and improve financial stability. The problem is the lag between data
generation and analysis. A CBDC reduces this lag. As a CBDC evolves, so do the methods of
data collection and analysis so accuracy will improve overtime and insights will closer align to
real-world trends.
Yes, a CBDC could affect the financial sector. I see it being a positive long term affect simply
because it will open the ability for many people to access new areas of the financial sector.
Stable coins do a good job of this, but stable coins are inertly used in the crypto space; since
the space is new and complex, there aren’t a lot of individuals actively working in the space.
Tools would include ways to generate information for single money transfers. The adverse
impacts would be identifying inefficient sectors in the financial space. This would be
considered creative destruction in the way that older, outdated institutions will suffer but allow
better replacements to thrive. The benefits will greatly outweigh the costs.
Yes, it is very important. Individuals trust something tangible over something that is intangible,
so access to central bank money is crucial. Think of paper backed digital currencies.
Protection from physical threats like powerful solar storms that could corrupt electronics are
crucial. Additionally, transparency of wealth is an important factor to consider; the data
generated from a CBDC should be available and able to be seen & audited by the average
consumer. This would prevent issues like a CBDC being issued faster than the real growth of
the economy resulting in inflation.
CBDC?
It would be asymptotic. The global financial system is approaching digital currencies and if the
U.S. decides to abandon this, we will be lagging far being the global economy (assuming the
global economy adopts CBDC’s of their own) and the U.S. will have to scramble to muster
something up while early adopters benefit from their respective economic boom. A U.S.
CBDC is crucial to the success of the national economy and the payment transfer system, the
U.S. will not be able to avoid this transition. Paper is linear, electronics are exponential as
information increases traditional transfer systems will get exponentially slower.
This should not be a question. Question is not whether the U.S. should keep up with the
Jones's, but rather an assortation that the U.S. should be the Jones's. I reiterate my point that
the global financial system is evolving into this space so it would be behooving the U.S. to
accomplish its transition sooner rather than later. If a nation is deciding if it should follow suit
based on the decisions of other nations, then that nation is lagging, period. The focus should
be innovating the domestic nation over following in the footsteps of others.
Encryption and decentralization are key if one would want to mitigate external risks with a
CBDC. Decentralization can be done by allowing multiple separate parties to uphold the
blockchain like banking, data centers, state governments; the more nodes a CBDC can
establish, the better. Encryption can be achieved with a highest standard for software
engineering. Data redundancy helps with internal risks like data corruption, technological
glitches, or individual malpractice.
The same way that banks do. backend regulation helps banks and governments observe
what is happening but allows a shield to prevent private information being seen. Data
breaches can happen but if everything is encrypted at the highest level, then the leaked data
won’t provide much use. Encryption is key because it allows the authorized user to access
data while preventing pirates from stealing sensitive information.
The increasing access to biometric authentication and multi-level authentication greatly

increases security. these should be implemented without a doubt. �The operational cyber risks
that cannot be avoidable comes down to human error. This could be a mistake in the creation
of CBDC that has an exploitable loophole or having an individual with ill-intent in the wrong
position of authority.�
Yes, it would act as a 'better dollar', therefore it would act as a legal tender that would coexist
with the traditional U.S. dollar.
A CBDC needs to pay interest. Interest should be paid because it provides economic
incentive for participation in a CBDC and will increase adoption rate. It is evident that not a lot
of people value time as highly as they should so the immediate benefits of speed using a
CBDC may not be enough to convince consumers to adopt a CBDC so interest will help.
Without interest, there is little skin-in-the-game for the average user that would make it harder
to get people onboard with a CBDC. �The best way is to 'stake' or lock CBDC for use that can
accrue interest at a market rate the same way deposits in a bank pay interest. These locked
funds can follow similar structures to CD's or deposit accounts that have withdrawal
requirements. Staking can follow terms of government issued bonds as well and would almost
eliminate the need for bonds to be traded on a financial exchange.�
No, for a CBDC to act as an alternative to the traditional U.S. Dollar, one cannot be limited. A
CBDC should be thought of as a long-term replacement to the physical dollar. There are no
limits to how much dollars one could have under their name so the same standard should
hold to a CBDC.
Banks, investment firms, governments, ones that primarily work the holding/distribution of
wealth should be the only ones that serve as intermediaries for the CBDC. Most regulatory
requirements that banks and other financial institutions are held to with money should equally
apply to a CBDC.
A CBDC should not have long-term offline capabilities. If it acts as a replacement to the
dollar, then it can be easily converted so one could take advantage of the 'offline' structure of
paper money and 'online' structure of a CBDC. They should be one in the same.
sale? If so, how?
Any account that holds CBDC could have a unique QR code assigned to them as well as a
secondary from of authentication like a pin. This would allow most phone users to hold a
scannable code that would need to be authenticated with a pin to allow for easy payments at
any place. A proxy card that has a chip could be issued in the short-term that is tied to a
CBDC account to make use of current infrastructure.
If the CBDC is tied to the dollar, transferability will not be an issue. Any entity that adopts the
infrastructure to support CBDC will be able to accept it from any user since it all relies on the
same baseline technology. If an entity would rather rely on traditionally ACH methods, then
changing CBDC to USD can be as easy as a button click. If an account holds $1,000 USD,
and a CBDC is pegged to the dollar, then one account could theoretically support payments
in CBDC & ACH simultaneously without the need for transfer.
CBDC?
Future technological innovations would need to prioritize speed and efficiency. Migration from
one platform to another can be a tedious task but this level of technological expertise would
be required to design a CBDC. Policy choices regarding this would be synonymous with the
history of ACH innovation. Per my aforementioned idea regarding ‘staking’ and interest
income; one could stake a nominal amount of CBDC and lock in voting rights so if something
needs to be changed with a CBDC, every individual that locks X-amount of CBDC gets a
vote. This would need to be tied to unique identifiers like SSN to prevent from double voting.
This offers an additional layer of participation that would incentivize users to adopt this
system.
benefits of a CBDC?
The bottom line is as information gets bigger, we need more speed to make use of it; a CBDC
greatly increases speed and efficiency when dealing with increasingly complex transaction
data; this can be transformed into economic benefits. That is what the focus of a CBDC
should be. With the sole focus of speed, the possibilities are limitless.
_________________________________________________________________________
Industry
Individual
Country
United Kingdom of Great Britain and Northern Ireland
State
Email
I see a huge risk of nefarious actors now or in the future using centrally controlled digital
currency to control people. �In a free market democracy there is no need for this level of
control. In my opinion a CBDC would be closer aligned to the values of communist China than
the USA.
Bitcoin. �Fixed supply. Immutable ledger.
inclusion?
Negative. One of the biggest factors in expanding the wealth gap is fiat currency and the
printing of new money.
I believe it would be dangerous for democracy.
stability?
Stability at the expense of authoritarian control of the nation is not worth it.
It would negatively affect the free market and democracy as a whole. Innovators and free
thinkers may rethink their decision to base themselves in the US
Bitcoin is the answer to this. A globally trusted immutable payment ledger which fosters global
cooperation between not only individuals, but all nations.
CBDC?
Let the free market decide this. Money = information. The distortion of the financial system
has already seen crippling impacts on the working & middle classes.
The US should lead the free world into adopting the free-est of all markets. Liberty and
defence of individual property rights should be at the forefront of all decisions.
I don’t know the answer to this. But please factor in that taking away people’s freedom and
privacy is a huge negative. I abhor criminality but freedoms are the bedrock of America.
If you make one then definitely.
I don’t believe that interest is necessary. �I believe the most important thing is a fixed supply.
The currency must return to being backed by something tangible. Fiat is leading to the slow
decline of society.
No.
Open source. �Transparent. �NOT existing banks. Cantillon effect is ruining the world.
No
sale? If so, how?
Bitcoin payment rails
CBDC?
Bitcoin will win in the end anyway. Bitcoin is the open source immutable fixed supply money
already chosen by engineers and working class people.
benefits of a CBDC?
Do NOT limit what people can spend their money on. �FREEDOM. OPEN SOURCE. �You have
a chance to build trust back into the financial system by choosing bitcoin over authoritarian
CBDC’s.
_________________________________________________________________________
Industry
Trade Organization
Country
State
Iowa
Email
The potential for surveillance and locking individuals and specific groups out of the economic
Yes we have answer in the crypto community that would eliminate these concerns
inclusion?
Yes thank he net effect would be negative those that are exclude now will be lost for ever and
with the disdain that many has towards the government they would leave the system also are
just participate only where forced their by eroding freedom
It would give the power to the government to withdraw are credit at will
stability?
Outing so much power in the government hands would allow them to have more power over
individual and cooperate accounts it would no longer be capitalism
It all depends if n the people involve I would rather it be in the hands
No it would make it better make it decentralized and have a limited amount made at the
beginning
No the public has already created a vibrant industry let’s stay American democratic and
capitalist
CBDC?
The usd will remain dominant has it will be the backing of most stable coins and people will
feel safe has the USA will not be a government in every ones account
People will flee those currencies for usd and stable coins
No it’s all predicated on whose in charge no one knows when someone with evil intentions
get in charge
It would not give privacy to consumers and it would cause more illicit activities
This is too much government in control off our money supply
No
See this is the issue why should we want the government be able to limit peoples asset
sale? If so, how?
CBDC?
benefits of a CBDC?
_________________________________________________________________________
Isaac
Industry
Individual
Country
State
Wyoming
Email
CBDC risks are that it is centralized.
DeCentralize
inclusion?
Negative for inclusion
The federal reserve does not have the ability to effectively implement monetary policy��Thats
why DeCentral currency was invented because of your failure. Bitcoin solved the problems
You created
stability?
It wouldnt matter �The only stability moving forward will be with DeFi not CFI or CBDC.
Its just another distraction, a tool to be used by centralized organizers of a failed

systtem��“Nonbank money” is everything better than what you provide
Dont issue one! �Just dont issue it..��A tool you could do is buy Bitcoin buy Ethereum and keep
your hands out of peoples accounts. Maybe a bitcoin backed or ethereum backed token
would work,, but the federal reserve is ways behind the power curve and has already lost
trust
No �Not important alt all��DeFi exists because Central bankers robbed everyone
CBDC?
The US way of being in the middle of money transfers is over. It has already evolved and the
federal reserve is just now asking how to participate in the evolution? Too late, for you, you
were supposed to be the leader and you failed everyone
The US should make up its own mind. Ask congress.
KYC is terrible idea �Dont store peoples information , ever
It wont��Its terrible thing run by centralized entity that only exists to expand itself and ensure its
own success above all else.
No comment
No absolutely not
What? How? From where?��No are you serious,, buy HEX
Yes control,, supreme control over the land, thats what you want to achieve with your cbdc.
None��Give up �Go home��Turn the lights off��Or start accepting the reality DeFi has Won
Yes �Paperwallets��Must we Teach you Everything about Money?
sale? If so, how?
Ask the creators of USDC��Ask Jack Mallers �
Well crypto is being adopted by visa and mastercard��The standards have already been
updated, just not yours, everyone else is updating. Central Banks have failed to update, its
too late now
CBDC?
Well most will be DeCentralized so Centralized stuff is going away
benefits of a CBDC?
Design if so the federal reserve is the primary beneficiary from every single transaction.
Design it so you have 100% access to everyones details, accounts and other information.
Design it so you can cut off anyone without notice or freeze all funds of any adversary
_________________________________________________________________________
Andrew Sears
Industry
Merchant
Country
State
Pennsylvania
Email
https://www.bandlab.com/revisions/0b78e499-86c6-ec11-997e-28187831e8a1�Part 1: Bitcoin
and Ethereum��There is also a part 2��And e have some drawings on puture currency�Sibly 248,
Forgiveness 175, Grace 84, Sagittarius give, Supreme Pizza make them liquidate that this es
Bitcoin and Ethereum and et will keep being more. Thank you Motley and Crew 1&2
Taurus Sun, Aries Moon
inclusion?
stability?
CBDC?
sale? If so, how?
CBDC?
benefits of a CBDC?
_________________________________________________________________________
Andrew Sears
Industry
Merchant
Country
State
Pennsylvania
Email
https://www.bandlab.com/revisions/0b78e499-86c6-ec11-997e-28187831e8a1�Part 1: Bitcoin
and Ethereum��There is also a part 2��And e have some drawings on puture currency�Sibly 248,
Forgiveness 175, Grace 84, Sagittarius give, Supreme Pizza make them liquidate that this es
Bitcoin and Ethereum and et will keep being more. Thank you Motley and Crew 1&2
Taurus Sun, Aries Moon
inclusion?
stability?
CBDC?
sale? If so, how?
CBDC?
benefits of a CBDC?
_________________________________________________________________________
Wilbur Fleck
Industry
Other: Retired banking and insurance
Country
State
California
Email
TRUST�Money is founded on trust. Similar to the way chairpersons of investigative

commissions are chosen for their existing high level of trustworthiness and freedom from
bias, CBDC should be a dedicated department in the Federal Reserve and the head of that
department should have a widely known high level of trustworthiness and freedom from bias.
I think this is even more important than their economic/finance expertise.�
inclusion?
DIVERSITY OF DESIGNERS AND DEVELOPERS�The Federal Reserve should seek to have

diversity both in the group that makes the design choices while writing the specifications and
in the group that develops the software. The design group would include not only people with
expertise such as government policy and economics/finance, but also people whose only
qualification is the ability to articulate the needs of groups who may not be otherwise
represented in the design process, for example, people on the have-not side of the digital
divide.�
stability?
SHARED OWNERSHIP�For both joint accounts at commercial banks and scenarios that
involve joint endorsement the Federal Reserve could consider making digital currencies with
appropriate compatibilities or deciding to let these services be handled by bank-created
money and physical currency.�
CBDC?
AVOIDANCE OF BACK SEAT DRIVING�By seeking input from the public and collaborating
with Congress, the Federal Reserve is doing due diligence fact finding/discovery effectively
and completely. When the framers met to write the Constitution, they shielded themselves
from outside influence by closing the doors and windows. Similarly, during deliberations juries
are insulated from outsiders and when we go into the voting booth we close the curtain. The
gravity of the design and development of digital currency makes it fitting that once the fact
finding/discovery is completed the design and development processes are shielded from back
seat driving by being done behind closed doors.��AVOIDANCE OF POST-DESIGN
CHANGES�Also, there should be no overlap between the design and the development. Put
differently, even though the creative process includes the potential for endless tweaking,
there should be a point at which the design is frozen and there are no design changes after
the design is given to the developers. This will be hard to achieve but it can mitigate some
complexity in the software and therefore generate fewer unintended consequences. It will
also avoid the costs of undoing and re-testing.�
OPEN BANKING�Open Banking and Banking-as-a-Service offer exciting possibilities to

empower consumers, but they also have significant risk. If safeguards against these risks
can be baked into digital currencies, the Federal Reserve should consider including the
safeguards in the designs.�
sale? If so, how?
CBDC?
UPDATING�CBDC should be structured to enable development of versions 2.0, 3.0, etc.�
benefits of a CBDC?
DIVERSITY OF USE CASES�Cars are made in a wide variety of models that are tailored to
different uses. To avoid applying programmed controls to all users even though the controls
apply only to some of the users a variety of digital currencies could be deployed. For
example: a currency tailored to family/student education spending and borrowing; a currency
tailored to shared liability for payment such as medical bills paid by both the patient and the
insurer; a currency tailored to controlled purchases such as purchase of prescription
medications or firearms; a currency tailored to spending that has external oversight such as
spending by government agencies.��SELF-PERSONALIZATION�If the Federal Reserve
chooses to deploy an e-wallet for mobile devices, it would be useful if the e-wallet had a
settings screen. For example, the user could register with the Federal Reserve a
payable-on-death beneficiary (Totten Trust) for the contents of the wallet. Upon receipt from
the beneficiary of proof-of-death of the wallet owner, the Federal Reserve would either
transfer the contents of the wallet to the beneficiary or void the contents of the wallet and
issue an equivalent amount of currency to the beneficiary.��ONGOING SUPPORT�The
Department of Health and Human Services gave health care providers and software
developers 8 years to migrate from paper health records to electronic health records. Even
after the close of the migration period HHS provides support to the providers and developers.
For example, it maintains an outstanding website (https://www.healthit.gov). The Federal
Reserve should create a website or several websites for ongoing support of consumers,
banks, and members of the ecosystem.�
_________________________________________________________________________
Industry
Technology Company
Country
State
Wyoming
Email
It is likely that the risks may be mitigated to potentially be nonexistent with the proper
settlement instrument being developed deployed and adopted.
Yes definitely, please look at the ERC20 monetary-gold digital asset USG at:
https://BuyUSGold.com �It would be impossible for the US Government not like it's own
Treasury digital gold currency tokenized on the blockchain for future mass adoption.
inclusion?
Unfortunately it's a Catch 22. In the event that is CBDC were to be gold backed digital dollar
or better stated – a monetary-gold digital dollar – an asset like the USG, a Direct Digital
Representation of United States gold coinage – such as the 1oz American Eagle Gold coin –
than the possibility would exist that the global demand would be for the better US Gold dollar
or than the US Fiat dollar. Naturally the possibility exists that further diminished buying power
or better described erosion of the US Fiat dollar would likely occur.
One only needs to look at the the Roman empire and its ultimate collapse to identify what
citizens truly desire. In the beginning the Roman coins were minted as a 100% silver coin,
and at the end of the empire the same coins were minted with less than 5% silver. If there
were to be a US fiat dollar reset with a digital replacement backed by Monetary Gold the
stable price buying power (stronger economy and employment) would become instantaneous
and the demand for the digital asset globally could be controlled by the supply – further
strengthening the value of the digital gold dollar – a new United States "Gold" reserve
currency.
stability?
The CBDC requires the ability to make the market, by supplying it upon demand and pulling
from it when there is less demand. Accomplishing this with a digital gold dollar would be a
global game changer with a tremendously positive impact. As gold has been a store of value,
and its price has been tracked for over 2000 years, naturally it is the choice that is necessary
for at least the G7 and likely the G20 to embrace. Think of this as a new Bretton Woods the
original in 1944 in preparing for the end of World War II and the rebuilding of the nations and
their economies, the only difference now is it's a Bretton Woods 2.0 conversation, inviting the
participating nations back to the table and embracing a new an improved monetary system.
Perhaps a better question is why would any government allow the competition to exist.
Technology is simply technology, what is been happening over the last decade is the
monetization of the technology in the emerging markets of cross-border settlement upon new
Blockchain technology and ultimately new merchant PoS networks. The central banks could
easily take on this new role and probably manage the responsibility in a way that private
companies may find challenging. Adoption and or fourth adoption being the single largest
barrier to entry and ultimately success.
It's a very good question I don't think there is a very good answer. If there isn't a blending of
the public and private sector to provide the transactional instrument as well as the settlement
instrument which could be all inclusive but likely better separate, then it's likely the central
bank will have to be the leader within the emerging market.
Look no farther than the information and format of the USG and the potential for a
fractionalized version of the USG – in a dollar form. Such an instrument (USGD) would be in
higher demand globally than that of any alternative dollar backed so-called stable coins. After
all it would be a US Gold Dollar (USGD).
CBDC?
They will likely develop as an alternative Visa or MasterCard remittance platform. All settled in
real time with transparency upon a Blockchain. Banks could become sponsors to a new
alternative platform, however, it's likely that through the inspiration or better stated the
desperation of the countries outside the borders of the US will embrace those alternative
systems because they are absent access to the visa and MasterCard international programs.
In a current model it's a credit qualifying criteria to become a merchant, and an alternative
system there's no extension of credit, and thereby a massive adoption by merchant because
they're not being declined in the process. Their GDP is are likely to increase dramatically as a
result of such access. Obviously they're not simply selling locally in the market but able to sell
their products globally through current Internet and developing Web3 technology.
The United States must be the leader. As the current reserve currency – a result of Bretton
Woods Accord in 1944, and had it not been for the Nixon shock on August 15, 1971 we would
still have some ties to a Tier 1 asset – Gold. The world understands that it settles its debt
using the dollar providing that dollar in a digital form that is actually backed by a hard ass it
would cause a continuation of the reserve currency without interruption. Anything less than
that conversation and that criteria that ultimate goal may see one of the foreign countries take
that leadership role on and become the reserve currency. It would be imperative that the G7
or the G 20 sit at the table and discuss a way to interact with a similar settlement instrument
of their own similarly backed.
It's possible that without the immediate action of establishing a CBDC that is backed,
alternative remittance platforms will emerge through inspiration and likely the desperation for
that improved system within the now described meta-verse.
The easiest answer that question is establish thing a Blockchain that identifies the digital
wallet addresses attached to a distinct legal entity and or individual regardless of their
domicile. By doing this government can enforce rules and regulations upon the responsible
party of the public wild address.
That answer is yes by default. In the absence of a country's leadership providing the better
legal tender there's no reason for mass adoption and change. As a potential result, a CBDC
might find that the digital instrument becomes a de facto legal tender.
Just as an individual might have multiple interests in distinct legal entities, it is likely that he's
single and user would access additional public wallet addresses and in turn surpass any
quantity limits that might be imposed from the onset.
sale? If so, how?
At the point of sale or POS any agreed-upon instrument for settlement makes the platform
agnostic. To break into a better remittance platform, a digital Blockchain settlement platform,
the selection of the better settlement instrument is all that is necessary. The better instrument
naturally a gold digital dollar.
The answer may be that the CBDC is nothing more than a transactional token for the benefit
of the ledger entry system. Checks and balances. However if there is a pairing between a
CBDC and say a USG or a USGD, then the role and responsibility can easily be managed by
properly licensed Digital and Traditional exchange platforms. US banks, US broker dealers –
that are FINRA regulated, are easily the path of least resistance and immediate adoption in
the marketplace. New technology standards were always be developed, and cross block
chain activity is easily accomplished today.
CBDC?
One thing for certain is everything is temporary and change is constant. Any forward thinking
technology innovations will simply improve access speed of transactions and transparency.
The core question that must be asked is what is the instrument by which the settlement is
taking place and if it is nothing more than a transactional token is there a pairing into a hard
asset class token. That hard as a token will naturally have liquidity on the existing exchanges,
banks with future regulatory expansion, and then FINRA broker dealers.
benefits of a CBDC?
The single most important decision that comes out of this process is the true and accurate
stable value token that is a true store of value. The USGold (USG) token is a direct
representation of the United States minted 1 ounce gold American eagle coin (Real US
Currency) it was developed for the purpose of demonstrating how it is a utility token, a utility
in that it serves a purpose, a settlement instrument. If he say BDC or Tamir this approach it
would have global globalit was developed for the purpose of demonstrating how it is a utility
token, a utility in that it serves a purpose, a settlement instrument. If he say it was developed
for the purpose of demonstrating how it is a utility token, a utility in that it serves a purpose, a
settlement instrument. If a CBDC were to mirror this approach it would have global
dominance as a leader. However, if the ultimate question is scalability, transactional speed
and ease of use through new remittance platforms, then it should simply be a transactional
token for the purpose of ledger entries. It then can simply be paired to one of the many other
so-called stable value coins that have some other type of asset that backs them.
_________________________________________________________________________
Vments
Industry
Other: Consulting
Country
State
New Jersey
Email
steven.wasserman@vments.com
Using a balance of financial institutions reserves held with and backed by the Fed for digital
fiat currency (effectively bank issued stablecoins), these FIs can be authorized to be able to
issue and circulate the digital currency between each other and their customers. The end
customer new digital currency accounts would ideally also be FDIC backed. This could be an
alternative for a retail circulation of funds with comparable credit and liquidity considerations
to how it was described in the paper for Fed direct issued CDBC and corresponding
accounts with them. �A CBDC exclusively for wholesale bank to bank settlement could also be
used to facilitate interbank settlement for when the retail bank issued digital fiat currency is
taken out of circulation for exchange back to “legacy” deposit funds or cash to the retail
customer when the retail digital currency was issued by another FI. This same wholesale
CBDC could also be integrated as an optional settlement method for other existing payment
rail settlement for what these rails can continue to provide clearing data services.�
The Fed could be the oversight body for the retail level bank issued stablecoins in a manner
similar to the relationship and oversight the Fed has for existing bank accounts. �Another
oversight option could be where the fed is just an active facilitator and collaborator in a bank
issued stablecoin network similar to the role they play in the Business Payment Coalition
Exchange Framework Oversight Committee. �
inclusion?
Financial inclusion could be achieved where the bank issued stablecoins could be
interoperable with new types of accounts which have lower or even no KYC requirements, but
which have limitations in terms of maximum individual and/or cumulative transaction and
account balance limits. These new accounts could be either bank or non-bank issued where
non-bank issued accounts would need to be through MSBs as they are today as they reach
and serve the unbanked and underserved. These non-bank entities would not be stablecoin
issuers in this ecosystem design, but could be distributors of the bank issued stablecoins
and/or CBDC.��These types of account could also be used in conjunction with offline use of
these digital fiat funds, where the offline transactions could optionally be totally anonymous or
at least pseudo-anonymous. All online transactions should also be pseudo-anonymous and
follow BSA and AML regulations. The limitations of the anonymous (or lower KYC) accounts
could be kept within AML limits.�
stability?
Since a CBDC would be safer and more attractive than current private non-bank stablecoins
and other non-bank money, it would have a much larger impact on financial institutions which
could loose deposits needed to enable them to continue to have funds for loans. This would
then create a need for loan seekers to seek alternative and potentially unregulated lending
services. If these FI were able to have digital accounts that the CDBC and/or bank issued
stablecoins could circulate through where partial reserves could be used for lending as it is
today, then this would be a better solution.
The tools to consider include structure and software to enable and control new types of lower
or no KYC accounts with limits within AML triggers.��Another set of tools would be software that
supports offline distribution, use, and conversion back to online versions of shadow copies of
all offline tokens that sync with their online issued copies after either device they were
transacted offline connects to the internet.��A library of open source development tools/APIs to
enable all sorts of functions around the issuance, distribution, use, redemption, account
management, and use case specific functions would also be helpful as well.�
Yes, but with similar limits such as those for ATM withdrawals to the lower or no KYC
accounts which could serve as a cash equivalent alternative.
CBDC?
The continued adoption of faster payment solutions in the US along with efforts to enable
these to be interoperable for cross border transactions can bridge the gap until when and if a
CBDC or a bank issued stablecoin network with oversight by the Fed, or Fed participating
overnight body, can evolve starting with how the digital fiat could be an optional method of
settlement to the clearing methods on these faster payment rails.
As the paper pointed out, there is concern about some of these other CBDC efforts, such as
by China, will affect the US dollar’s prevalence as accepted currency outside of the USA. We
do not want to wait and see to the point of being too late to loose some or all of this strength
of the US Dollar which could affect US cross border commerce.��The US should continue its
efforts to at least be ready, willing, and able to move ahead once all requirements, policies,
and testing can be done. It should avoid saying that it no longer sees a need and benefits to
continuing this pursuit, which would have others take more of a center stage which could
have adverse affects that were already pointed out about the adoption of alternative to a US
CBDC or a central bank overseen network of bank issued stablecoins. �
All transaction detailed data, including personal and confidential data, need not be stored in
the CBDC ecosystem other than a pseudonymous id that FIs that onboard customer accounts
that hold CBDC funds. The FIs in turn record the applicable separate KYC information in their
systems and are only accessible to them and the end customers this data belong to plus to
the transacting parties and their FIs where only the necessary information for the receiving
party to verify the sending party is needed.��As described in other responses to this RFC, some
of the end user accounts could have lower or no KYC when the account has applicable
limitations to its use. There would still be a pseudonymous id at least tied to a government
issued identification for less limited account usage, and perhaps just a biometric hashed id of
an anonymous account owner where that biometric id could not be associated to the identity
of the account owner, but could at least be used to control access to use of the account.�
One of the key features should be that each CBDC token can be verified as one that
originated in its ecosystem which has controls over the parties that can issue and hold
reserves, distribute, and/or record transactions in the ecosystem on behalf of their customers.
The access methods and controls for these operators needs to be as secure as possible to
prevent cyber attack and the requirements for access to the operator’s systems needs to be
just as secure to prevent attack from within one or more of the operators.�All transactions
should be credit push and not debit pull as is the case for the real time rails of TCH and
FedNow. �These things do not preclude fraud at the end user level to address account
takeover, synthetic identity, and some of the other types of fraud that we continue to see and
as classified in the Fed’s fraud classifier. �The CBDC ecosystem design could also include a
means of fraud information sharing across FIs, including blacklisted or suspicious accounts
and party identities. It could also provide a means of detecting AML across multiple FI
accounts linked to the same party ids.�The ecosystem design could also include additional
means of identity registration and verification of onboarded end customer payers and payees
that funds are being transacted to. Some key directory functionality could be provided along
the lines of some of the characteristics as described in the white paper from the Directory
Models Work Group of the US Faster Payments council.�
What difference would this really make as long as it would be “good funds” and eventually
available to all (i.e. ubiquitous)?
No in the case of where the account were one held directly with the Fed, which I disagree
with. For intermediated accounts, especially per the bank issued stablecoin approach, these
accounts should be eligible to earn interest comparable to interest available with checking
accounts. Other forms of economic incentives could be provided as well by intermediaries
similar to incentives for debit and credit card usage when they process transactions through
the CBDC ecosystem that they are permissioned operators for.
Only in conjunction with lower or no KYC accounts as descried above.��Cross border

transactions and accounts holding US CBDC that may be in other countries may need to
have applicable limits as well.��The total CBDC (or bank issued stablecoins) in circulation
should be limited along the same criteria of the total of printed paper and minted coins. �
There could be multiple levels of intermediaries in the CBDC ecosystem, much like there is
today, where only those that are currently eligible for having accounts and reserves with the
Fed should be the top level. Then smaller FIs and Fintechs of these top level or Fintechs of
the lower level FIs could be nested sub-accounts where access to the CBDC does not
dis-intermediate the FIs that have the ultimate compliance, including security controls over
access to these sub-accounts in the ecosystem which serves as a “book of record” that
effectively enables a distributed open banking capability in conjunction with the CBDC
ecosystem design.��In Vments FedNow RFC response, there is additional detail provided in the
sub-account design along with other design specifics relative to the ecosystem involving bank
issued stablecoins.�
Absolutely for a number of reasons, including if and when the lights go out as well as for
where internet access may be limited, which can be more prevalent for those that are
unbanked and underserved. �A design that can support this is one where each CBDC token
online includes an optional offline device id that it was downloaded to where it could be
transacted offline and then synced when either party of the transaction connects online.��There
are many other details about the specific of this offline design and issues that it needs to
address which can be provided upon request and are too long to include in this RFC, but
which were included in Vments FedNow RFC response.�
sale? If so, how?
This needs to be an absolute requirement to foster adoption. The use of digital wallets, QR
codes, biometrics, and directories using aliases, can all contribute to ease or use and
acceptance. The offline capability at point of sale should also be considered here, where at
least the merchant can be online to real time validate the offline tokens it accepts, or its
device can at least check for CBDC token watermark type validation plus transacting party
validation against a downloaded blacklist of bad actors, including those that had attempted to
backup, restore, and reuse already used offline CBDC tokens.
The CBDC tokens could be integrated as an optional means of settlement in existing payment
rails where these rails at least continue to serve as clearing for the transaction data optionally
real time settled using the CBDC (or bank issued stablecoin equivalent).��
CBDC?
benefits of a CBDC?
The sub-accounts design described above could be provided through a distributed ledger as
the “book of record” for the minimal transaction information that can be stored and accessible
to the participating permissioned operating parties where the information is pseudonymous
and have just enough to be able to effectively enable a peer to peer transaction between
operators that then transparently facilitate the same through their sub-account intermediaries
and in turn to end customer user experiences. �The intermediary operators would also have
cloud and/or on-premise servers that interface and hence reconcile to the distributed “book of
record”, where these servers can include the data necessary for the operator’s compliance
with all applicable regulations for being such financial services.��An addition and very unique
design consideration is where the CBDC tokens (or bank issued stablecoins) could be issued
into a line of credit account where this affects the reserve requirements versus when these
same tokens are issued into a “cash” account. Then as the line of credit tokens are used, they
become cash to the receiver and part of the balance due the lender, who in turn needs to
adjust their reserves accordingly.��Smart transactions is another design concept where the
cloud and/or on-premise servers described above can record detailed transaction data not
shared in the distributed ledger other than for hash control totals to be able to help validate
that this off distributed ledger data has not changed and is effectively immutable as well as is
the distributed ledger data. This requires applicable blockchain functionality for security and
protection over any of the data being modified versus incrementally adjusted through new
transaction data.��All of the features described within this RFC are included in Vments
ecosystem design which I would be happy to share with those interested to learn more about.
In my response to the original FedNow RFC, I had included several details about the specific
design of the digital fiat token, tiered sub-accounts, smart transactions, and more.�
_________________________________________________________________________
David Lon Bishop
Industry
Individual
Country
State
California
Email
It would create a system that could take spending decisions away from the individuals that
earned the money and would place it in the hands of the government and politicians. If
someone fell into disfavor, they could instantly be stripped of the money which is what they
need to survive. When you have the ability to strip people of their financial resources, it gives
the government too much leverage over the governed.
Just let people live free from an overbearing government. Financial freedom is an important
freedom.
inclusion?
Senior citizens like me would be largely excluded because we be forced to pay for things in a
way that is foreign to us. How would we handle trust accounts? What happens to our life
savings if we cannot readily access our money without government oversight? Smart people
will be buying up gold and precious metals to avoid CBDC.
Why doesn't the government just allow our free enterprise system set its employment and
price �-stability goals through supply and demand like we have done for over 200 years. If a
good or service is worth a price a buyer is willing to pay, the price is set by free trade.
stability?
Negative. Any time the government artificially sets a price for some good or service, it
distorts the price for that good or service that would be set by free and fair trade.
It would be a disaster. I do not believe in Bitcoins or any form of currency other than money
printed by the government. If people want to freely invest in nonbank money, they should be
free to without the government trying to compete by compulsion.
The government should just avoid the whole thing.
NO! I can go to my bank and put money on my ATM card or fill my wallet with cash and buy
what I want. The less interference from the government in my banking business, the better.
There is no problem with the current system and I would like to keep it that way.
CBDC?
So far, no problems. Let us keep it the way it is.
We do not spend Euros here to buy things and if Germany decides to use CBDCs within their
borders, it their business. Goods and services cross borders so foreign currencies should not
influence economic decisions in the United States.
If you think trusting the government with your life is a good idea, you might what to talk to
some Indians. Will the servers that will contain all the information related to everyone's
finances be protected against EMP waves or any other type of attack?
People have disclose information during a transaction. How do unknow what you know?
Keep it dispersed like we do now in private banks. I go to my banks once a month and do my
banking in front of a teller. I works really well.
No.
No.
No. How do you buy a house or a car?
Do not fix what ain't broke.
The cash in my wallet already has an "offline" capability. Why change what already works.
sale? If so, how?
I do not have a problem buying what I want now. Why mess it up.
Use cash.
CBDC?
Expect oppression from those that control the financial transactions of everyone in the
country.
benefits of a CBDC?
Revelation 13:16,17 say, "And he causeth all, both small and great, rich and poor, free and
bond, to receive a mark in their right hand, or in their foreheads:"�"And that no man might buy
or sell, save he that had the mark, or the name of the beast, or the number of his name."�The
CBDC will be implemented because Bible said it 2000 years ago. Those that create this
system will face the judgment of God.
_________________________________________________________________________
Kate
Industry
Country
State
Pennsylvania
Email
Risks: Government outreach in a form of total control over individuals’ money, such as
punishment if a form of cutting access to funds for whatever reasons government decides to
do. Canada was perfect example when they cut access to peoples bank accounts during
truckers protests. Control of wether individual must spend money or not through negative
interest rates. Privacy violations.
The current system is efficient enough
inclusion?
Negative, especially for older people, usually struggling with computers, digital accounts,
whose mental abilities are declining to understand constantly changing rules and policies.
Physical cash also helps staying within the budget and not overspend, thus lower income
families will be in strugle too due to ease of overspending.
stability?
Negative. Due to government total control of all the “money”. And government already a
horrible spender and overspender and cannot manage budget effectively.
Cbdc would hurt banking industry completely. Why do you need a bank if federal reserve
issues, distributes and holds individual’s funds through its own system of accounts? Is
federal reserve also going to give out loans and mortgages since it is the only owner of
currency?
Cash should always be accessible and accepted as the form of payment everywhere, no
exclusions. Businesses should be prohibited under threat of penalties from not excepting
cash.
CBDC?
United states shoukd focus in its own issues and matters, and not trying to “keeping up with
Jones’”. USA should keep its nose in its own plate.
No
Not possible
Cyber hackers do develop along with technology development. There is no perfection and
never be, weak points woukd be present regardless, thus cyber criminals would still exist and
perfect their “skills”
No
Yes. It is called cash.
sale? If so, how?
CBDC?
benefits of a CBDC?
_________________________________________________________________________
Kate
Industry
Country
State
Pennsylvania
Email
Risks: Government outreach in a form of total control over individuals’ money, such as
punishment if a form of cutting access to funds for whatever reasons government decides to
do. Canada was perfect example when they cut access to peoples bank accounts during
truckers protests. Control of wether individual must spend money or not through negative
interest rates. Privacy violations.
The current system is efficient enough
inclusion?
Negative, especially for older people, usually struggling with computers, digital accounts,
whose mental abilities are declining to understand constantly changing rules and policies.
Physical cash also helps staying within the budget and not overspend, thus lower income
families will be in strugle too due to ease of overspending.
stability?
Negative. Due to government total control of all the “money”. And government already a
horrible spender and overspender and cannot manage budget effectively.
Cbdc would hurt banking industry completely. Why do you need a bank if federal reserve
issues, distributes and holds individual’s funds through its own system of accounts? Is
federal reserve also going to give out loans and mortgages since it is the only owner of
currency?
Cash should always be accessible and accepted as the form of payment everywhere, no
exclusions. Businesses should be prohibited under threat of penalties from not excepting
cash.
CBDC?
United states shoukd focus in its own issues and matters, and not trying to “keeping up with
Jones’”. USA should keep its nose in its own plate.
No
Not possible
Cyber hackers do develop along with technology development. There is no perfection and
never be, weak points woukd be present regardless, thus cyber criminals would still exist and
perfect their “skills”
No
Yes. It is called cash.
sale? If so, how?
CBDC?
benefits of a CBDC?
_________________________________________________________________________
Industry
Individual
Country
Mexico
State
Email
Cash everyweare
No
inclusion?
Postive
No
stability?
CBDC?
sale? If so, how?
CBDC?
benefits of a CBDC?
_________________________________________________________________________
Katelynn vanecek
Industry
Individual
Country
State
Wyoming
Email
None as I could read
Yes of course there's always better achieving opportunities for everything
inclusion?
No, postive
Positively
stability?
Negative
Yes, non bank money
Unsure, possibly
Yes
CBDC?
Greatly
Yes
Unsure
Unsure
Unsure
Yes
Yes
No
Unsure
Unsure
sale? If so, how?
Unsure
Unsure
CBDC?
Unsure
benefits of a CBDC?
Unsure
_________________________________________________________________________
Industry
Other: Civil society monetary movement
Country
State
North Carolina
Email
A national CBDC has to conceived on the international level of a transformed international

monetary system which can be called Bretton Woods 3.0 that is very fundamentally different
from the reformist Bretton Woods 2.0, proposed by the IMF and followed by Kevin Gallagher
of Boston University and Richard Kozul-Wright of UNCTAD in their 2022 Polity publication
The Case for A New Bretton Woods.��This transformational Bretton Woods 3.0. deals with the
real global emergencies in climate, health, food and governance. What is needed for such
Bretton Woods 3.0 is the Tierra Monetary Paradigm (TMP) in which its monetary architecture
is built on the monetary decarbonization standard of a specific tonnage of CO2e per person
as proposed in Verhagen 2012"The Tierra Solution: Resolving the Climate Crisis through
Monetary Transformation". This TMP also includes the global Tierra currency that would be
created, distributed and supervised by the UN People's Bank which would be a Federated
Global Sovereign Monetary Authority (Global Fed). The USA and other nations can work
towards this Tierra Transformed International Monetary System (TTRIMS) by adding the
decarbonization/optimal solarization monetary mandate to its dual mandate of full
employment and price stability, thus making a national monetary step to the goal of a safe,
sustainable, and, therefore, stable international monetary system. Designing a CBDC without
an integrated international sustainability framework will not lead to national, let alone
international monetary progress.�
Yes, see question 1
inclusion?
Depends on the nature of the financial inclusion in a transformational or reformist

national/international monetary system.
A U.S. CBDC should be part of the Tierra Transformed International Monetary System
(TTRIMS)'s global currency of the Tierra that is created, distributed by the UN People's Bank
which functions internationally as the Dr. Omarova's People's Ledger functions
nationally.�Such transformational CBDC can not only implement the dual mandate of price
stability and full employment. but also, the necessary the third mandate of
decarbonization/optimal solarization that will contribute to advent of the monetary standard of
TTRIMS.
stability?
The transformational CBDC would advance stability because it is rooted in a just, sustainable
and, therefore, stable TTRIMS.
No stablecoins and crypto in general are part of TTRIMS. As a matter of fact, the TTRIMS
and its Tierra Monetary Paradigm (TMP) are a complete system that is the real competitor to
the crypto world. As a matter of fact, the TTRIMS and its Tierra Monetary Paradigm (TMP)
form a complete system that is the real competitor to the crypto global system. The real
challenge of the US Fed is to lead with TTRIMS and TMP in the global battle of making the
crypto world subject to the UN People's Bank.
The financial sector whose dominance has led to the financialization of societies, has
radically changed in the TTRIMS framework with its TMP as the fractional reserve system is
abolished and banks are to operate on 100% reserves.
yes
CBDC?
The payment system will stumble along in the present unjust, unsustainable, and therefore,
unstable international monetary system. In TTRIMS/TMP pathway the Tierra balance of
payments system accounts for both financial and ecological (climate) debts and credits
presenting realistic monetary planning rather than reacting to events within and outside the
crypto world.
The USA should go beyond the resources of the Bank of International Settlements and the
IMF and convince nations to participate in the launching of the UN Commission of Monetary
Reform and Transformation which would review theoretical and practical monetary advances
since Bretton Woods 1.0 and would engage in utilizing the international monetary system for
building up a sustainable economy and a just and sustainable global governance system.
The main risk of the present reformist approach to CBDC is the one of not developing an
international transformational framework that would resolve many problems that are not
resolvable within a national monetary framework.
The Federated Global Sovereign Monetary Authority (Global Fed) of the UN People's Bank
would be able to develop the proper balance given that its governing Central Banks
representatives have the power to straighten out this concern.
Same answer as in #12.
The Tierra single global currency would be legal tender for all nations. The value of a national
or regional Tierra would depend on the nearness of the Tierra decarbonization standard of a
specific tonnage of CO2e per person. The average tonnage is 4 tons of CO2e with a wide
range of tonnage of a small developing below one ton and the top tonnage of 23 per person
in the USA.
The digital currency of the Tierra is used in the Central Bank’s accounts of both individuals
and organizations. Given that both commercial and public banking systems are not creating
money in the form of Tierras, the central bank members of the UN People's Bank could agree
for practical purposes to charge a stable, minimal amount of interest. Note the governing
board of the UN People's Bank do not need revenue from interest because it is sole creator,
distributor and overseer of Tierras. Also, the national fiscal systems do not need to raise
money through taxes. Their main purpose is to reduce inequality. As shown by Michael
Hudson, Assyrian and Mesopotamian civilizations had laws to reduce economic concentration
of land every fifty years. The Jewish Jubilee had a similar objective.
Yes, to reduce economic concentration and its associated political power in the
financialization of societies.
Banks would become utilities without the privilege of creating money.
No, because the “Offline” entities cannot be engaged in creating money, though those entities
could be engaged as distribution channels.
sale? If so, how?
The Tierra would easily be used at the point of sale. Besides its role as means of exchange it
also functions as a store of value when saved by individuals and organizations.
This transferability across multiple platforms is one of the main advantages of an international
monetary system with a single global currency as the Tierra.
CBDC?
Design and policy choices derive from the TTRIMS/TMP pathway that promotes the needed
technological innovations.
benefits of a CBDC?
In conclusion, CBDC issues cannot be considered without its international dimension as is

made clear by Jamie Martin of Georgetown University in his forthcoming book of the
Meddlers. As a sustainability sociologist of international development with a focus on the
transformation on the monetary, financial, and fiscal subsystems of the world economy I have
been advocating for over a decade a monetary pathway as opposed to a geoengineering
pathway out of the present world disorder with its emergencies in climate, health, food and
global governance. We can transform that human-made rule-based world (dis)order by
basing the unjust, unsustainable, and therefore, unstable international monetary system on a
decarbonization standard of a specific tonnage of CO2e per person with its digital currency of
the Tierra that will be created, distributed and supervised by the UN People's Bank which is
considered the Federated Global Sovereign Monetary Authority(Global Fed) of the 21st
century. The world community in the global North, South and East and West needs to move
away from the unjust, unsustainable, and therefore, unstable international financial
debt-based system to a money-based system within a decarbonization-based international
monetary system with its inequality-reducing fiscal system.
_________________________________________________________________________
Industry
Other: education
Country
Netherlands
State
Email
inclusion?
stability?
CBDC?
sale? If so, how?
CBDC?
benefits of a CBDC?
_________________________________________________________________________
Industry
Technology Company
Country
State
Delaware
Email
Multiple comments from multiple people follow:�o Inaction or delayed reaction by the Federal
Reserve may give cryptocurrencies the time to solve implementation imperfections and
become de facto currencies, much like the USD has become the currency of choice in
Venezuela. This is undesirable because the central bank could lose monetary policy
effectiveness and the banking system at large would also be sidelined.��o Strongly consider
using US CBDC as a beneficial tool for international political and financial stability - in other
words, as a tool of State. Today we have countries (like Ecuador) that rely on USD as fiat.
We also have many countries (esp where inflation is higher) where there is a gray market in
physical USD - extending that to digital currency would be very interesting to think through.��o
Potential benefit - provide every US citizen with a fixed monetary benefit they can tap into,
toward whatever social programs they need at various times in their lives. For example, in
2021 the US spent 5.1% of GDP on Social Security vs 4.1% of GDP for Medicare - what if
people could shift funds from one to the other as desired? Or fund basic needs earlier in life?
The resulting freedom might lead to a worse end-of-life (if Medicare is sacrificed), but the
tradeoff for a higher quality of life earlier might be worth it. �o First, please consider that CBDC
does not need to be synonymous with crypto-currency. The main point to consider is that the
nation does not have a means currently for digital transactions that are cash-like and for
which the cost of the transaction is largely covered by the government. Today's cash
infrastructure is primarily paid for by the government's expenditure on the printing, minting,
and distribution and management of paper and metal cash in the form of banknotes and
coins. A digital method of transaction which is cash-like is possible without reliance on
cryptographic techniques. �That said, benefits of cashlike digital transactions include
near-zero cost of transactions for all, reduced fraud, greatly reduced risks of identity theft, and
reduced crime.��o A US digital token, in our perspective at Vaiu Global Inc., is not necessarily
recorded on the blockchain; we use the term token independent of blockchains. Such tokens
will be stored in regular modern databases protected by existing bank security.�Social policy,
economic policy, and targeted policies for communities can be implemented via an
account-based system. �
Yes. The current direction of cryptographic CBDC upends all current central bank monetary
controls and payment infrastructure and could lead to bank disintermediation. The move is
drastic, unneeded and is revolutionary when an evolutionary approach should be used. The
current Central Bank monetary policy tools work, money is already digital inside the banking
system, so the only thing that needs to evolve is paper money. However paper money has 2
sides to it discussed even in the earliest bitcoin papers. The first is money as a value storage
medium. Bitcoin and other crypto currencies do this well, albeit wasting a lot of energy, but
that is improving. The second is a level 2 transaction network. This in turn is not a strength
of cryptocurrencies. However, there is no need for the storage medium and the transaction
network to work on the same technology. In fact monetary policy is simpler when the two are
separate infrastructures.��The Central Bank should seek solutions from the private sector,
issuing an invitation to tender for a national payment infrastructure technology contract. The
tender should be open to new entrants and not exclude based on size, payment operator
experience, or cryptographic technology. The current infrastructure is already a global
oligopoly. The tender should also allow improvement proposals in any elements of the
current banking infrastructure. Current CDBC initiatives globally use blockchain and DLT
technologies, which are great, but there are alternatives, and we believe are the better
solution. Once the payment infrastructure technology is defined, operator contracts could
also tendered so that systemic risk is minimized.��The DARPA SBIR program is an example of
how to incite cooperation with the private sector while respecting intellectual property.
Research and development requires the brightest minds, and sometimes those are in the
private sector. The United States Federal Reserve should let the global population of the
world propose the best possible solution to the digital dollar. We believe it is a solvable
problem today, and the faster the digital USD is implemented, the faster the economic
advantages will be evident.�
inclusion?
We believe there is a potential hindrance to inclusion - related to the excluded person’s

safekeeping (from theft and destruction), upkeep (charging, not accidentally damaging) of the
device/money as well as pervasive access to connectivity; as well as the possibility of selling
the device for other more urgent or desired needs.��Positives: �1) Cash can be lost or stolen -
easier for some who need inclusion.�2) Unbanked are sometimes unbanked due to unwanted
costs. CBDC accompanied by an agency or policy to provide free service to the
otherwise-unbanked would remove that barrier.�3) Monies for social welfare programs such as
SNAP, or temporary relief for disasters, one-time stimuli (e.g. COVID stimulus) can be
transmitted instantly and more efficiently. �3b) *If identity of spender is verified, it ensures
monies are spent by the designated recipient�3c) If identity of merchant (or merchant type) is
verified, it verifies monies are spent in the area they should be.�3d) Can potentially enforce
good spending - for example, if people currently spend a monthly allowance in a week - you
can allocate daily or weekly or whatever is most appropriate.�3e) Can potentially stimulate
good habits, like saving money, by matching a % of money not spent.�
We believe moving transactions and cash more into the digital domain has the potential for
much more efficient monitoring and management of where money is and how it flows, and
much faster and more targeted delivery of money to where it needs to be. This can also be
done far more cheaply than with physical cash.�
stability?
Potential positive effects from:�- ability to track money flowing through the system (at least at a
high level), if that feature is built in. �- being able to specifically stimulate or subdue certain
areas of the economy in near-real-time. For example, with COVID we saw payments made to
Americans (likely due to make up for loss of income) - but we could instead or as well have
stimulated the economy by rebating/subsidizing X% of purchases in certain areas
(restaurants) that were hardest-hit. �Potential effects (not opining positive/negative) from
being able to:�- implement policies such as taxing assets over a certain amount that aren’t
being used (spent on things). �- offering US CBDC to other countries - either as a 1:1 peg to
the USD without it being a US-domiciled USD; or as a USD good anywhere in the world.
(Also potential political stability, which affects financial stability)��Potential large negative effects
from risk of widespread compromising or misuse of the system, if there is a single system
responsible for it all..
Anything that can be done digitally usually comes with the ability to do things
programmatically - so, faster / much higher volume / more coordinated - than when just
humans. Programmatically hoarding money; “runs” on a bank; overloading the system with
transaction volume; and more, are potential risks.�
(We are not sure we are interpreting this question properly.)��We don’t think of cash as
banknotes and coins - much of money and payments in the US today is already in digital form
as far as the user is concerned. Instead, what is needed is a superior method of payment.
Vaiu Global has developed what we call cash-like digital transactions, or CLDTs - which
facilitate the movement of money among people and businesses in a cash-like manner. We
believe this is a good and safe evolution of today’s currency.��If the question is, should physical
cash remain an option that can be widely used for payments - our answer would be: (a) the
US should strive for 100% inclusion and adoption if deploying a digital-only solution, and
there are multiple barriers in place for digital that happening completely; and (b) as with any
critical system, a fail-safe should be in place for transacting should the primary method be
unavailable. Physical currency is one method - but one challenge is to know how much each
person is entitled to - if digital cash is unavailable systemically for any period of time, odds are
account balances are as well.�
CBDC?
We have already seen the trend towards the use of Bitcoin as the globally available medium
of exchange with growing acceptance - there are several reasons for this: inefficiencies, high
costs, and KYC-type delays in the current f/x market - including in cross-country remittances.
(We believe anonymity is a factor for some, but not the primary motivator.)��That hasn’t
stopped more classic payment options from seeking to themselves get cheaper, faster, etc -
we will probably see multiple “winners” just as we have today, in the absence of - or even in
the presence of - a non-mandated CBDC.�
Continued US’s financial and political leadership stability is aided by the world using the USD
as a standard / benchmark / reference currency. The US should be doing everything it can to
maintain and extend this position vs all other world currencies and alternate currencies - and
continue enjoying its position of stability in the global markets. �That includes incrementally
evolving its monetary system to include digital representation of currency. We believe that
licensed entities such as remaining as intermediaries trusted by the public is a good model for
future success - and we believe that one driver of cryptocurrency and alternate currency
adoption in some countries is a lack of trust in too much power being put in a government’s
hands.�
A multi-option approach would reduce risk and let market forces evolve an optimal solution.
Rather than picking a solution, the United States should create guidelines and allow any
solution meeting the guidelines, passing certain tests, to be "a" and not "the" digital cash
solution protected by the laws of the United States of America.�
Vaiu Global has developed a cash-like digital transaction which can be configured to preserve
privacy without providing complete anonymity - using credential-free exchange of value. We
are in conversation with banks to prove out this novel useful and non-obvious system for
transacting and are happy to discuss further. �Removing complete anonymity means
associating someone’s identity with each digital transaction - many (most?) Americans are
concerned about government overreach in this area, and we feel they would respond with
lack of trust in a solution that puts easy association of their identity to their movement of
money directly in the government’s hands. Delegating de-anonymization to the private sector
and making requests for information transparent to watchdog groups or the public, over time,
might help keep some of the public trust.�
Much of today’s money is already digital - with different financial institutions having their own
resiliency and cyber security built into their part of the overall financial system. Continuing to
leverage that ecosystem and modernizing a protocol different implementations from different
participants would mitigate systemic risks. Vaiu believes strongly in this approach as a
next-step for today’s cash and commerce worlds - with a possible longer-term evolution to
more centralized administration.�
We at Vaiu Global do not see CBDC as a new "thing" to be or not to be legal tender. The
question by itself indicates a bias towards a CBDC being a new thing. A CBDC need not be a
new thing. The United States has a perfectly fine currency, the US Dollar. That is the
currency. What the US needs to do now is to allow for cash-like transactions digitally of US
Dollars. We call these CLDT: cash-like digital transactions. These need to be recognized and
sanctioned and protected by US law, much as digital signatures became legally recognized. �
We believe this question may be biased towards an unnecessary change to the US financial
system. US Dollars held in an account may or may not pay interest depending on what the
market allows. �A CBDC that pays interest is really a CBDC with a growing value. �More
interesting in some situations would be a digital US token that loses value over time. �Such a
token would encourage spending and increase the overall money velocity. �If the question is
whether the US Government should pay interest to CBDC holders (like a sweep account or
certain Treasury instruments), that can certainly be an option. But this should be integrated
into current national economic policy.
We believe the United States should generally not limit the amount of money an individual
can hold. It may make sense in the nearer-term for risk mitigation purposes to limit the
amount of CBDC that can be held; it may also make sense to limit the duration of validity of
any cash token for similar risk management purposes. We have implemented a short
(single-digit days) lifespan of a token before returning value to the originating account.�
We at Vaiu Global believe that the entire US banking system should stay just as it is with no
new intermediaries needed. No new regulatory structures are needed. New regulations will be
needed for the use of digital cash by non-human agents.�
Yes, definitely. There is no guaranteed ubiquity of connectivity anywhere today. We have

done some thought/work on this, but will not share it in a public forum - please contact us for
more information.
sale? If so, how?
Yes, certainly; it will increase the likelihood of adoption and ubiquitous use. Our cash-like
digital transactions (CLDTs) and our Vaiu Checkout product are designed to make
transactions simpler, safer and speedier than they are today. �
We at Vaiu Global believe that cash-like digital transactions (CLDTs), as conceived and
offered by Vaiu Global Inc. are in fact the solution to transferability across payment platforms,
domestically and internationally, across currencies, and conditioned for acceptance. The new
standard needed is one that defines the minimum cash packet structure needed to
communicate a transaction's parameters. We propose our cash packet structure as a starting
point.�
CBDC?
We at Vaiu believe that future technological innovations will enhance, but not entirely
overturn, cash-like digital transactions, CLDTs. What such technological innovations will do to
the alternative mainstream proposals of blockchain and cryptographic approaches to produce
a "thing" called a CBDC are uncertain in our view.�
benefits of a CBDC?
Vaiu Global believes that CBDC does not need to be synonymous with crypto-currency. The
main point to consider is that our nation does not have a means currently for digital
transactions that are cash-like and for which the cost of the transaction is largely covered by
the government. Today's physical cash infrastructure is primarily paid for by the government's
expenditure on the printing, minting, and distribution and management of paper and metal
cash in the form of banknotes and coins. A digital method of transaction which is cash-like is
possible without reliance on cryptographic techniques. We call this a cash-like digital
transaction or CLDT as an alternative to CBDC. �The benefits of an economy running on
cashlike digital transactions (CLDTs) include near-zero cost of transactions for all, reduced
fraud, greatly reduced risks of identity theft, reduced crime, and immediate cash-like
settlement of a zero-risk payment instrument.�
_________________________________________________________________________
Sally Jane Gellert
Industry
Other: citizen
Country
State
New Jersey
Email
This is not something that we should be pursuing; already, the private Federal Reserve has
too much control over monetary policy, and we need to stay away from anything that gives
the Federal Reserve more influence.
There are no real potential benefits to a CBDC; for those who want them, there are credit and
debit cards and digital currencies already; the rest of us are just fine with our private cash,
thank you very much.
inclusion?
A lot depends on implementation. More worrying is the ability of the centralized authority to
track every transaction—a clear violation of every USAmerican’s expectation of financial
privacy and control.
This is outside my expertise, but honestly, not a concern—we should not be creating a
CBDC, so they can keep on keeping on—and let’s have an audit, please, so that we the
people, through our representatives in Congress (with open reporting to the rest of us) can
keep tabs on this private entity.
stability?
negative; it would give the Federal Reserve even more options for tampering
with/manipulating the system
I am little concerned with the financial sector, which has way too much of an influence on our
society as it is.
Just don’t do this; no change, no impact, and we retain what little privacy we still have.
Cash usage must be completely, 100% supported, with few if any restrictions. Already, bank
reporting of $10,000 transactions is an intrusion into many people’s privacy. Let’s not make
things worse. Not everyone has or wants a bank account, or wants to do everything through
an intermediary. Peer-to-peer cash transactions are important.
CBDC?
outside my expertise—but there seems to be an awful lot done already with 1s and 0s—why
not keep on keeping on?
They shouldn’t. If we have a healthy economy, with every person having access to cash and
employment, we need not worry about what others are doing. In fact, we should pull back a
lot of our overseas military involvement to focus on our own needs, anyway.
no; this is inherently a risky proposition that must not be pursued
It can’t. Complete anonymity is necessary for freedom. There are other means to combat
illicit activities.
Cyber risks are probably inherently unavoidable, and the same is likely true of operational
risks—power fails, computers go down, etc. Yet I can still hand someone a dollar bill, and ze
can still make change.
no
If they were to exist, which they should not, interest should be handled just as it is for real
dollars.
Absolutely not—but then they should not exist in the first place.
Stop. CBDCs must not be created; therefore, they need no intermediaries.
Currency must work off line. Therefore, CBDCs must not be created without the same offline
capacity as cash now—i.e., I need to be able to hand one to a neighbor.
sale? If so, how?
We have cashless options for those who want them. The rest of us insist on being able to
use cash just as we do now.
outside my expertise�I can hand a coin or dollar bill to anyone.

CBDC?
In frighteningly unanticipated ways—don’t do it.
benefits of a CBDC?
There are no benefits; keep cash as it is and audit the Federal Reserve.
_________________________________________________________________________
abdii mohmmed
Industry
Country
Ethiopia
State
Email
bank
inclusion?
500
stability?
10000
CBDC?
12
13
14
15
16
17
sale? If so, how?
1929
20
CBDC?
21
benefits of a CBDC?
22
_________________________________________________________________________
Industry
Country
State
Hawaii
Email
CBDC should NOT be implemented, period. Why you may ask? If implemented this would
enable the US Goverment to control how, when, & where to spend OUR money; in the likes
of China & Russia. How you may ask? Simple, by programming. This is where conflicts of
interest come in. CBDC would allow the US Goverment to fund an broad spectrum of
unnecessary projects. For example, if the US Goverment wanted they could restrict citizens
to spend OUR OWN money at any store they wanted. This could and most certainty would
eliminate small businesses and in-turn create major monopolistic organizations.
inclusion?
stability?
CBDC?
sale? If so, how?
CBDC?
benefits of a CBDC?
_________________________________________________________________________
Industry
Country
State
Hawaii
Email
CBDC should NOT be implemented, period. Why you may ask? If implemented this would
enable the US Goverment to control how, when, & where to spend OUR money; in the likes
of China & Russia. How you may ask? Simple, by programming. This is where conflicts of
interest come in. CBDC would allow the US Goverment to fund an broad spectrum of
unnecessary projects. For example, if the US Goverment wanted they could restrict citizens
to spend OUR OWN money at any store they wanted. This could and most certainty would
eliminate small businesses and in-turn create major monopolistic organizations.
inclusion?
stability?
CBDC?
sale? If so, how?
CBDC?
benefits of a CBDC?
_________________________________________________________________________
Andrew Young
Industry
Individual
Country
State
Ohio
Email
If built on a US founded ledger like Ripple, XRP, we would have the security of knowing that
we have the talent and expertise in house (US).
N/A
inclusion?
Net positive.
It could provide greater transparency as to where all of the money goes.
stability?
Depends on if they can just print more coins. Or at what rate they print more crypto so to
speak. I think crypto would be more stable, transparent and cheaper than printing hard cash.
Probably way easier for the government to manage the value in real time.
I think the CBDC could hurt private crypto currencies some. I think it is hard to predict how the
crypto market will ultimately react to CBDC’s. I would trust a CBDC backed by a government
over most private crypto. However I would rather put my money in crypto to hedge against
governments devaluing their CBDC through increasing their total number of tokens.
You might make a law that requires businesses to start gradually paying employees in the
CBDC at a scheduled increasing rate… 1st year, companies forced to pay 5%, next year
15%, next year 40% etc.. to ease it in.
No. Get rid of fiat. It costs to much to print and distribute. It’s easy fat that can be cut off of the
US Gov.
CBDC?
California based Ripple XRP. American made, and controlled. Ripple and XRP is the one
shot the US has at success. It has the track record and resources… and the product for cross
border payments. It is the easy choice as a replacement for SWIFT.
It says that the day is coming where the US dollar will lose its reserve currency status.
If other governments get there CBDC up and functioning before the US, we could see the
value of the dollar drop and lose our power on the world stage. The good news is that we
have the best crypto currency and company on US soil that can help. Ripple and XRP.
Don’t care.
N/A
Yes.
Yes. It’s just like a paper currency but digital and cheaper to make.
It’s scary that you ask this question. No. That is ridiculous. We aren’t China. This is America.
Ripple XRP. I’ll leave the second part up to you.
Yes but idk how.
sale? If so, how?
Absolutely. It replaces the dollar.
US based Ripple XRP. Ask Brad Garlinghouse.
CBDC?
We will have to wait and see.
benefits of a CBDC?
Needs to be green, or ISO20022 complaint, less than a penny transaction fees, needs to
have a certain level of privacy, needs to be US based technology.
_________________________________________________________________________
Industry
Individual
Country
State
Utah
Email
There are no benefits of a CBDC. The fiat ponzi that has been rampant throughout the world
has corrupted and fractured the world. A CBDC gives unlimited power to the government over
peoples rights to property, privacy, and a way to opt out of debasement of our purchasing
power.
Yes, through a peer to peer, decentralized monetary network that cannot be controlled by a
central authority, government, or bad actor. BITCOIN JUST IS. It incentivizes use of
renewable energy pushing forward innovation in technology and infrastructure. The world is
and will continue to adopt it wether the US decides to lead in the innovation or not. If we
choose this CBDC route, capital, innovation, freedom, will all collapse within the United States
and we will cease to be a FREE COUNTRY.
inclusion?
No, this limits financial inclusion by forcing other to still abide by the rules of a central body.
Freedom to choose is inclusion. Forcing this upon your citizens is how china is ruling. With
communism. America was not and will not fall to communist ideals.
The federal reserve has done nothing but inflate the dollar to infinity, causing havoc and
filtering wealth from the bottom 90% to the top 1%. The federal reserve SHOULD NOT EXIST
stability?
Absolute NET NEGATIVE
LET THE FREE MARKET DICTATE. A CBDC is not only financially immoral, but it will bring
forth the downfall of the UNITED STATES. Bitcoin will survive and prosper, wether the United
States nurtures this innovation or not.
Truly free markets.
No, stable coins and modern crypto brokers that actually give value back to the individual
unlike banks and central banks, will bring the lower and middle class out of poverty.
CBDC?
Bitcoin, literally does this without any trusted third party, has never been hacked, and no one
can scalp money off the backs of hard working people sending money to their families.
The United States should not allow a CBDC in any way shape or form. It is core to who we
are, the freedoms outlined in the constitution and bill of rights. If a CBDC is brought forth, it
WILL be the end of the US Government
Bitcoin, self sovereignty
Bitcoin, do your research please
Use Bitcoin,
No
No
No
No
No
sale? If so, how?
No
No
CBDC?
No
benefits of a CBDC?
Bitcoin
_________________________________________________________________________
Inca Digital
Industry
Technology Company
Country
State
District of Columbia
Email
eric.oconnor@inca.digital
inclusion?
A CBDC could increase the availability and accessibility of monetary data. Existing resources
such as FRED have greatly improved access to data and tools. FRED gives a trusted
common source for GDP, CPI, various rates and other important economic information. �A
CBDC could improve the granularity in which some of this information is made available
(through FRED or another central source), allowing markets to become more efficient and
transparent. �Larger, more well-endowed, institutions have the ability to model and forecast
data points, which gives them an asymmetric advantage in traditional finance. This paradigm
is shifted within the crypto ecosystem, where data is publicly available to be verified by
anyone with the necessary hardware, and made visible through multiple data providers (such
as block explorers, wallet providers, infrastructure services, and various charting/querying
tools. Blockchain information is available to all participants at virtually the same time, which
could reduce the risk of front running. Note: front running and insider trading do widely occur
within crypto, but hinge on real-world information, not native blockchain data.�A CBDC might
also enable the publishing of more data, which is currently unfeasible.�
stability?
A CBDC has the opportunity to reset the current economic system. Since leaving the Gold
standard, there has been increasing debts and inflation is currently heating up. The US dollar
is currently in Fiat form, the only thing backing it is the full faith and credit of the government.
This has led to rapid printing of cash to help keep the economy floating in the stressful times
we have been going through. CBDCs are a way to create a new hard currency system with
value attached to an actual product that provides real value and utility. �The major economic
reserve currency cycles of history, ie. the Dutch and British, have all gone through similar
processes - decoupling the monetary system from a hard currency reserves. It has always
ended with the dominant reserve currency falling away. This unique opportunity allows the
government to recouple and restabilize the economic system and maintaining our reserve
currency status and ensuring the US remain the global lender of last resort.�
Privacy preserving tools which insure that consumer data is protected from political or
technical exploitation would be crucial to a successful CBDC.�Tools which protect consumer
personal and transaction-level data would not diminish the potential benefits of a CBDC. In
fact, these tools could protect vulnerable consumers who currently rely on the closed source
security measures of commercial banks, credit card companies, and payment processors.
Identity theft, financial data breaches, and fraudulent transactions plague our current financial
sector. �Individuals participating in the current crypto landscape are, in fact, especially
vulnerable to these risks as they often rely on new on/off ramp services and exchanges in
addition to the banking and financial services used by the broader public.�Data transparency
achieved through a robust freely available platform could mitigate the adverse effects of
unequal access to information, and promote financial inclusion (see #3).�Integrated measures
for stopping and tracing illicit financial transactions would greatly assist the job of intelligence,
defence, and enforcement agencies to crack down on financial crimes.�Digital currency
systems, if designed properly, would hinder criminal usage while maintaining privacy. For
example: mechanisms for identifying and flagging activities such as money laundering or
terrorist financing could then trigger de-anonomising of account or transaction data or
automatically freeze funds for investigative purposes. �
CBDC?
We are already seeing an explosion in new cross border payments, both centralized and
decentralized: from in-game currencies and assets with robust crypto/fiat marketplaces, such
as “Old School RuneScape” and “CS:GO”, and mobile-minute transfer systems, like MPesa,
to blockchain networks which support native assets and stable-pegged tokens. These various
mechanisms of transacting outside of the traditional financial system are bifurcated and can
be exceedingly difficult to analyze or measure.�In the absence of a U.S. CBDC, use of these
alternative methods of international payment will only continue to grow. They often require
minimal-to-no KYC, have no size limitations, and can offer far less fees than bank transfers,
western union, or MoneyGram.�With other nations looking at adopting these alternative
payment solutions or developing their own digital currencies, less financial activity will need to
re-touch the existing banking/finance world. This migration of large economies to the broader
alternative digital economy should hasten the United State’s decision to issue a CBDC.
Financial regulatory and enforcement bodies will be evermore burdened to track and
understand both domestic and cross-border activity as there are less touch points to the
legacy financial system. �
With other nations looking at adopting these alternative payment solutions or developing their
own digital currencies, less financial activity will need to re-touch the existing banking/finance
world. This migration of large economies to the broader alternative digital economy should
hasten the United States' decision to issue a CBDC. Financial regulatory and enforcement
bodies will be evermore burdened to track and understand both domestic and cross-border
activity as there are less touchpoints to the legacy financial system. As such, all digital assets
and will need to have acceptance by governments and the regulations necessary for the
market to grow. In order to protect the US consumer from the ever-increasing digital
economy, having a stable store of digital value that can be integrated with all networks
allowing for access to USD reserves rather than bank accounts full of cash and cash
equivalents providing liquidity to this system. This will also make it easier for the government
to ease the volatility of these nascent markets creating a safer space for innovation and
growth.�
The creation of trusted sources of information which can be accessed equally across the
broader public. Making non-sensitive economic data available in a more granular and closer
to real-time fashion improves transparency and efficiency. By adapting existing public sources
such as FRED, or through creating new sources the FED can mitigate potential risks
associated with information asymmetry from a CBDC.�In addition to public information
sources: depending on the structure of a CBDC, systems which allow interoperability with
outside data reduce risks posed by financial crime or economic climate. Through
sophisticated referencing of data associated with sanctioned entities, money laundering, or
other criminal activity, transactions on a CBDC network could be regulated with varying
degrees of automaticity. Further, such systems of interoperability could be extended to enable
financial activity beyond simple transactions securely.�Oracles provide a unique way to
connect real-world information to blockchains and enable functionality which would otherwise
be unfeasible. Payments dependent on real-world information can leverage data provided
through an oracle to facilitate more complicated contracts than simple transactions. An oracle
system could enable registered sources from various institutions to plug into the network -
creating a robust economy connected directly to the CBDC.�
The U.S. dollar is the most utilized currency in Illicit financial activity (by virtue of it being the
most utilized currency globally). Being able to program controls and requiring verification to
create an account, yet cryptographically securing this information, would allow a preservation
of consumer privacy without facilitating illicit activities. �
There should be a central ledger, all transactions are written to daily. As such, all
transactions can be accumulated on local ledgers and then transmitted, or queued for
transmission, at predetermined intervals. The ability for economies to function even in the
event of disaster or loss of communications is paramount to a functioning society. A CBDC
network could effectively create a mesh network of networks, allowing for redundancy in
transmission and verification, decreasing the chance of an "offline" event. These
considerations are similar to the one's needed when planning disaster response, as is done
with emergency response communications systems. Mobile command stations and hubs
provide this and would limit the downtime of economic activity. As it stands currently, in the
event of an "offline" situation a cash powered economy is limited by access to goods and
services provided online, and the digital economy is limited by the laws surrounding the use
of money in the digital world. A digital dollar would solve far more problems with additional
solutions being layered on to solve problems like, "offline" as they arise, rather than trying to
create the perfect currency.�
sale? If so, how?
CBDC?
benefits of a CBDC?
_________________________________________________________________________
Bryan
Industry
Individual
Country
State
Florida
Email
Can you name it "Surveillance Coin?"
Yes, bitcoin fixes the monetary system which politicians have destroyed.
inclusion?
CBDs are a scam.
We should end the fed.
stability?
NO.
CBDC?
sale? If so, how?
CBDC?
benefits of a CBDC?
_________________________________________________________________________
Mari Werner
Industry
Individual
Country
State
California
Email
mari@workableeconomics.com
I think there is a large potential benefit to CBDC if it were implemented as a replacement for
commercial-bank-created bank-account money, rather than as an addition to it. That option is
discussed in the paper, “The People’s Ledger: How to Democratize Money and Finance the
Economy” by Saule T. Omarova. The existing system of allowing commercial banks to create
the money supply by lending is deeply dysfunctional. It requires that many people carry lots of
debt all the time just to keep the economy supplied with money. And the burden of paying
interest on all that debt falls disproportionately on the middle class and the poor who are
unable to afford a house or a college education without borrowing. (See
www.workableeconomics.com/Where-does-money-come-from?)
Our constitution gives congress the power to coin money. Putting the money creation power
under congress via the Treasury might be a better and more direct approach.
inclusion?
With respect to inclusion, I believe that as long as cash money is still readily available, CBDC
could have a positive effect. If CBDC were implemented in a way that is equally accessible to
all residents regardless of account size, income, net worth, credit history, or other qualifiers,
that would be an improvement over what is currently offered by commercial banks.
It would be a huge improvement, particularly if CBDC replaced commercial-bank-created

money. The Fed would have direct control over the supply of money to the economy, and in
coordination with Congress would be in a position to enter new money into the economy in a
much more egalitarian way. As it is, the Fed has to work indirectly by manipulating interest
rates and buying treasuries from investors—which was demonstrated in both the Great
Recession and the pandemic to pump up the stock market while people in the real economy
continue to suffer.
stability?
If CBDC were designed and operated as a service to the Main Street real world economy,
and if it were a replacement rather than an addition to bank-account money, which is currently
created by bank lending, it could have a positive effect on stability. The existing system of
creating the money supply through interest-bearing bank debt is intrinsically unstable: the
growth or shrinkage of the money supply for the whole economy is dependent on the lending
decisions of commercial banks, along with the ability and desire of the public to borrow
money and repay loans. �As mentioned above, CBDC could be designed and implemented in
a way that gives the Fed direct control of the money supply. If that direct control were used
carefully and directed toward the benefit of the society as a whole, and if it were prevented
from being used for blowing up speculative bubbles or disproportionately benefiting wealthy
investors, it could have a very positive effect on stability.�
The financial sector in the US is currently much, much larger than it needs to be and is doing
far more to generate inequality and benefit wealthy investors than it’s doing to support the
productive real-world economy. Therefore massive shrinkage of the financial sector would
inherently be a positive thing in the long term for the overall economy and the general public.
Of course those who are making fortunes in the financial sector wouldn’t see it that way. The
current arrangement between the financial sector and the government/public sector is that the
financial sector collects the gains while the government and the general public absorb most of
the losses. Because of that, allowing or contributing to financial-sector shrinkage without
adversely affecting the productive economy would be tricky. Nevertheless, that outcome
would be very desirable.�I believe that the effects of CBDC in this regard should be studied
and evaluated, not on the basis of maintaining or protecting the financial sector as it currently
exists, but rather on the basis of protecting ordinary people and the producing economy from
whatever fallout might occur in the financial sector. �
Again, I think the adverse impact to pay attention to and work to mitigate is the impact on the
Main-Street, producing-economy, ordinary-people sector, not the financial sector itself. The
current dominance of the financial sector has generated a disgraceful level of inequality and
economic injustice, so if some of the excess in the financial sector were drained into the
working economy, that would actually be a positive effect overall, although it might
temporarily appear to be an adverse impact in the financial sector. �There may be existing
economic modeling tools that could be put to use by people who are able to think outside the
current economic box and make the primary focus the working economy and the welfare of
common people rather than the dominance of the financial sector.�Another thing that might
help would be to rescind the quasi-private structure of the Federal Reserve, and make it a
government entity under the Treasury. This could put it in a position to respond better and
more quickly to the needs of the country as a whole, and have less undue and unfair
influence from the private financial sector.�
Yes. I think cash usage should be defended, and cash should continue to be made available
and widely accepted. But if it were to decline anyway, having an easily accessible form of
public (not privately produced) money is important.
CBDC?
I believe that what other nations are doing with CBDC is information that needs to be
considered, and projections should be worked out of what is likely to happen if one country
does it and another doesn’t. Exactly how that would play out, and whether countries should
try to coordinate with one another on the implementation, I don’t know.
I believe this should be handled in a similar way to what US banks currently do with customer
accounts.
Yes, of course.
No, it should not pay interest. I believe the charging and paying of interest is an aberration in
our current economic system. The primary purpose of money is to function as a medium of
exchange of actual products and services. If people are allowed to collect additional money
based simply on having already hoarded some, without providing a tangible product or
service, the money system is polluted and its value as a medium of exchange is diminished.
The collection of interest degrades the money system and fosters injustice. At this point
interest is so deeply ingrained in our current system that we’re addicted to it. For CBDC to
not pay interest will not cure our collective addiction to interest, but it might be an incremental
step in the right direction, and it could work to discourage abuse of the system.
Maybe. Not sure.
Not certain, but some possibilities to explore: New arms or departments within existing public
institutions such as post offices, social security, veterans administration, disability offices.
Also existing banks and possibly new institutions. Private institutions would need to be
carefully regulated to prevent abuse.
I believe it should be set up with at least enough offline capability that people could access
their accounts and withdraw or deposit cash without the system being fully online for payment
processing.
sale? If so, how?
Yes. I think this could be done with existing technologies using cards like ATM cards,
Electronic Funds Transfers, and other tech currently used by banks and credit card
companies.
I believe existing technology that allows transferability across existing multiple platforms
should be mostly adequate with some adjustments related specifically to CBDC.
CBDC?
The federal government and the Federal Reserve would need to keep abreast of new
innovations, and if such were creating loopholes through which the CBDC system could be
defrauded or exploited for personal gain, actions would need to be taken to prevent it. This
could be additional technological security protections or government regulations against the
exploitative practices.
benefits of a CBDC?
As mentioned above, I think the most important design principle to consider is making CBDC
a complete replacement for the bank-account money currently created by private banks when
they lend money at interest. Details of how this might be done are outlined in "The People’s
Ledger: How to Democratize Money and Finance the Economy" by Saule T Omarova.�Also
important is the principle explained in the paper by Michael Kumhof et al, "Central Bank
Money: Liability, Asset, or Equity of the Nation?" regarding how central bank money is
accounted. It is illogical to consider central bank money a liability, since the only obligation
attached to it is for the central bank to ‘redeem’ one dollar for another dollar. Rather central
bank money should be accounted under a new framework as social equity of the US.�
_________________________________________________________________________
William Snedden
Industry
Country
State
Texas
Email
A CBDC would end our right to privacy.
Have a physical currency backed by gold instead of debt.
inclusion?
Negative
Too much control for the Federal Reserve.
stability?
Negative
Yes
None
Just have a currency backed by real assets not debt
CBDC?
sale? If so, how?
CBDC?
benefits of a CBDC?
_________________________________________________________________________
William Snedden
Industry
Country
State
Texas
Email
A CBDC would end our right to privacy.
Have a physical currency backed by gold instead of debt.
inclusion?
Negative
Too much control for the Federal Reserve.
stability?
Negative
Yes
None
Just have a currency backed by real assets not debt
CBDC?
sale? If so, how?
CBDC?
benefits of a CBDC?
_________________________________________________________________________
Industry
Academia
Country
State
California
Email
inclusion?
stability?
CBDC?
I am deeply concerned about privacy issues. I think that it may not be possible to ensure the
public that the government will not abuse its role when given such power. Some illicit
financial activity should be accepted, in my view, in order to preserve freedom, privacy, and
anonymity for the people.
I hope that there will always be other options to make and receive payments so as to
preserve the freedom and privacy of the people. I recommend that CBDC should be an
optional, not a required, form of payment.
sale? If so, how?
CBDC?
benefits of a CBDC?
_________________________________________________________________________
Austin Quinton
Industry
Other: Sofware
Country
State
Georgia
Email
Cardano
Cardano
inclusion?
Cardano
Cardano
stability?
Cardano
Cardano
Cardano
Cardano
CBDC?
Cardano
Cardano
Cardano
Cardano
Cardano
Cardano
Cardano
Cardano
Cardano
Cardano
sale? If so, how?
Cardano
Cardano
CBDC?
Cardano
benefits of a CBDC?
Cardano
_________________________________________________________________________
Industry
Country
Czechia
State
Email
25milion
50%
inclusion?
50%
yes
stability?
yes
BIC/SWIFT:CEKOCZPP IBAN:CZ09 0300 0000 0002 9832 9537
Bank name ČSOB
Jakub Hájek bank name conto
CBDC?
yes
no
yes
yes
yes
yes
no
yes 50%
email
yes
sale? If so, how?
yes And sell in widraw bank
yes
CBDC?
no
benefits of a CBDC?
yes
_________________________________________________________________________
Industry
Country
Czechia
State
Email
25milion
50%
inclusion?
50%
yes
stability?
yes
BIC/SWIFT:CEKOCZPP IBAN:CZ09 0300 0000 0002 9832 9537
Bank name ČSOB
Jakub Hájek bank name conto
CBDC?
yes
no
yes
yes
yes
yes
no
yes 50%
email
yes
sale? If so, how?
yes And sell in widraw bank
yes
CBDC?
no
benefits of a CBDC?
yes
_________________________________________________________________________
Industry
Other: usainfo@emrgroup.com sec energy sales@sec-ep.com
Country
State
Texas
Email
A�Angola, Republic of (Banco Nacional de Angola) (Link to an external website)�Argentine

Republic (Banco Central de la Republica Argentina) (Link to an external website)�Armenia,
Republic of (Central Bank of Armenia) (Link to an external website)�Australia (Reserve Bank
of Australia) (Link to an external website)�Austria, Republic of (Oesterreichische Nationalbank)
(Link to an external website)�Azerbaijan, Republic of (Central Bank of the Republic of
Azerbaijan) (Link to an external website)�B�Bahrain, Kingdom of (Central Bank of Bahrain)
(Link to an external website)�Bangladesh, People's Republic of (Bangladesh Bank) (Link to an
external website)�Barbados (Central Bank of Barbados) (Link to an external website)�Belgium,
Kingdom of (Nationale Bank van Belgie) (Link to an external website)�Bolivia, Republic of
(Banco Central de Bolivia) (Link to an external website)�Bosnia and Herzegovina (Centralna
Banka Bosne i Hercegovine) (Link to an external website)�Botswana, Republic of (Bank of
Botswana) (Link to an external website)�Brazil, Federative Republic of (Banco Central do
Brasil) (Link to an external website)�Brunei Darussalam (Autoriti Monetari Brunei Darussalam)
(Link to an external website)�Bulgaria, Republic of (Bulgarian National Bank) (Link to an
external website)�C�Canada (Bank of Canada) (Link to an external website)�Cape Verde,
Republic of (Banco de Cabo Verde) (Link to an external website)�Chile, Republic of (Banco
Central de Chile) (Link to an external website)�China, People's Republic of (The People's
Bank of China) (Link to an external website)�Colombia, Republic of (Banco de la Republica de
Colombia) (Link to an external website)�Costa Rica, Republic of (Banco Central de Costarica)
(Link to an external website)�Croatia, Republic of (Croatian National Bank) (Link to an external
website)�Cyprus, Republic of (Central Bank of Cyprus) (Link to an external website)�Czech
Republic (Ceska Narodni Banka) (Link to an external website)�D�Denmark, Kingdom of
(Danmarks Nationalbank) (Link to an external website)�Djibouti, Republic of (Banque Centrale
de Djibouti) (Link to an external website)�Dominican Republic (Banco Central de la Republica
Dominicana) (Link to an external website)�E�Ecuador, Republic of (Banco Central del Ecuador)
(Link to an external website)�Egypt, Arab Republic of (Central Bank of Egypt) (Link to an
external website)�El Salvador, Republic of (Banco Central de Reserva de El Salvador) (Link to
an external website)�Estonia, Republic of (Eesti Pank) (Link to an external website)�European
Union (European Central Bank) (Link to an external website)�F�Finland, Republic of (Suomen
Pankki) (Link to an external website)�French Republic (Banque de France) (Link to an external
website)�G�Georgia (National Bank of Georgia) (Link to an external website)�Germany, Federal
Republic of (Deutsche Bundesbank) (Link to an external website)�Greece - Hellenic Republic
(Bank of Greece) (Link to an external website)�Ghana, Republic of (Bank of Ghana) (Link to
an external website)�Guatemala, Republic of (Banco de Guatemala) (Link to an external
website)�Guyana, Co-operative Republic of (Bank of Guyana) (Link to an external
website)�H�Honduras, Republic of (Banco Central de Honduras) (Link to an external
website)�Hong Kong Special Administrative Region (Hong Kong Monetary Authority) (Link to
an external website)�Hungary, Republic of (Magyar Nemzeti Bank) (Link to an external
website)�I�Iceland, Republic of (Sedlabanki islands) (Link to an external website)�India (Reserve
Bank of India) (Link to an external website)�Indonesia, Republic of (Bank Indonesia) (Link to
an external website)�Ireland (Central Bank & Financial Services Authority of Ireland) (Link to
an external website)�Israel, State of (Bank of Israel) (Link to an external website)�Italy,
Republic of (Banca d'Italia) (Link to an external website)�J�Jamaica (Bank of Jamaica) (Link to
an external website)�Jordan, Hashemite Kingdom of (Central Bank of Jordan) (Link to an
external website)�K�Kazakhstan, Republic of (National Bank of Kazakhstan) (Link to an
external website)�Kenya, Republic of (Central Bank of Kenya) (Link to an external
website)�Korea, Republic of (Bank of Korea) (Link to an external website)�Kuwait, State of
(Central Bank of Kuwait) (Link to an external website)�L�Lao, People's Democratic Republic of
(Bank of the Lao People's Democratic Republic) (Link to an external website)�Latvia, Republic
of (Bank of Latvia) (Link to an external website)�Lebanon, Republic of (Banque du Liban) (Link
to an external website)�Lesotho, Kingdom of (Central Bank of Lesotho) (Link to an external
website)�Lithuania, Republic of (Lietuvos Bankas) (Link to an external website)�Luxembourg,
Grand Duchy of (Banque Centrale du Luxembourg) (Link to an external website)�M�Macao
Special Administrative Region (Autoridade Monetaria de Macau) (Link to an external
website)�Macedonia, Former Yugoslav Republic of (National Bank of the Republic of
Macedonia) (Link to an extern
https://www.boj.or.jp/en/about/link/cb.htm/�
inclusion?
Provider: Dow Jones��Dow Jones Industrial Average�Provider: Standard & Poor's��S&P 500�S&P
400�S&P 600�S&P 1500�S&P/ASX 200�S&P/TSX Composite Index�S&P Global 1200�S&P
Custom Group of indices�S&P Leveraged Loan Index�Case–Shiller index�Provider: Russell
Investments��Russell 1000 Index�Russell 2000 Index�Russell 3000 Index�Russell Midcap
Index�Russell Microcap Index�Russell Global Index�Russell Developed Index�Russell Europe
Index�Russell Asia Pacific Index�Russell Emerging Markets Index�Provider: FTSE Group��FTSE
100 Index�FTSE 250 Index�FTSE 350 Index�FTSE AIM UK 50 Index�FTSE All-Share
Index�FTSE/Athex Large Cap�FTSE Bursa Malaysia Index�FTSE Fledgling Index�FTSE Italia
Mid Cap�FTSE MIB�FTSE SmallCap Index�FTSE techMARK 100�FTSE4Good
Index�FTSEurofirst 300 Index�Provider: STOXX Limited��EURO STOXX 50�STOXX Europe
50�STOXX Europe 600�STOXX Global 1800�Provider: Morgan Stanley Capital
International��MSCI World Index�MSCI EAFE (Europe, Australasia, and Far East)
Index�Provider: Bombay Stock Exchange��BSE SENSEX�Provider: Reuters��Reuters-CRB
Commodities Index�Provider: Markit��ABX�CDX / iTraxx�CMBX�Provider: Historic Automobile
Group��HAGI Top Index�Provider: CRYX��CRYX5�CRYX10�CRYX25�CRYX50�CRYX100�See
also�Edit�Stock market index�List of stock market indices�Producer price index�Price
index�Chemical plant cost indexes�Bureau of Labor Statistics�Dow Jones
Indexes�Indexation�economic indicator
https://iscrapapp.com/scrap-laws/�
stability?
https://en.m.wikipedia.org/wiki/Index_(economics)
https://en.m.wikipedia.org/wiki/Prices_of_chemical_elements
https://www.aig.com/l/global-privacy-policy
Dallas Main Center�Interfirst Bank Plaza�Republic Bank Plaza�First Republic Bank Plaza�NCNB
Plaza�NationsBank Plaza
CBDC?
https://www.legifrance.gouv.fr/codes/texte_lc/LEGITEXT000006070721/2020-09-18/
https://en.m.wikipedia.org/wiki/Industry_Classification_Benchmark
Sec energy�� https://www.aig.com/l/global-privacy-policy
https://en.m.wikipedia.org/wiki/Pascal_(unit)
https://en.m.wikipedia.org/wiki/Lists_of_stars_by_constellation
https://bankcodesdirectory.com�
https://bankcodesdirectory.com�� https://www.boj.or.jp/en/about/link/cb.htm/
sale? If so, how?
CBDC?
https://bankcodesdirectory.com�� https://bankcodesdirectory.com�� https://www.boj.or.jp/en/about/l

ink/cb.htm/
benefits of a CBDC?
_________________________________________________________________________
Cassidy Blonsky
Industry
Individual
Country
State
California
Email
This sesbto be a fitting decision of financial security during these times of unpredictable
methodologies within the scope of many banks. Investing with new technologies and new
currencies along with new futures , this may be a steady for anyone looking for reputable and
solid system.
Not sure I can answer that now.
inclusion?
Positive for compliant and moderate financial trusts.
It can give some people a relief in that it is backed up with our primary system of governing
finances.
stability?
This is the answer in my opinion for today's unsured public banking.
I understand that decentralized banking is just that . The cryptocurrency system is in most
part an account run by people involved rather than a public or private institution.
Not sure.
I don't see a time ever where some sort of system of "cash" or monies tokens etc will be not
used as a form of trade.
CBDC?
Ungoverned methods are rarely trusts or worth the hassles.

Every nation has its right to there own type of taxation and trade.
sale? If so, how?
CBDC?
benefits of a CBDC?
_________________________________________________________________________
Robert Walk
Industry
Individual
Country
State
Michigan
Email
The risk of invasion of my personal privacy exists when banks and the government have
access to every financial transaction that is made. Furthermore, there would exist the ability
to block or deny certain transactions deemed to be unacceptable to some. The other huge
risk is that of a cyber attack on the ditigal currency. With increasing targeted attacks on the
power grid and operational technology, this would be another avenue for state sponsored
attackers to try and disrupt the US.
Yes, by returning to a asset backed physical currency.
inclusion?
"Inclusion" should not be part of the vocabulary when discussing the monetary system of the
United States. We should be focusing on outcomes that could help the economy grow by
ensuring businesses and entrepreneurs can hire and retain workers as well as allow for fair
competition. In short, less regulation and direct manipulation of our economy.
I think the governments pursuit of maximum-employment and price-stability are outside of its
responsibilities. These goals go against a true capitalist free market approach.
stability?
CBDC would have a negative effect on financial stability as it would further decouple the
dollar from any tangible asset.
Tying the currency to a hard asset like gold or silver.
It is critically important that cash or cash equivalents be maintained for the freedom to move
and perform commerce in the US.
CBDC?
We should never consider a global currency as this would negatively impact the majority of
Americans who do not rely on the government for assistance.
What other nations do should not influence the decisions of the US when it comes to our
economy. It is vitally important that the US continue to lead in the world and not follow what
other nations are doing.
My money and how I spend it are of no business to the government. I should have complete
anonymity in my financial transactions.
There are no avoidable cyber risks when creating a digital currency. There may be mitigation
techniques but there is no way to reduce risk 100%. Further, I have little faith the government
is able to protect assets and other computer related networks from state sponsored cyber
attacks.
Absolutely not!
No. There should be no CBDC.
No, this implies you are limiting individuals wealth. It is not up to the government to determine
how wealthy or poor an individual is allowed to be.
sale? If so, how?
CBDC?
benefits of a CBDC?
_________________________________________________________________________
Industry
Payment System Operator or Service Provider
Country
Czechia
State
Email
Yes
Yes
inclusion?
Yes
Yes
stability?
Yes
Yes
Yes
Yes
CBDC?
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
sale? If so, how?
Yes
Yes
CBDC?
Yes
benefits of a CBDC?
Yes
_________________________________________________________________________
Industry
Country
Czechia
State
Email
Eys
Yes
inclusion?
Yes
Yes
stability?
Yes
Yes
No
No
CBDC?
Yes
No
No
No
No
Yes
Yes
Yes
Yes
Yes
sale? If so, how?
Yes
Yes
CBDC?
Yes
benefits of a CBDC?
Yes
_________________________________________________________________________
Lord mokou
Industry
Country
South Africa
State
Email
Thanks very much appreciated
Yes interested mokou
inclusion?
Yes money
Yes I need to get more information about my computer life and the second time around
stability?
Good
Yes bank account details
Yes
Yes
CBDC?
Good day
Yes in the future business leaders
Yes
Yes I need information to Parvati
Yes
Yes
Business
Structure project
CBDc
Business development manager
sale? If so, how?
Money saving
Yes
CBDC?
benefits of a CBDC?
Owens
_________________________________________________________________________
Industry
Country
Czechia
State
Email
No
No
inclusion?
No
No
stability?
No
No
No
No
CBDC?
No
No
No
No
No
No
No
No
No
No
sale? If so, how?
No
No
CBDC?
No
benefits of a CBDC?
No
_________________________________________________________________________
Industry
Individual
Country
State
Hawaii
Email
The fact that Bitcoin is highly underrated and deserves to be acknowledged even if for legal
and obvious reason should only be allowed and protected in the united states of America only
it may be too late but the good new is, after the duplicates one thing was missing and
excluded I'm new to this system but would like to join and I'm 99.9% sure you need me since
Bitcoin is essentially my personal information and In order to restore and rebuild America
strong the foundation and our country as a whole needed adjustments and more people
willing to cooperate but I do apologize on behalf of our securities here in the state of Hawaii.
We may have lacked an entire it department because I was working as an individual I have
noticed the executive branch is here and had to experience a rather unpleasant temporary
downgrade to selflessly help an individual that also counts as everyone I'm sure you may be
aware of the division but I am here to request for you to reconsider after I submit all the
reports and missing information that I am trying to give you, on top of alot more you may not
know because I'm thinking this is history in the making because this is meant to be perfect
any doubts you may have id ask that you contact me or reach out I'm sure everyone is waiting
for retire so I'm receiving alot of uneasy and shocked responses by what feels like the whole
world to me so how do I or we get started?
Yes our way, or just include me and I think that's it..lol
inclusion?
No I believe I have the correct and accurate information and so any doubts are quite useless
to me because it's all perfect because of you people but adding me seems to create some
kind of perfect harmony and balance
Not sure and do not know
stability?
Extremely positive if I am able to get you to connect my local state of Hawaii as a foreign
country to the united states'of America first in order to secure all the states because our
economy has been suffering and what BTC Bitcoin is, essentially vital and what is odd though
is it somehow was strong enough to keep our entire countries economy from collapsing and
held it up the cons are it was my personal information and social security number that had to
be used and caused it to travel to Jamaica but not the country and we have two good men to
thank for that. Also the banks had almost gone to being leased because of the value going
down with the balance being thrown off but it was an exclusion so it was like the entire police
taskforce and the people were debating over what they could all get away with and it seemed
like no one was allowed to go override anything I am in a rush though because I am afraid of
other countries needing money and if we are the cause of it we need to get together online
there is no time to travel and everything can be done remotely but I need one issue with
approval from whoever has the highest authority because it's not possible without them that
why the overdrawn mark on the bill proved that it had something to with me but didn't
associate me with anything mainly because literally everyone was forced to break rules and
laws and the good I am should overrule all the mistakes and corrupted people just trying to be
free and with money it is entirely possible. Also one USD is approximately $24 in HNL.the
mistake was thinking I was a foreigner when the problem is that the state I live in needs me
and has always been struggling with the economy for as long as I've been alive.thank you
and If I am wrong I worry for our banks securities because I may be harmless but I'm
everything to the fake government running because you all defaulted to leaving me with
everything that isn't fair such as liabilities, accountability ,responsibility ,duties, emergency
management,global credit freeze on my personal file, and I also have everything you are
needing in one place, I am so sorry if you had to listen to my ignorant side this is all new to
me. I am a high school dropout and a mother of four and a current college student and
employee at liberty university and national governments as the main study or course. On my
Experian file there was a judicial foreclosure telling me I would turn into the lender and in no
way am I ever cheating the system because with the covid misinformation combined with the
Whitehouse covid rules spelled disaster and unreported data all you really need I think is my
name my SSN and dob, address on file because of the ccpa, not cpa now. And account or
login information on over a thousand websites should help fill in what is missing
For the better it's like going from negative to 100 percent
Would need to consider the bigger picture even if matters are quite personal for everyone
here I only see the good outcome if the federal reserve system either needs to retire and be
placed with new employees or the registration for a new type of currency that needs approval
and needs to be reviewed from a federal and central or presidential authority because I don't
indulge or rejoice with doing what is wrong and I am aware that I have the power to do
anything but do not trust going forward without being included so that the power and choices
go to the ones who deserve it and earn it even when you had given up believing someone like
me doesn't exist..
The app on apple and googles play store named cash app had missing central authorities
that disappeared on my personal account even though my account has no suspicious activity
but was needed as a security on behalf of our people
CBDC?
Less information to vital records or emergency management had gone astray and almost too
quiet and peaceful for comfort which could only mean one thing..but I wouldn't be so sure
They have the means and information to act accordingly to what they know but also may be
unaware of all that is going on unless that was a hiccup and they were watching me the entire
time then something isn't right there
International monetary fund certificate is in my systems internal storage which also hold
official applications and also the broken u.s. constitution that had been used and abused but
only because of a language barrier and unknown system errors that were also irrecoverable
but was recovered and is working now
Just be glad I'm not like everyone else is all I have to say..
Well insurance was the issue for me and identity theft but I was able to reclaim and make the
law work for me because it never will work for the wrong people even if you force it. Let's just
say the warnings and risks were not issued and everything that was supposed to be
dangerous had not been registered I hope that there is a way to bridge or connect the
accounts or companies because I'm getting calls and emails and texts and almost every one
is a scam or is considered spam and I'm reviewing messages that need to be reviewed and
released from a quarantined message
Yes but not without careful assessments and physical assistance with protection and
securities in place before continuing business because the banks were not secure and if we
have vaults here I'm not sure what the value or type of offset may be inside
Everything is automated and defaulted so this question is no longer needed
Yes and no maybe having two or three or splitting the responsibility or finances considering
the question is indicating of a large amount to be dispensed should be considered
Privately held banks, national banks, and any bank that lacks security and privacy that need
to be restored or replaced or added
Only if the servers or online activies are at risk or is being overflooded
sale? If so, how?
Yes because of compliance that should have been there but somehow wasn't able to be
made aware of this issue early on
Sure
CBDC?
No
benefits of a CBDC?
Maybe
_________________________________________________________________________
Industry
Individual
Country
India
State
Email
THE KING SOLOMON POST � OM SHANTI OM (LET THERE BE PEACE

IN � THIS WORLD)�THIS IS SWISS/FRENCH/DUTCH/INDIAN/UNITED NATIONS
/BRITISH INTERNATIONAL DISPATCH ISSUED FROM THE WORLD
SECRETARIAAT/DESK OF LORD RAVINDER(RABBINDER);KUMAR SHARMA (THE
ROYAL CROWN/RA-UNCODE(THE SUN GODD-THE SUPREME POWER-THE HEAD OF
STATES-THE ALIEN KING from outer space)/REXMUNDI/THE MASTER MASON CODE IS
LAUSDEO/THE HEAD SUPREME COUNCIL OF EU@UN(uk)/I.E.F-IN/THE
CHAIRMAN-UNESCO AND WORLD BANK(IMF) FOR THE IMMEDIATE RELEASE OF
FUNDS ILLEGALLY WITHHELD AND FROZEN FROM THE YEAR 2006 TO 2021-22 BY
FEDERAL RESERVE BANK OF NEWYORK AC NO GOVT OF INDIA RESERVE
BANK OF INDIA AND INDIAN BANKS NAMELY STATE BANK OF INDIA AC NO
CENTRAL BANK OF INDIA AC NO NOW FROZEN PUNJAB
NATIONAL BANK AC NO & AND OTHER INDIAN
BANKS IN GROSS VOILATION OF FOREIGN EXCHANGE MANAGEMENT ACT 1999 AND
ARTICLE 5 OF UNITED NATIONS UNIVERSAL DECELARATION OF HUMAN RIGHTS
WHICH STATE THAT NO ONE SHALL BE SUBJECTED TO TORTURE WHETHER
PHYSICALLY AND OR FINANCIALLY AND OR BOTH AND OR DEGRADED INHUMAN
AND CRUEL TREATMENT TO WHICH I HAVE BEEN SUBJECTED TO FROM THE YEAR
2006 TO 2021-22 BY FEDERAL RESERVE BANK OF NEWYORK GOVT OF INDIA
RESERVE BANK OF INDIA AND INDIAN BANKS RESULTING IN MY ACCIDENT ON
14/10/2019 IN SHIMLA HP INDIA AS A SUV OVERRAN ME CRUSHING ME ALMOST TO
DEATH BREAKING THE BONE OF MY LEG AND NOW I AM BED RIDDEN AS A STEEL
PLATE HAS BEEN PUT IN THE BROKEN BONE OF MY LEG AND 3 TO 4 MISCARRIAGES
AND ABORTIONS OF MY WIFE WHO IS PRESENT QUEEN OF EGYPT FRANCE INDIA
AND SCOTLAND(UK) CARRYING IN HER VEINS THE HOLLY GRAIL AND HOLLY BLOOD
OF JESUS CHRIST AND INVINCIBLE PHARAOHS FROM THE HOUSE OF KING DAVID
WHO FORMED THE UNITED NATIONS DEPRIVING THE PRESENT FRENCH THRONE
OF ITS 3 TO 4 LEGITIMATE BIRTHRIGHT KING AND QUEENS THUS I HAVE NOT ONLY
BEEN TORTURED BOTH PHYSICALLY AND FINANCIALLY FROM THE YEAR 2005 TO
2021-22 BY FEDERAL RESERVE BANK OF NEWYORK GOVT OF INDIA RESERVE BANK
OF INDIA AND INDIAN BANKS BUT I ALSO HAVE BRUTALLY BEEN MURDERED ALL MY
PAYMENTS FROM THE YEAR 2006 TO 2021-22 BE IMMEDIAYELY RELEASED UNDER
AN URGENT INTERNATIONAL PRIORITY A CODE ONE AND PAYMENT CODE 2AA OF
UN PROTOCOL AND UNITED NATIONS(PRIVILEDGES AND IMMUNITIES) ACT 1947
WHICH IS APPLICABLE TO THE STATE OF HIMACHAL PRADESH IN THE UNION
TERRITORY OF INDIA .� HOSANNAH FILIO DAVID � HOSANNAH TO THE
SON OF DAVID � FRENCH(ARCADIAN) ROYAL LINE �MESSAGE STARTS:-�I AM
THE FIRST BREEZE BLOWING IN THE DARK OCEAN OF ETERNITY I AM THE FIRST
SUNRISE I AM THE FIRST GLIMMER OF LIGHT A WHITE FEATHER BLOWING IN THE
DAWN WIND I AM RA I AM THE BEGINNING OF ALL THE THINGS I SHALL LIVE
FOREVER I SHALL NEVER PERISH � FROM THE HOUSE OF LIFE EGYPT �
THE BOOK OF BREATHINGS�"Hail to THE mysteries jealously guarded by RA.� May the
doors of vast HEAVENS open before me.�May my past PRESENT and future LIFE BE
glorious!� Verily I AM powerful for I have completed the cycle of metamorphoses �I
who speak I know OF hidden things� I can traverse THE UNIVERSE and take possession
of my CELESTIAL HERITAGE, knowledge and an abundance of wealth and power, open the
doors of vast HEAVENS open before me .�May my past PRESENT and future LIFE BE
glorious!� Verily I am powerful for I have completed the cycle OF metamorphoses.�I who
speak I know OF hidden things � I can traverse THE UNIVERSE and take possession OF
my CELESTIAL HERITAGE, knowledge and an abundance of wealth and power open the
doors OF it to me as I wish to receive it.�I claim THE THRONE OF HEAVENS as my
BIRTHRIGHT�What has once been mine SHALL be mine again."�Is there any WHO would
CHALLANGE me???��I AM DIVINE LORD RAVINDER(RABBINDER) KUMAR SHARMA THE
MASTER OF TEN THOUSAND CHARIOTS � GODD OF WISDOM �
THE BOOK OF WISDOM � LORD OF ALL HEAVENS � LORD OF
ALL WORLDS� MESSAGE ENDS �FEAR ME O YE ENEMIES OF EGYPT AND THIS
WORLD �LORD RAVINDER(RABBINDER) KUMAR SHARMA �BIRTHPLACE VILLAGE AND
� CELL AND
WHATSAPP �POSTAL ADDRESS �LORD RAVINDER KUMAR SHARMA �BIRTHPLACE
�VILLAGE AND
� CELL AND WHATSAPP
Xxxx
inclusion?
Xxxx
Xxx
stability?
Xxxx
Xxxx
Xxxc
Xxxx
CBDC?
Xxxx
Xxxx
Xxxx
Xxxx
Xxxx
Xxxx
Xxxx
Xxxxx
Xxxx
Xxxx
sale? If so, how?
Xxxx
Xxxx
CBDC?
Xxxx
benefits of a CBDC?
Xxxx
_________________________________________________________________________
Industry
Individual
Country
Canada
State
Email
CBDC access technology risk��Additional regulated controls for CBDC digital access
technology may be necessary for settlements to and from private money and non-bank
money to protect Central Bank money and Commercial Bank money. �Unregulated digital
technology for purchase and redemption of CBDC could create the means for episodes of
unfriendly coordinated destabilizing reverse runs and conventional runs on Commercial Bank
money to and from Central Bank money, causing potential for harm to the operation and
function of Commercial Banks, M1 money and local economies. �It is intended that Central
Bank money stock includes CBDC which, like physical fednotes, are liabilities of the
sovereign central bank and legal tender. By extension of generally accepted accounting
principles such liabilities are digital assets in possession of holders with 'unequivocal certain'
claim rights on the sovereign government. These claim rights are calibrated in the sovereign
unit and shall be accepted when offered in economic episodes as a grant of consideration to
account for payment of debts, settled immediately and on account. �If possession of the
stock of CBDC claim rights is to seamlessly transfer and exchange in local economic
episodes between the stock of CBDC and Commercial Bank money at par and vice versa,
then Commercial Bank money stock may become by extension, similar to expressions of
safe, stable and unequivocally certain CBDC claim rights. Federal Deposit insurance gives
more of such certainty, while those households and businesses in economic episodes retain
accountability for knowing who they are dealing with. An ecosystem of laws supporting the
clearing, possession and holdings of Commercial Bank money claim rights has evolved over
time. Such Commercial Bank claim rights interchangeably support the operation of a safe,
stable and certain sovereign money ecosystem in economic episodes. � �If settled ultimately
or backed by Central Bank money and Commercial Bank money, it follows that private money
and non-bank money digital assets offered as consideration by one counterparty in economic
episodes in private markets and marketplaces, may by extension become an expression of
the safe, stable unequivocally certain stock of M1 money claim rights. It is not hard to
imagine that CBDC and Commercial Bank money accepted without regulated digital
technology access controls may be used instantaneously and perhaps in parallel to settle
immediate purchases and redemptions of private money and non-bank money. Private
digital assets calibrated in the ‘dollar’, the sovereign unit, may become functionally like and
also fungible with CBDC and Commercial Bank money inside and outside sovereign money
ecosystems without regulated digital access controls. Private money enabled by Central
Bank and Commercial Bank money may become like Central Bank and Commercial Bank
money. �M1 money stock digital access technology without access controls could potentially
harm Commercial Banks if access technology is used as a means for unfriendly coordinated
movements of CBDC and Commercial Bank money. Existing limits and other regulated
controls like Anti Money Laundering programs may be insufficient to control CBDC access
technology risk. Uncontrolled digital access technology means (mediums and methods
used) when joined together with unfriendly intentions and coordinated movements of CBDC
and Commercial Bank money, create the potential for harm. �
All of the potential benefits of a CBDC can be better achieved by thinking differently now
about the operation of money and payments in economic episodes. A brief discussion of the
forms of money, limitations of barter and related coincidence of wants reveals opportunities
for updating the concepts of money and payments returning intrinsic value to Central Bank
money and addressing financial inclusion. �Money stock and its representations existed in
transactions and relationships before Central Bank money. For example, money existed as
counterparty account positions marked up in ancient trading ledgers, and as physical
commodity reserves wanted in economic episodes and considered ‘ready money’ with
intrinsic value, and sovereign authorized fiat money gold and silver coins with intrinsic value
calibrated and circulated by sovereign nations. After the gold standard backing sovereign fiat
money was finally abandoned in the 1970’s, US Federal Reserve notes and coins lost any
remaining intrinsic value in and of themselves, leaving extrinsic value perceived by holders
and those who want to hold US Central Bank money stock. �Of course in any economy,
even in commodity based barter exchange economies, households and businesses get from
each other what they cannot otherwise give themselves or want to do themselves. The limited
opportunity for scalable, repeatable economic activity, diversity, leverage and growth in barter
exchange episodes having a necessary coincidence of wants and work efforts, was solved in
similar ways by the introduction of sovereign fiat money gold and silver coins and later legal
tender money liabilities of sovereign nations. These circulating fiat money stock things,
objects or mediums with marketable intrinsic value or certain unequivocal cash claim rights on
sovereign nations, have the effect of granting discretion and the freedom of households and
businesses to extend satisfaction and wanted advantages into the future, resolving current
episodic frictions and uncertainties from a necessary coincidence of wants and efforts in
barter. �There is another side of this coin when ‘granting discretion’ to hold fiat money stock
freely into the future. The disaggregation and separation of immediate cooperation by
households and businesses in economic episodes is lost. A coincidence of wants and work
efforts previously necessary to mitigate each other's current economic frictions and
uncertainties and achieve different advantage and satisfaction in barter exchange episodes,
is lost and may no longer be required for advantage and satisfaction in a sovereign economy
with sovereign fiat money. �Instead, to achieve different advantages and satisfaction, a
dependence is created on the sovereign nation for an adequate supply of circulating
sovereign fiat money cash claim rights and on money mediums and things with marketable
value calibrated by the sovereign nation. The intrinsic value of metal coins and circulating fiat
money legal tender cash claim rights, each releases and obviates the need for a necessary
coincidence of wants and work efforts of households and businesses in economic episodes
found in barter exchange. �With these historical effects it is no coincidence that some of the
benefits of a possible CBDC respond to the corresponding loss of intrinsic value, and loss of
episodic cooperation for financial inclusion of sovereign fiat money ecosystems. �See the
comments that follow regarding financial inclusion and returning intrinsic value fiat money. �
inclusion?
stability?
CBDC?
sale? If so, how?
CBDC?
benefits of a CBDC?
_________________________________________________________________________
Industry
Technology Company
Country
State
Email
Yes. See: Blockchain, Cryptocurrency and the Future of Monetary Policy

https://www.prlog.org/12785779-blockchain-cryptocurrency-and-the-future-of-monetary-policy
.html
Yes. See: Is FedCoin, a US Government-issued cryptocurrency, feasible?

https://www.prlog.org/12772509-is-fedcoin-us-government-issued-cryptocurrency-feasible.ht
ml
inclusion?
No. See: Crypto Inclusion Myths

https://www.impactinvesting.online/2022/01/crypto-inclusion-myths.html Also see: Creative
Investment Research Issues Statement for the Record on Crypto Inclusion Myths
https://www.prlog.org/12899511-creative-investment-research-issues-statement-for-the-recor
d-on-crypto-inclusion-myths.html
See: Blockchain, Cryptocurrency and the Future of Monetary Policy

.html
stability?
See: Creative Investment Research Testifies Regarding Proposed Merger of U.S. Bancorp
and MUFG Union Bank
https://www.prlog.org/12908180-creative-investment-research-testifies-regarding-proposed-m
erger-of-us-bancorp-and-mufg-union-bank.html
See: Thriving As a Minority-Owned Business in Corporate America: Building a Pathwa...

https://www.amazon.com/dp/1484272390/ref=cm_sw_r_tw_dp_R8B1F987756Y464GYNKX
via @amazon
See: Creative Investment Research Testifies Regarding Proposed Merger of U.S. Bancorp
and MUFG Union Bank
https://www.prlog.org/12908180-creative-investment-research-testifies-regarding-proposed-m
erger-of-us-bancorp-and-mufg-union-bank.html
Yes.
CBDC?
See: The Future of Money https://youtu.be/n1i4J8df0t0 via @YouTube
Is FedCoin, a US Government-issued cryptocurrency, feasible?

ml
Yes. See the links above.
Three separate questions. Don't mix.
Blockchain, Cryptocurrency and the Future of Monetary Policy

.html
Yes.
See: Is FedCoin, a US Government-issued cryptocurrency, feasible?

ml
See: Blockchain, Cryptocurrency and the Future of Monetary Policy

.html
sale? If so, how?
CBDC?
benefits of a CBDC?
_________________________________________________________________________
Industry
Other: Intertribal Community Development Entity
Country
State
Oklahoma
Email
rick@buffalotraks.com
Indigenous Nations Tribal Reserve (INTR): Regulatory Compliant Fiduciary and Intermediary
--The INTR ecosystem was designed with permissioned and interconnected, interoperable
“hoops” for use by citizens, governments and industries to support and enhance “... monetary
stability, financial stability, and a safe and efficient payment system.” INTR has potential
public and private benefits as a payment and logistical utility incubator. INTR was founded in
2001 and has pursued an Indian Country pilot project using distributed ledger technologies
(DLT) for financial inclusion of Native Americans and their surrounding low-income
communities beginning in 2016. We were persuaded by Vice Chair Lael Brainard’s numerous
presentations on Indian Country and digital assets to contact the Federal Reserve. The
gracious and kind responses from Vice Chair Brainard, the Minneapolis Center for Indian
Country Economic Development and Megan Cruz of the St Louis Branch came swiftly and all
directed INTR to respond to the CBDC paper with comments./// “Provide benefits to
households, businesses, and the overall economy that exceed any costs and risks” INTR’s
comments report on a multi-year evolution of designing and de-risking a minimum viable
product for an Indian Country Credit Program using DLT. We have jumped through many
hoops designing, then positioning to launch an optimal regulatory system for using DLT in
order to provide for integration, interoperability and cross-jurisdictional cooperation. The free
market encourages the creation of the right intermediaries. Non-monopolistic and existing
legal and financial systems work best: licensed fiduciaries using regulated banks are a
natural choice for trusted intermediaries. ///“Yield such benefits more effectively than
alternative methods” Analogous to a digital form of money, INTR’s ecosystem consists of a
programmable convertible virtual currency (CVC) (Trak$), a digital contract escrow account
(Smar>Trak$), and a DLT identity account (Self>Trak$) combination, with transaction
reversibility and alternate dispute resolution or arbitration (Hoop$).///“Complement, rather
than replace, current forms of money and methods for providing financial services.” Instead of
joining the thousands of unregulated token launches, INTR sought the direct guidance from
the SEC Fin Hub/Corp Fin beginning in 2019, and from the Oklahoma Department of
Securities (ODS) and Tax Commission (OTC) beginning in 2018. INTR found its design in
these agencies’ legal and fintech sandboxes (digital dollar, tribal casino, industrial hemp,
medical marijuana regulation and taxation, 501c3 donations, poker chip payment avatars,
social media, cooperatives, and real estate/construction contracts ). ///“Protect consumer
privacy”: INTR has designed, tested, and demonstrated with the guidance of state, tribal, and
federal tax and securities regulators, a payment and tracking incubator, which uses a
convertible virtual currency (CVC) and digital contracts within interoperable and
permissioned “hoops” for identity protection. These interconnected circular designs might be
useful to the Federal Reserve in evaluating an interoperable ecosystem for a CBDC, which
extends and complements “...existing means of payment..” We have experimented and
adjusted the design to reflect tribal, state and federal securities, tax, and financial
regulators’ guidance on “...how to ensure a CBDC would preserve monetary and financial
stability…” ///Protect against criminal activity: We have observed others' attempts to create
both regulated and unregulated convertible virtual currency (CVC) designs (Libra, Ethereum,
EOS, Ripple, Bitcoin, USDT, USDC, etc.) INTR vetted and incorporated at least a dozen
foreign jurisdictions’ DLT regulatory designs on “...how to preserve the privacy of citizens and
maintain the ability to combat illicit finance.” We have employed and investigated many tech
providers, cryptocurrencies, and tested multiple DLT minimum viable products and designs.
Much of what we found does not protect, rather the intended effect of these developers has
been to disrupt and to destroy long-standing legal relationships./// Broad support from key
stakeholders: After working out the details of a payment and tracking system within the ODS
and SEC FinHub sandboxes, INTR introduced HB 3279, the Oklahoma Distributed Ledger
Technology Assets Offering (DLTAO) Act with bipartisan passage in the OK House (75-12).
We withdrew the bill from OK Senate consideration for reintroduction next session. We
determined that the stakeholders need to determine and better integrate the banking and
Federal Reserve perspectives. (Throughout these comments, we will quote from the
language of OK HB 3279, as the proposed law bears on the issues raised for comment.)�
An iterative and alternative approach exploring a CBDC’s potential benefits in a pilot project:
banking the unbanked in Indian Country could positively achieve the Federal Reserve’s
CBDC goals. ///INTR’s charter goals overlap those of the Federal Reserve as we seek:
“...how a CBDC could improve the safe and efficient domestic payments system.” INTR’s
charter assignment is to “define and safeguard” an Indian Country fintech integration so as to
bank the unbanked by using U.S. bank depositories for asset backing of the CVC. INTR
proposes to use its CVC and DLTAO ecosystem designs to help demo and explore a United
States CBDC design for potential properties, costs and benefits beginning with the Idigenous
unbanked in Central Oklahoma. ///A Federal Reserve CBDC would be a liability of the Federal
Reserve, but commercial banks might not receive enough support were a CBDC only
administered by the Federal Reserve. Thus, a CBDC by definition would tend to replace,
rather than complement current forms of money and methods for providing financial services.
INTR’s intermediary approach with the unbanked will allow commercial banks to be used as
depositories for purchasing and backing a CBDC. ///"Move fast and break things!” was the
mantra of early tech innovators, but the federal securities regulators, financial agencies, and
the U.S. Congress have pushed back against lawless tech firms. Benefitting the public
interest and the Federal Reserve’s remit is INTR’s charter and statutory mandates. There are
potentially great social and economic benefits in moving deliberately in accordance with the
Rule of Law in order to protect the U.S. dollar and a stable monetary policy using DLT. Our
evolutionary and iterative designs involve studying DLT failures. Regulatory agencies helped
INTR’s securities, organizational, and tech designs; now we seek the Federal Reserve’s
regulatory guidance./// In the DLTAO Act, HB 3279 drafts, we embedded federal securities
laws into Oklahoma law through reference to INTR’s no action features and by inclusion of
the officially announced SEC no action positions. The reasons for proposing HB 3279 are:
to provide a DLTAO regulatory framework, to thwart financial and criminal corruption, to
collect taxes, to incubate DLT, and for financial inclusion of the unbanked.///A larger purpose
is served by adapting a law first approach to distributed ledger technology (DLT) regulations.
Typically, DLT transactions are immediately validated and cleared, then settled shortly
thereafter, automatically without a central authority. A more optimal DLTAO ecosystem
design should modify this unregulated and un-permissioned protocol with recourse,
reversibility, and dispute resolution. Our design optimization calls for closed, but
permissioned, and interoperable “Hoop$”, and uses a licensed fiduciary (INTR) and a stable
token, Trak$, which is a programmable U.S. dollar avatar backed by deposits in U.S. and/or
state financial institutions.///The regulatory design strategy is intended to establish an optimal
economic development utility incubator for solving universal and intractable problems such
as dispute resolution, financial inclusion, tax evasion, and money laundering. To evolve such
a universal capability one would do well to seek chaotic use cases that are complex, and
then overlay a minimum viable legal, organizational and DLT product design solution. If the
design involves a digital asset, the next step is the SEC Fin Hub sandbox. The
multi-jurisdictional, tribal casino, cannabis/hemp regulation and tax remittance,
cryptocurrency, and money laundering problems appeared to us as the worst regulatory
problems with the most difficult DLT design challenges. We have sorted out the factual,
legal, organizational, and tech details for several of those use cases and formally
demonstrated the same by written submissions and live presentations in multiple instances to
SEC Corp Fin/Fin Hub staff and to the SEC Fin Hub director, Valerie Szczepanik, on
February 23rd, 2022.///Such an ecosystem as described in the OK DLTAO Act and
presented to the SEC would “...not favor any policy outcome…” but could enable federal,
tribal and state governments collaboration and cooperation in creating a CBDC minimum
viable product for testing. An Indian Country pilot might provide a study for more efficient
underwriting, tax, securities, and financial compliance using DLT for custody, payment,
services and product/services tracking. Working together, multiple jurisdictions could integrate
a federal, state, local, and tribal compliant digital payment landscape for the future, while
fitting within the current SEC securities’, UST, OCC, FinCEN, FDIC, and Federal Reserve
monetary policies’ envelopes.�
inclusion?
Banking the Indigenous Unbanked: “MENDING THE HOOP”�A pre-Columbian economic
system, which some Natives referred to as the “Hoop” was long established before being
broken. There are over 33,000 enrolled tribal members living in Central Oklahoma. Many are
unbanked and nearly all live outside of their tribal jurisdictions. Indigenous Nations Digital
Villages or “Indigivils” can be launched using a combination of tablets, apps, and special
ATM’s to bank the unbanked in remote places. Indigivils first launch is as a pilot project in
Oklahoma and Cleveland Counties, which are not tribal lands included in the McGirt v.
Oklahoma decision, but are rural, suburban and urban, former “Unassigned Lands.”///INTR
has authority to operate a Credit Program here in accordance with its tribal charter and the
Oklahoma Indian Welfare Act. Both the statute and charter require INTR to use U.S. and
state banks as depositories. INTR and its community partners proposed the Oklahoma
Distributed Ledger Technology Assets Offering (DLTAO) Act, which was on its way to
passage in April 2022. If the law passed, it could clarify for Oklahoma and its tribal
governments a federal securities and BSA compliant system for governments using DLTAO
vendors to bank the unbanked.///In articulating the collaboration of tribal and state in the
proposed DLTAO Act, we have welcomed the leadership and words of support coming from
the Federal Reserve's Vice Chair, Lael Brainard. She appeared and presented before our
Oklahoma tribal communities in October 2021 at Oklahoma City: ``As Native communities
tackle these impediments to financial inclusion, collaborative efforts across a range of
public-sector, private-sector, and nonprofit organizations can be helpful. As part of our
mission to build a strong, inclusive economy, the Federal Reserve has a role to play in
supporting economic growth and financial inclusion in Native communities.”
https://www.federalreserve.gov/newsevents/speech/brainard20211013a.htm
COLLABORATION TO HELP THE UNBANKED BY EXPLORING CBDC
DESIGNS--Electronic Fund and Information Transfer System Interchange: Integrate a federal,
state, local, and tribal compliant digital payment landscape for the future, while fitting within
the current US Treasury, SEC, and Federal Reserve monetary and securities policies. Define,
integrate, and safeguard Indian Country distributed ledger technologies (DLT) within U.S.
financial institutions to design, demonstrate, and explore a United States central bank digital
currency (CBDC) creation for potential properties, costs, and benefits.
https://www.federalreserve.gov/newsevents/speech/brainard20220218a.htm///Distributed
Ledger Technologies(DLT) to Bridge the Indigenous Financial and Digital Divides Over 16
percent of Indigenous households were unbanked in 2019—three times higher than the
national average. Unbanked Poor Problems: credit readiness, homebuyer education, lack of
local bank branches, trust property as collateral, Native small businesses,financial literacy,
and personal financial management skills. FinTech Solutions: Digital Assets Processors,
Distributed Ledger Technologies, Smartphones/Tablets, Trak$ ATM’s, and Internet Access
Indigenous Nations Digital Villages or Indigivils: Public/private sector cooperative associations
can grow distributed ledger technology (DLT) networks for financial and digital inclusion by
using available resources: technologies, organizations, institutions, and existing laws. Indian
Country fintech utility incubator for financial and digital “…collaborative efforts across a range
of public sector, private-sector, and nonprofit organizations…” �Colonization Begins (1492):
Breaking the Hoop� • Indian Removal Act (1830): Remove Indians to Indian Territory
(eventually becoming Oklahoma).� • Worcester v. Georgia (1832): Marshall Court upheld
Indigenous self-governance rights, but Jackson refused to enforce and began the Trail of
Tears, forced removal of tribes to Indian Territory (Oklahoma). • Curtis Act (1898): Congress
limits tribal self-governance in Oklahoma and takes away their lands again. �Reversing
Colonization & Mending the Hoop �• OIWA (1936): Resurrected Oklahoma Indigenous powers
of self-governance. �• INDIAN SELF-DETERMINATION ACT (1975): Rejuvenated tribal
governments by rejecting and countering previous bad policies. �• IGRA (1988): Regulates
Indian gaming to rejuvenate Indian Country. � • POTUS (1999-2022): Presidential Memos on
Tribal Consultation by Clinton, Bush, Obama, and Biden.� • NABDA (2000): Encourages
public/private partnerships and innovation.� • McGirt v. US (2021): SCOTUS rules that portions
of Oklahoma remain Indian land.
Regulatory strategies demand that law code comes first and predetermines computer code.�
DLT can be designed with or without a central authority and by individuals or entities with no
basis to trust each other. These networked back, decentralized, trustless systems like
Bitcoin are intrinsically anarchic, unstable, and are not the needed design solutions for a U.S.
CBDC, which could help with price stability or implementing U.S. monetary policies.
Unregulated cryptocurrencies present legal and economic challenges of fluctuation,
anonymity, and money laundering. At a minimum, the ideal ecosystem enforces regulated
and stable transactions acceptable to the SEC, FinCEN, OCC, FDIC, and the Federal
Reserve, thus requiring reversibility and trusted intermediaries or fiduciaries for AML, KYC,
BSA. INTR acts through licensed and bonded fiduciaries and can serve in a central
intermediary role determining who can set up a node and confirm transactions in a given
permissioned ecosystem. �The more INTR was guided by regulators in its DLTAO design
criteria, the more we explored an emerging concept which we discovered had gradually
broadened into an “internet of regulation”. These regulatory strategies demand that law code
comes first and legal code must dominate computer code. �When the Oklahoma DLTAO Act
was introduced in the OK House, there was immediate pushback against anyone suggesting
monopolistic tech or government centralized control. OK HB 3279 has been influenced by
public opinion and numerous corrections were made to satisfy critics. In addition to the HB
3279, multiple local, state, federal and tribal governments and agencies, including the SEC
and branches of the state of Oklahoma government, have been contributing to our iterative
DLTAO design evolution.�The optimal CBDC scenario appears to indicate an ecosystem of
trust. The ideal CBDC could require either directed or independent intermediaries serving as
licensed fiduciaries or trustees in the public interest overseeing distributed ledger offerings.
DLT ecosystems should have as their prime motivation, the reinforcement of
trustworthiness and incorruptibility within the financial system. Using DLT to support and to
effectively implement monetary policy in the pursuit of the Federal Reserve’s
maximum-employment and price-stability goals, the following criteria are central
considerations. �To Create Value or Issue Bank or Asset Backed Assets not Simply
Vanishing Virtual or Network Backed Assets��To Transfer and Record Value or the Ownership
of Real Assets Based Upon Immutable Identity and Authenticated Agreements �To Reverse
Those Transfers of Value or Ownership of Tangible and Intangible Assets and to Resolve
Disputes Between Parties to Transactions��To Allow Owners of Assets to Exercise Certain
Rights and Duties Associated With Ownership, and to Record the Exercise of Those Rights
and Duties in Accordance With Choice of Law, Venue, and Jurisdiction�� PROOF OF WORK
CONSENSUS DOES NOT SERVE THE NEEDS OF A CBDC�INTR exercised its capability to
act as a fintech utility incubator and intermediary with the recent passage of HB 3279 in the
OK House (DLTAO Act). The CVC sandbox designs demoed to the SEC for casino and
cannabis tax remittance and AML were a starting point for drafting the DLTAO Act. The
ecosystem was designed with a programmable digital dollar and flexible logistical and
payment tracking features tied to custodian/product/event/services. The purpose of selecting
the use cases of federally legal industrial hemp and state-lawful, medical cannabis taxation
and regulation in Oklahoma, was to find the most confused regulatory challenge for which to
design a DLT solution. Then INTR took the best parts of that rigorous design to organize a
regulatory solution in the form of a state statute integrating federal, state, and tribal laws. �
�We experimented and found it impossible for certain tech designs to conform to the law. A
U.S. CBDC using a decentralized cryptocurrency ecosystem and a trustless “Proof of Work”
consensus mechanism like Bitcoin uses would negatively “... affect the Federal Reserve’s
ability to effectively implement monetary policy.”��Poor Proof of Work Performance
(Millisecond) Transactions�Scalability is an often- cited concern of current blockchain
technology. Bitcoin handles 7 TPS on average with greatly delayed confirmation times.
Ethereum is much faster with 25 TPS. which pales in comparison to the 1,700 TPS achieved
by VISA.�� Trustless Proof of Work Wastes Energy �The current estimated annual electricity
consumption of Bitcoin is estimated at 40.5 TWh, an amount above the annual consumption
of entire countries, such as Argentina or Belgium.��
stability?
The choice of CBDC designs will determine its negative or positive effects on financial
stability �Insofar as it is possible, the goal should be to preserve the financial stability status
quo with the use of any CVC or CBDC using DLT. The problem is that many of the
cryptocurrency projects are disruptive and were particularly designed to compete or interfere
with the U.S. central bank. The Federal Reserve promotes stability and reduces systemic
risks and has done a remarkably good job if one looks at the challenges presented in 2008.
Those features which helped to overcome that near meltdown should be bolstered and not
disrupted. The advent of the first cryptocurrency project was Bitcoin in 2008 and it was
specifically directed as an alternative to fiat currency and central banking. A CBDC with
optimal design capabilities would dampen the effects of these disrupters and facilitate
positive stability to counteract negative imbalances through:��Monitoring- The ideal registry,
custodian, and events correlations allow the granular monitoring of specific dollars, banks,
people, locations, transfers, and industries and could be done in real time. Supervision at
Micro and Macro Levels- Within an optimal DLTAO ecosystem, if a given commodity or
service price level becomes unstable in a region, for example the price of asparagus grown
in Central Valley, that event could be identified immediately, correlated and reported to the
party with the need to know. This would reinforce the Fed’s capability and “...promotes the
safety and soundness of individual financial institutions and monitors their impact on the
financial system as a whole, while helping to serve the Federal Reserve Charter purposes of
“... consumer-focused supervision and examination, research and analysis of emerging
consumer issues and trends.” � Cryptocurrencies and Stable Coins Provide No Consumer
Protection and Have High Run Risk: Most cryptocurrencies and stable tokens are not asset
backed nor do they have guaranteed or audited deposits. The regulated stable coin must be
asset backed within insured U.S. depository institutions, which are subject to appropriate
supervision and regulation, at the depository institution and the holding company
level.��Payment System Risk: Wallet providers would be subject to appropriate federal
oversight. In addition, any DLTAO ecosystem operator as supervisor of CVC issuance must
meet appropriate risk-management standards. The state of Oklahoma legalization of medical
cannabis presented regulatory chaos and provided the opportunity for us to design a
complete DLT solution for an intractable regulatory problem. The DLTAO Act was drafted to
reduce the chaos of an unregulated cannabis supply chain. Engagement in US and Abroad-
The design elements could be broadened to include most other logistical and payment
challenges. �Relevant provision from OK HB 3279 (DLTAO ACT): �AS INTRODUCED��An Act
relating to technology; creating the Oklahoma Distributed Ledger Technology Assets Offering
Act; providing legislative findings; defining terms; authorizing state to develop and use
distributed ledger technologies; requiring certain software; requiring certain security and legal
requirements; permitting use of certain smartphone applications; authorizing additional uses;
requiring certain software features; limiting use of convertible virtual currency; prescribing
value of convertible virtual currency; providing requirements for digital and smart contracts;
requiring a digital identity and wallet; prohibiting use of convertible virtual currency as an
investment; requiring use of decision tree; requiring separate digital contract to charge a fee;
prescribing procedure for payment; requiring ecosystem operator to collect fees and taxes;
requiring ecosystem operator to perform certain accounting; prescribing method of
compensation; requiring ecosystem operator to provide certain information; requiring the
Oklahoma Tax Commission and Office of Management and Enterprise Services to make
certain determinations; authorizing the Tax Commission, Office of Management and
Enterprise Services, Secretary of State, and State Treasurer to promulgate rules; allowing
payment of taxes from certain sources; permitting Tax Commission to appoint agents for
certain purposes; creating requirements for distributed ledger technology asset offering
agents; creating requirements for distributed ledger technology asset offering ecosystem
operators; authorizing the Tax Commission and Office of Management and Enterprise
Services to promulgate rules to validate transactions; allowing certain contracts; allowing use
of memorandums of understanding; allowing certain working groups; prohibiting certification
as a class action;��
The ideal CBDC is not disruptive, but it harmonizes with existing regulatory and financial systems.
Why is digital currency not widely used? lack of regulation unstable value slow transactions
stigma from use in money laundering, tax evasionAn optimal CBDC can be used readily as digital
contracts built to protect users and the law. regulated and protected by international, federal, state,
and tribal laws always worth $1 and 100% reserve backed in US banks or as a CBDC closed loop
payment mechanisms that are fast, efficient, and safe prevents cybercrime, money laundering, and
tax evasion Regulated Convertible Virtual Currency Reportedly, cyber criminals will steal over
$6 Trillion in 2021, exceeding the GDP of Japan. $USD backed, smart money can be used with a
mobile app or card so as to prevent cybercrime and to collect taxes. Profits should fund sustainable
community development in rural, low-income, and minority communities. Problem: US agencies
struggle with digital currencies as governments, consumers, and businesses seek a safe, usable option.
Solutions: select regulators opinions on CVC’s- An optimal design is that of a regulated, reserve
backed, stable digital currency intelligently built to protect privacy, law, people and their rights.“…our
current payment mechanisms, domestically and internationally, have inefficiencies, those
inefficiencies are the things that are driving the rise of bitcoin.” - Former SEC Chairman Clayton
(November 23, 2020). Despite its recent rise, Bitcoin price volatility, slow transactions, lack of
regulation, high power needs, and illicit activity problems, all limit mainstream use. Satoshi Nakamoto
ushered in the “Internet of Value”. Mark Zuckerberg advocated for the adoption of Libra and Diem for
his personal “Internet of Money”. A CBDC with an intelligent design could incubate an “Internet of
Regulation” capable of reinforcing legal norms. “…(P)rivate digital currency-based payment
systems could magnify concerns surrounding illicit activity and consumer risk” - Federal Reserve
Governor Brainard (February 5, 2020). CBDC transactions must be federally reported. The
ecosystem operator as a fiduciary and intermediary, ideally collects and remits taxes as it flags and
reports illicit activities. Encryption and distributed ledger technology eliminate common consumer
vulnerabilities “…if we really think the crypto world is going to be part of the future, it needs to come
inside of the public policy envelope.” -Gary Gensler, SEC Chairman (October 15, 2018) According to
US Treasury Secretary Janet Yellen “…regulating institutions that deal in bitcoin...is certainly
important.” (February 18, 2021)REGULATORY COMPLIANT DLT From 2016 to 2021, the
United States Securities and Exchange Commission has provided guidelines for intelligently designing
a CVC. SEC Commissioner Hester Peirce observed that “...the opportunity to develop multiple
regulatory solutions to a single problem, is a feature of the United States’ own system” (July 30,
2019)USE CASE | LAW | ORGANIZATION | TECH● Since 2016, INTR has modeled, developed,
and integrated legal, DLT, and organizational sandbox designs to explore a programmable digital
dollar design for the unbanked, casino, cannabis, and crypto use cases in order to comply with federal,
tribal, and state policies.● INTR is designed to enable federal, tribal, and state governments to
efficiently ensure legal, tax, securities, and financial compliance by using DLT for custody, payment,
and product/services/event tracking solutions.● We adjust our ethical, organizational, and tech
protocols with key agencies' guidance and regulations, to include S.E.C. Fin Hub, the U.S.T. and the
Federal Reserve. Proof of Trust and an Optimal CBDC. The Proof of Trust protocol permits
transactions to be gathered sequentially and recorded; cryptographically validated in chronological
order; and allows the resulting ledger to be accessed by different servers. Unlike the thousands of
unregulated, network-backed crypto- INTR has not issued any tokens or posted a public web site and
has only moved value in the SEC sandbox in demos before Corp Fin and Fin Hub staff lawyers and
directors. INTR’s “Trak$” CVC design will be asset backed and guaranteed in U.S. banks.
The Rule of Law is the socio-economic tool lacking from multiple unregulated
cryptocurrencies. �Traditional societal, legal, and economic values seem almost everywhere
absent from the Internet. These simple tools that we use every day to enforce the law,
protect consumer vulnerabilities and to attain the benefit of any contractual bargain are
identity, informed consent, and dispute resolution. Any CBDC connected to the Internet
should be a regulatory design with effective and reliable protections for consumers. If there
is to be a CBDC with correlative rights and duties, a new covenant for an American version of
World Wide Web citizenship should be explored. If we begin migrating deliberately onto the
Internet our brick-and-mortar laws, customs, and norms, the substantive and procedural laws
should be easily enforceable within and throughout the Internet by regulators and the courts.
�Many of these promoters and developers with their thousands of unregulated
cryptocurrencies have announced a goal of anarchy calculated to disrupt and dominate
domestic and international economic relationships. The stated purpose has been to replace
economic reality and trust with a trustless virtual society whose starting point is computer
code. While in the SEC sandbox, INTR was guided to create the basic tools for mitigating
adverse impacts of a CBDC on the financial sector. Those tools do not begin with computer
code, but are customary, legal and inherent in our everyday lives within civil society and are
found in our legal codes and precedents. � Digital Contract to Verify Consent-
Smar>Trak$�Example: – Defines consent to agreement or contractual conditions under which
corporate bond transfer occurs and uses a decision tree for specifying agreed to
terms��Business Rules or Governing Laws Agreed to within any Contract are Entered upon a
Decision Tree and are Embedded in the Distributed Ledger & Executed with the Transaction
�Mutual Consent is Given by the Parties to the Agreement upon an Easy to Read Decision
Tree Format which is Verifiable and Signed �Encoded in Programming Language Reflects
the Consent of the Parties to the Enforceable Agreement, to Include Provisions for Breach,
ROI, Liquidation, and Bond Discharge Terms��Digital Contract to Verify Identity-
Self>Trak$��Ledger is shared, but participants require privacy and governments require identity
reporting for Travel Rule compliance. Solution is to use bonded and licensed fiduciaries as
trusted intermediaries for Regulatory and Contractual Compliance and Certainty��Regulatory
needs – Transactions to be regulated – Identities of the parties must be linked to a
transaction and known by a fiduciary as intermediary so as to Comply with Banking and
Securities Laws��Transactions must be authenticated and identities verified with 2FA,
biometrics, etc. Identities are Protected by Distributed Ledger Technologies �The use of
cryptography is overseen by licensed and bonded fiduciaries engaged as trusted
intermediaries supervising all suspect transactions for compliance, and are essential to these
regulated processes, thereby fulfilling commercial and regulatory expectations so as to
reduce transaction risks and to increase voluntary adherence to the Rule of Law��Provisions
relative to a regulatory tool kit quoted from OK HB 3279 (DLTAO ACT): �I. Every distributed
ledger technology asset offering ecosystem shall be designed in such a way that it becomes
a public utility for tax remittance, payment, custodian and product or service information
transfer and revenue sharing, and to become autonomous and disintermediated by using
programmable smart contracts managed by algorithms and encoded with relevant state,
county, local, tribal, or federal laws and regulations for taxation, accounting, escrows,
remittances, custody tracking, and other applications.�J. The initial use case shall be a
distributed ledger technology asset offering ecosystem which shall provide an integrated
logistics, payment, and tax recording and remittance system for the use of government taxing
and regulatory authorities that will also provide for customer payment and custody transfers
using escrow and smart contracts for services and goods at the retail and wholesale levels
among producers, merchants, and customers.�K. Every distributed ledger technology or
fintech vendor shall tailor its technology to comply with and conform to the state's records
laws and regulations for dispute resolution, evidentiary proceedings, money services
businesses, tax revenue remittance, tax reporting, securities, and escrow.�
AN OPTIMAL USE CASE FOR A CBDC DESIGN AND LAUNCH TESTING: Banking the
Indigenous Unbanked:� �A minimum viable product for a payment and data network using
specially configured ATM’s and distributed ledger technologies for the Indigenous unbanked,
should have the least regulatory friction and the greatest government and financial community
support. The social media responses, focus groups, mainstream media and legislative
feedback from introducing HB 3279 (OK DLTAO Act) indicate that everyone wants cash left
in the system. �A cash dispensing and acceptance capability launch will require physical
locations with ATM branches which take and dispense cash. The long-term objective is a
CBDC design. We might have created a minimum viable product (MVP) design for a CBDC
in the initial DLTAO Act phase. However, this phase involving building out ATM’s and their
physical branch locations should further reveal the optimal design and deployment which will
allow cash transactions.�According to the paper, a CBDC should be “... privacy-protected,
intermediated, widely transferable, and identity-verified.” The intermediated model
suggested in the paper would best facilitate INTR’s existing privacy and identity-management
design frameworks, allow innovation; and reduce disruptions to U.S. monetary policy. “(T)he
private sector would offer accounts or digital wallets to facilitate the management of CBDC
holdings and payments.”�If the unbanked are to be included financially, cash transactions can
be cleared and settled automatically but reports must be filed with OCC or FinCEN of cash
transactions exceeding $10,000 (daily aggregate amount), and suspicious activities reported
that might signal criminal activity (e.g., money laundering, tax evasion)�INTR would ideally be
in a position, vis-a-vis, state operations to support state and federally chartered commercial
banks by making deposits in those institutions for backing the CVC with bank assets. The
proposed OK DLTAO Act provides for deposits for asset backing in local banks. Moreover,
tribal government or international financial operations would best be backed by the Federal
Reserve issued CBDC. The proposed bill received the greatest group opposition from the
State Banking Department at the last hour before the matter was to go to the Oklahoma
Senate Commerce Committee vote. � This opposition emerged after multiple attempts were
made over several years to inform the state agency concerning the nature of OK HB 3279
and those engaged in its advocacy. �Relevant provision from OK HB 3279 (DLTAO ACT):�
“(M)aking cashless purchasing easier with biometric identification and database matching and
providing for the availability of easy digital asset payment systems, which can convert cash,
bank debit account or checking deposits, and credit cards to a digital asset representing as
a programmable digital dollar,”�
CBDC?
WITHOUT THE FEDERAL RESERVE OVERSEEING CBDC DEVELOPMENT, THERE

WILL BE CONTINUOUS NONCOMPLIANT EXPERIMENTS, WHICH VIOLATE
SECURITIES LAWS AND THE TRAVEL RULE�Devolving Down to Economic Anarchy� •
Bitcoin -- “Nakamoto” (2008) https://bitcoin.org/bitcoin.pdf� • Ethereum -- Buterin (2013)
https://ethereum.org/en/whitepaper/ �• Ripple/XRP -- Schwartz (2014)
https://www.allcryptowhitepapers.com/rip ple-whitepaper/ � �SEC Regulatory Framework�•
Former Chairman Jay Clayton (Dec 2017): https://www.sec.gov/news/public-statement/
statement-clayton-2017-12-11 �• Former Director William Hinman (June 2018):
https://www.sec.gov/news/speech/speech-hi nman-061418 �• FinHub created (Oct 2018):
https://www.sec.gov/news/press-release/201 8-24�TurnKey Jet: Jonathan Ingram,
https://www.sec.gov/divisions/corpfin/cf-noaction/20 19/turnkey-jet-040219-2a1.htm� �Valerie
Szczepanik of FinHub (March 2019): Explained at South by Southwest (SXSW) in Austin,
Texas that the SEC's existing securities laws may regulate certain types of stable coins: “So,
you can call it a utility coin, call it a stable coin, call it a consumptive coin or some other coin.
We're going to look at the characteristics. What's the economic reality? What's happening
with the transactions involving the coin? And we'll give it the label that it deserves under the
law.” https://decrypt.co/5940/secs-crypto-czar-stablecoins-might-be-violatin g-securities-laws
10� • Libra (June 2019) -- Zuckerberg -- “The world truly needs a reliable digital currency and
infrastructure that together can deliver on the promise of ‘the Internet of Money.’” �• Pocketful
of Quarters (July 25, 2019) -- Jonathan Ingram,
https://www.sec.gov/corpfin/pocketful-quarters-inc-072519-2a1� • Renegade Panda (July 30,
2019) -- Commissioner Hester Peirce,
https://www.sec.gov/news/speech/speech-peirce-073019 �Optimal Distributed Ledger
Technology Ecosystem Designs.� Any of INTR’s progress has been evolving in an iterative,
trial and error process. The project always proceeds with law first and combines law practice
and distributed ledger technologies. We use behavioral code, law code, and computer code
combined and methodologically resolved. Use case, law, and tech combined is one way of
expressing this neural, jural, computational parallel to fact-law-tech. Proceeding with law first
has proven to be a superior method for legally compliant and socially beneficent technologies
designs. INTR began to develop and design this law first technique, fitting it within regulatory
parameters for DLT and AI, with the guidance and oversight of local, federal, state, and tribal
government agencies.�Beginning in 2018, INTR entered the securities sandbox with the U.S.
Securities and Exchange Commission, Corp Fin/Fin Hub, and the Oklahoma Department of
Securities. This four-year process has culminated in INTR, giving optimally compliant,
distributed ledger technology demonstration presentations to the SEC Corp Fin/Fin Hub staff
attorneys. SEC Director Valerie Szczepanik attended INTR's most recent DLT demo. which
was held on February 23rd, 2022. �Inspiration and invitation for SEC Engagement- In July
2019, SEC Commissioner Hester Peirce gave her “Renegade Panda'' speech in Singapore,
calling for cross-border regulation of digital assets and announcing the formation of Fin Hub.
As Commissioner Peirce observed: "In the U.S., we often refer to our states as 'laboratories
of democracy.' Instead of implementing all policy at the federal level, different states try
different policies. Policies that prove to be highly effective can serve as models for federal
level policy and can inform the development of policy by the other states."�SEC
Commissioner’s Call to Action: INTR immediately sent a letter to SEC Fin Hub for
consideration in helping to realize a “Renegade Panda” solution. INTR has four years of
sandbox designs with government agencies and close, iterative coordination with Fin Hub,
under the watchful guidance of Corp Fin lawyers and staff. Now INTR suggests it should
continue striving for an optimal cross-jurisdictional regulatory and institutional response, such
as Commissioner Peirce envisioned and with the Federal Reserve’s input. INTR has
attempted to foster innovation and competition by borrowing the best DLT practices and by
incubating new regulatory evolutions within the State of Oklahoma and Oklahoma Indian
Country, two of the “laboratories of democracy.”�

Relevant provision from OK HB 3279 (DLTAO ACT): � A. For convertible virtual currency
designed for the state and its political subdivisions, an entity operating an ecosystem, and
any entity affiliated with the ecosystem operator, shall not use any proceeds from the
convertible virtual currency sales, purchases, transfers, or conversions to develop the
ecosystem, applications, or platforms referenced by this act, which shall be fully developed
and operational at the time of any convertible virtual currency transfer or conversion.�B. The
convertible virtual currency designed for the state and its political subdivisions shall be
exclusively marketed to customers and immediately usable for its intended function or
functions at the time it is purchased, sold, transferred, or converted and not with any potential
for the increase in the market value of the convertible virtual currency.�C. The ecosystem
operator shall restrict sales, purchases, transfers, and conversions of the convertible virtual
currency to ecosystem digital wallets only.�D. Any customer who holds convertible virtual
currency designed for the state and its political subdivisions may only transfer or convert the
convertible virtual currency at the face value of One United States Dollar ($1.00) per
convertible virtual currency to another ecosystem-approved wallet.� �E. The operator of the
ecosystem shall sell, purchase, transfer, and convert the convertible virtual currency designed
for the state or its political subdivisions at a price of One United States Dollar ($1.00) per
convertible virtual currency throughout the life of the program, and each convertible virtual
currency shall represent an ecosystem obligation to convert or transfer the convertible virtual
currency at a value of One United States Dollar ($1.00) per convertible virtual currency.�F.
Convertible virtual currency designed for the state or its political subdivisions shall be fully
backed by United States dollar assets deposited in United States financial institutions.�G.
Selling, buying, converting, or transferring convertible virtual currency designed for the state
or its political subdivisions for less or more than One United States Dollar ($1.00) shall be
technologically impossible.� � A. Digital contracts or smart contracts used by this state and its
political subdivisions shall be programmed for accountancy, identity, regulatory permissibility,
and legality, credit verification, product location, work performance, customer status,
agreements, and various relationships as conditions precedent to escrowed funds release.�B.
Smart contracts shall track performance from inception to completion and legally satisfy the
release from escrow, which initiates a convertible virtual currency transfer.�C. The ecosystem
network provided for the benefit of state agencies, political subdivisions, and tribal-level
entities on a voluntary basis shall be controlled and regulated by an electronic funds transfer
system interchange.�D. Anyone who interacts with the ecosystem shall have a digital identity
and wallet which shall be a precondition to initiating a convertible virtual currency transfer.�E.
Any transfer of convertible virtual currency shall be in accordance with the Travel Rule as
defined in Section 4 of this act.�F. Customers shall agree with a conspicuous electronic
signature declaring that they are acquiring the convertible virtual currency for a consumptive
purpose and not as an investment, nor with an expectation that the convertible virtual
currency shall earn profits based upon the activities and efforts of third parties.�G. Convertible
virtual currency functionality shall always be associated with a digital contract, which shall
determine the terms of how, when, where, and to whom any convertible virtual currency is
transferred or converted by an ecosystem operator.�H. Before any transfer, purchase, sale, or
conversion of convertible virtual currency is finalized, the customer shall first enter decision
tree terms to show mutuality of consent between customers.�I. To form a smart contract or to
obtain any services from the ecosystem, customers in a supply chain must agree to terms
and fees for using the smart contract software, which may be established by the participating
state agency, political subdivision, or tribal entity and the ecosystem operator who provides
various services in exchange for the customer paying the fees to the ecosystem operator, as
set forth in a smart contract agreement for services rendered as determined between the
parties or by operation of the participating government agency, tribal entity, or political
subdivision.�J. Customers may purchase digital contracts and the negotiation of the charged
fee in another digital contract, which is the smart contract, escrow, and accounting tool that
determines the income going to the ecosystem operator for its services and that defines the
ecosystem operator-to-customer and any controlling law or regulation affect
Properly configured Distributed Ledger Technologies (DLT) have great promise as "truth
machines" to provide privacy and could help deal with federal, state, and tribal government
designs and regulation of a CBDC to prevent illicit financial activities. �Currently, there are
many controversies, illegalities, and abuses concerning cryptocurrencies and blockchains.
There have emerged from blockchain businesses a plethora of Ponzis, scams, and money
launderers. Securities status and Banking Secrecy Act legalities are proper concerns for
governments and their citizens. INTR’s goal is to combine the best existing legal and
managerial practices, and to operate in accordance with the European Union’s (EU)) General
Data Plan Regulation (GDPR). (“The request for consent shall be presented in a manner
which is clearly distinguishable from the other matters.”) It should be clear to any participant
what data processing activities are intended to be carried out, which grant the subject an
opportunity to consent to each activity, separately and individually.� � � �Relevant provision from
OK HB 3279 (DLTAO ACT) concerning how a CBDC could provide privacy to consumers
without providing complete anonymity and facilitating illicit financial activity?�: 3)�holding down
compliance costs and allowing legal transactions at a lower price point, and�(4)�increasing
logistical velocity and improving quality and quantity in supply chains by reducing delivery
time, increasing specific product availability, and facilitating predictive, just-in-time production,
processing, and merchandising,�d.�enhancing the stability of any legal market by:�(1)�using the
cashless, electronic fund transfer of digital assets for all transactions between all parties
within the specified community, including employees, to maximize micropayment capabilities
and to create a maximally productive and legally adherent business community,�(2)�reporting
shrinkage and lost product in the supply chain at any point and identifying
culprits,�(3)�complying with the Anti-Money Laundering and Know Your Customer provisions of
the federal Bank Secrecy Act, and the Suspicious Activity Reports of the United States
Treasury Financial Crimes Enforcement Network,�(4)�increasing data collection for business
owners and policymakers at a lower cost, thus reducing administrative compliance overhead,
and�(5)�automating periodic data reporting volume and tracking data from point-of-sale
systems, thereby providing policymakers and regulators with real-time data that predicts black
market emergence,�e.�generating statistical data for decision-making by:�(1)�allowing designated
agency or authorized political subdivision personnel to create surveys and order data
sets,�(2)�allowing digital asset micropayments to obtain survey reporting participation, thereby
reinforcing research efficacy,�(3)�establishing and collecting Health Insurance Portability and
Accountability Act of 1996 (HIPAA) compliant, self-reported, voluntary patient reviews, and
correlating and tracking specific products for their physiological and psychological efficacy,
thus enabling patients, health care providers, labs, processors, and producers to better
calibrate and correlate their related choices, and�(4)�giving policymakers empirically based and
broad statistical samples based on surveys,�f.�optimizing the remittance, accounting, and
reporting of tax revenue by:�(1)�tabulating financials for businesses and regulators and making
data available to business owners and government agencies in real time and on a
need-to-know basis, while using data privacy best practices,�(2)�allowing regulators to calculate
business or activity density, estimate illegal activity, and model taxation rates to compete with
and minimize black market activities,�(3)�monitoring consumer price sensitivity to allow for
appropriate modification of taxation policy, and�(4)�keeping retail prices below the threshold
consistent with best practices for preventing illegal activities,�
Relevant provisions from OK HB 3279 (DLTAO ACT): �BE IT ENACTED BY THE PEOPLE OF
THE STATE OF OKLAHOMA:�SECTION . NEW LAW A new section of law to be codified
in the Oklahoma Statutes as Section 12001 of Title 74, unless there is created a duplication in
numbering, reads as follows:�This act shall be known and may be cited as the "Oklahoma
Distributed Ledger Technology Assets Offering Act".�SECTION . NEW LAW A new
section of law not to be codified in the Oklahoma Statutes reads as follows:�The Legislature
makes the following findings concerning the necessity for the Oklahoma Distributed Ledger
Technology Assets Offering Act:�1. For the immutable recording of identity, contracts, and
payments, as well as protocols that govern the production, distribution, and consumption of
goods and services in a digital economy, distributed ledger technology assets offering
ecosystems afford the most efficient, effective, and transparent method of achieving such,
necessitating a proactive strategy to create, maintain, and advance the regulation of Internet
activities;�2. Especially configured and government-regulated blockchain and distributed
ledger technologies have emerged as critical solutions to many Internet crimes, cyberwarfare,
tax revenue collection, product diversion, state and non-state acts of terrorism, money
laundering, foreign interference with information technologies, and corruption problems; and
in view of such, the State of Oklahoma has the potential to foster an Internet of regulation and
to create new forms of decentralized platforms and distributed applications that have
advantages over the current centralized Internet platforms and applications;�3. The State of
Oklahoma has the power and opportunity to realize its potential to become a global leader
and a center for companies and entrepreneurs that seek to utilize distributed ledger
technology systems to power blockchain- and distributed-ledger-technology-based business
models, social media, and governmental systems, all of which will drive innovation within the
state and give the State of Oklahoma an economic opportunity and global advantage to
develop local economies, create new jobs, and export locally developed technologies;�4.
Oklahoma's many sovereign entities and governmental units are not optimally integrated or
united in law enforcement, Internet regulation, or first-responder efforts. Distributed ledger
technology assets offerings, digital contracts, and immutable identities can enable precise
financial auditing and the coordinated tracking and tracing of the activities of criminal
elements, cyber incursions, and organized crime, making it more difficult for these criminal
and terrorist elements to be able to hide their activities. These same capabilities will
augment, facilitate, and integrate the protection of public safety and can immediately help first
responders to identify and meet the needs of the citizenry, especially in victim identification,
triage, treatment, search-and-rescue functions during natural and man-made disaster events,
such as pandemics, tornadoes, and floods, and also will assist in detecting and preventing
foreign military cyber and signals intelligence operations;�
CBDC should be designed as legal tender. �Exceptions could be made to limit the types of
purchases and the nature of debtor payment could be controlled so that a CBDC would be
difficult to use for crime. �Moreover, having the capability of converting the cash transaction to
a commodity using a CVC has ramifications for long term capital gains versus short term. The
interface between the convertibility of the asset from currency to commodity seems to have
broader ramifications for fiduciaries and financial products. INTR presented the following
donative and commodity use case to the SEC Fin Hub on 2/23/2022.�Dona>Trak$: Digital
contract that tokenizes a tribal casino customer’s donative tax deduction on interest earned
on assets escrowed in an attorney trust account. Interest is derived from storing a prepaid
value using the convertible virtual currency (CVC) Trak$ as a commodity and as an IRS
501c3 donor credit recorded as a digital contract (Dona>Trak$). Escrowed by a tribal casino
on behalf of a customer. Escrow services offered by the Oklahoma Bar Foundation (OBF) for
member attorneys as a tax advantaged transaction deposited into a trust account pursuant to
the OBF program known as- Interest on Lawyers Trust Accounts (IOLTA). The donor
acquires the CVC or Trak$ as part of a distributed ledger technology assets offering, with the
CVC used as the digital dollar avatar backed by U.S. dollars in U.S. banks. �Such an
arrangement might drive funds into public purposes and establish reserves and equities
which lend to financial stability.�� Although the DLTAO Act was written agnostic of any cannabis
use case, when it was revealed that the ecosystem had particular relevance to regulate
cannabis, a groundswell of interest ensued. The bill became highly controversial and motives
surfaced relating to those engaged in tax evasion (one estimate was that as much as
$100,000,000 in cannabis taxes were not being paid). �OK HB3279 benefits: �promotes
consumer protection and community development through consumer-focused supervision
and examination,� � research and analysis of emerging consumer issues and trends, �
�community economic development activities, � �and administration of consumer laws and
regulations�
NO. �Beginning in April 2019, INTR submitted interest bearing digital dollar designs to state
and federal securities regulators as part of no action applications. We proposed a token
which would attract more holders and it would be backed by assets like Treasuries and
blue-chip stocks so that it could gain in value to offset inflation. Both securities agencies, the
S.E.C. Fin Hub and Oklahoma Department of Securities, rejected a digital dollar design
which accrued in value or had an ROI. �Why not? The basic CBDC should not compete with
bank interest rates. The CBDC can be an avatar for the U.S. dollar and operate like cash and
not pay interest, otherwise it could compete with not only banks but US Gov’t securities. The
U.S. digital dollar’s value should be neutral and truly reflective of the U.S. cash dollar design,
A key function of the Federal Reserve is to “...facilitate U.S. dollar transactions and
payments…” The U.S. dollar does not pay interest and a CBDC that pays interest works
more like a bond or stock than it does a currency. �How? The measure of the dollar’s
purchasing value as it relates to the CPI and inflation calculator is a natural function of fiat
currency inflation and the Federal Reserve has a predictable mechanism for the control of
inflation by adjusting interest rates. �Other CBDC related products which accrue interest
could be devised which involve tokenization to increase access. For example, treasury bonds
could be tokenized and purchase of treasuries is an existing strategy of many to hedge
against inflation. To give greater access to the retail sale of treasury bonds by tokenization
and DLT asset offerings could be a product that the U.S.T. and the Federal Reserve might
consider. � The root idea behind INTR’s internet of regulation approach is to not disturb
existing systems, like the cash dollar or digital dollar systems. INTR would support the
Federal Reserve function of fostering a payment and settlement system safely and efficiently
through services to facilitate transactions and payments.� Coders and data architects should
be led by lawyers and behavioral economists so as to mimic existing economic systems in
order to achieve stability, control, and to avoid disruption. The best practice in designing
virtual economic systems is to have the major premise be the fact/law/policy and the minor
premise is the tech. This can be described as a neural-jural-computational process and
consists of migrating the relevant law(s) onto the Internet and embedding the law codes as
neural networks and only then does one apply the computer coding. �
There should be considered a limitation on transaction packet size to thwart hacking and
identity theft.
INTERCONNECTION AND TRUST MECHANISMS �An intermediary firm can operate as an

interconnecting trust mechanism that defines where the immutable state of the interconnected
transactions is recorded. With hash-lock and time-lock mechanisms, that immutable state is
recorded on the ledgers with the interconnected transactions. This is similar to bridging and
sidechain approaches, where, however, some nodes (the verifiers-INTR) need to view and/or
process the whole or a subset. This intermediary is referred to as a DLTAO ecosystem
operator in accordance with OK HB 3279. �Relevant provision from OK HB 3279 (DLTAO
ACT): �5. The unalterable recordings of revenue collection and product tracking, by any state,
county, or local governmental unit or agency of the State of Oklahoma, should occur through
an ecosystem operator that has had prior successful participation in state and federal
no-action processes pertaining to securities registration, exemption, regulation, and
compliance requirements for persons or entities using distributed ledger technology assets
offerings. In addition, an ecosystem operator should have a demonstrated capacity to assist
in the incubation of distributed ledger utilities to avoid any monopolies forming;��6. The
anticipated benefits of the development and use by the State of Oklahoma and its political
subdivisions or agencies thereof of an integrated logistics, information, custodial, and
payment tracking ecosystem, which uses hack-resistant distributed ledger technologies and a
convertible virtual currency include:�a.�keeping customers' and any government citizens' or
licensees' data secure and confidential, but available to ecosystem participants, stakeholders,
regulators, and law enforcement communities on a transparent and need-to-know basis, as
allowed or required by relevant laws or agreements between cooperating customers,
persons, or parties, �13. "Distributed ledger technology asset offering agent" means a person
who is appointed by a distributed ledger technology asset offering ecosystem operator and
who is a licensed attorney with at least fifteen (15) years of law practice, in good standing with
the Oklahoma Bar Association, and is appointed as counsel by the submission of entry of
appearance documentation to the Oklahoma Department of Securities, the Office of
Management and Enterprise Services, and the Oklahoma Tax Commission;�17. "Distributed
ledger technology asset offering ecosystem operator" or "ecosystem operator" means a
person or entity which employs at least one licensed Oklahoma fiduciary as its principal agent
and which has general supervisory control over the subject ecosystem and provides to its
customers smart contracts for electronic funds transfers, tax remittances, contract forms,
escrow, custody, and goods and services tracking that become obligations for customers to
pay the ecosystem operator in accordance with the terms of a designated and immutable
smart contract;� Prior to the acceptance by a state, county, or local governmental unit or
agency of a vendor's bid or offer to contract, the prospective ecosystem or distributed ledger
technology asset offering ecosystem operator shall show proof of having successfully
participated in a state or federal convertible virtual currency and payment gateway
demonstration and no-action processes. and�2. Demonstrate the proper procedural protocol
publicly or privately in a test of the distributed ledger technology to the satisfaction of the state
or federal securities regulators' compliance review processes.�D. Preferences should be given
to ecosystem operator applicants which have obtained United States Treasury, United States
Department of Agriculture, and government charters, or certification as community
development entities or credit programs which have maintained such status for at least ten
(10) years and which are headed by licensed Oklahoma fiduciaries.� A distributed ledger
technology asset offering ecosystem operator shall:�1. Conduct its business with honesty and
integrity;�2. Communicate with all stakeholders in a fair, clear, and non-misleading manner;�3.
Conduct its business with due skill, care, and diligence;�4. Identify and manage any conflict of
interest that may arise;�5. Have effective arrangements in place for the protection of
stakeholders' and customers' funds;�6. Have effective administration arrangements;�7. Maintain
all of its systems and security access protocols to appropriate international standards; and�8.
When an ecosystem operator maintains a website and is required to make public disclosures,
make public any information or provide notice to the public on its website as required by law.�
Yes. �The storage of value on a digital wallet is not dependent upon the Internet and can be
transferred to another customer's wallet using currently available technologies. To avoid
double spending, INTR’s Trak$ can be transferred in this way using a QR code, bar code,
RFID or NFC capability. The transferred value could be held in the wallet and redeemed for
cash or deposited into a commercial bank account at the leisure of the customer. Then at
such time as Internet services are resumed. The redemption or further transfer can occur., or
any other required regulatory reporting can be accomplished. �
sale? If so, how?
Yes. �Use Case- Bank handling letters of credit(LOC) �Bank wants to offer DLT services to a
wider range of clients including startups �Currently constrained by costs & the time to
execute�DLT provides common ledger for letters of credit �Allows bank and counter-parties to
have the same validated record of transaction and fulfillment�But if dispute arises, then there is
recourse based upon relevant choice of law or by agreement�Increase speed of execution
(less than 1 day) �Vastly reduced cost�Dispute resolution and reversible transactions�Licensed
and Bonded Escrow Agents and Fiduciaries Oversee Compliance��Use Case - Corporate Debt/
Bond�Bank Holding a Corporate Debt Would Like to �What?�Pay vendors quickly for
transactions validated by the client �Allow the corporate client to see the payment is
made�Provide government with oversight of the process�Reverse Transaction Based Upon
Fraud or Mistake��How?�Distributed Ledger Technology provides a common ledger for
recording the corporate debt/bond,�Available to bank, corporate client, vendors and
government �INTR provides mechanisms for consensual settlement and dispute
resolution��Benefits?�Speeds up vendor payments bigger net discounts�Eliminates risk and
accelerates decision making�Owning bank can spread the cost across each
market�Transaction reversibility and Travel Rule adherence �Fiduciaries ensure contractual and
regulatory expectations��Relevant provision from OK HB 3279 (DLTAO ACT): � I. To form a
smart contract or to obtain any services from the ecosystem, customers in a supply chain
must agree to terms and fees for using the smart contract software, which may be established
by the participating state agency, political subdivision, or tribal entity and the ecosystem
operator who provides various services in exchange for the customer paying the fees to the
ecosystem operator, as set forth in a smart contract agreement for services rendered as
determined between the parties or by operation of the participating government agency, tribal
entity, or political subdivision.�J. Customers may purchase digital contracts and the negotiation
of the charged fee in another digital contract, which is the smart contract, escrow, and
accounting tool that determines the income going to the ecosystem operator for its services
and that defines the ecosystem operator-to-customer and any controlling law or regulation
affecting or specifying contractual relationships.�K. The digital contract or smart contract shall
determine how the ecosystem operator compensates the customer and how the customer
compensates the ecosystem operator for goods and services. The contents of a digital
contract may be determined by reference to existing terms administered by the ecosystem
operator as an agent of a participating state agency, tribe, or political subdivision, but any
participation by a tribal entity must be voluntary and as part of a memorandum of
understanding or other appropriate agreement as provided by this act or by federal, state, or
tribal law. A digital contract and payment to the customer by the ecosystem operator may
include, but is not limited to, customer efforts as measured by volume of transfers or
conversions, payment for the customer filling out a survey, or a referral fee for additional
customers brought in by a customer. Services the ecosystem operator may provide to
customers for which the operator is compensated may include such matters as identification,
transfers, conversions, agreements, escrow, consent, due diligence, custody, taxation, or
other matters.�L. The ecosystem operator shall extract fees pursuant to the controlling law,
regulation, agency rule, or digital contract account's defined terms, debited from the
business's or customer's bank account as payment for the ecosystem operator's services.
The defined terms for those services shall be found in the digital contract accounts or the
relevant law or regulation affecting the specific agency, political subdivision, or tribal entity.�M.
The ecosystem operator's debits and credits shall be entered onto the immutable ledger in
the form of a customer credit or debit to their digital wallets or corresponding bank accounts
using automated clearinghouse services and application program interface.�N. Compensation
shall be paid to or by the ecosystem operator in United States dollars. Any fees the
ecosystem operator charges for transfers, conversions, escrows, tax remittances, or other
services performed in assisting in the execution of customers' transactions, or digital
contracts entered between customers, shall be based upon a negotiated fee schedule, which
shall be calculated, accounted for, tracked, and collected from any transaction between the
customers, and a deduction shall be debited from the customers' accounts pursuant to an
agreement as memorialized in the smart contract account. Such fees charged may differ
depending on matters such as the type of transaction…”�
An effective CBDC will be interoperable to securely and efficiently interconnect diverse

distributed ledgers.�Interoperability between closed and permissioned digital silos becomes of
paramount importance for guaranteeing a universal, unified, and non-segregated realm for
distributed ledgers and multiple interoperable ledgers. An interledger solution is one that
allows the interconnection of multiple ledgers, with flexibility for supporting innovation.
Interledger approaches include 1) atomic cross-chain transactions, 2) transactions across a
network of payment channels, 3) the W3C Interledger Protocol (ILP), 4) bridging, 5)
sidechains, and 6) ledger-of-ledgers.�All nodes have some level of access to the ledger. Trust
is based on explicit factors in the system (e.g., transactions happening between the peers,
behavior observed in the network), or on other implicit elements, such as business
relationships between peers or any other criteria relating to the underlying application
supported by distributed ledgers. All nodes agree to a protocol that determines the “true state”
of the ledger at any point in time. The application of this protocol is sometimes called
“achieving consensus.” �Unlike Ripple/XRP, Bitcoin, or Nxt, which are anonymous, and are
inflexible unless forking, have no asset backing, do not protect their users, and are
completely without recourse: the optimal ecosystem uses escrows as digital contracts and
has central authorities who are licensed and bonded professionals and fiduciaries.
Fiduciaries can intermediate to resolve disputes based on the Rule of Law and can reverse
transactions if there are unlawful or mistaken actions taken by permissioned customers.�The
bridging approaches consider a consensus mechanism, such as Proof-of-Stake, Delegated
Proof-of-Stake, or Proof-of-Authority among the bridge nodes used. The current, optimal
interoperable capability involves Proof of Trust and can include paying fees to these bridging
nodes for the interconnection services that they provide. Our pilot project in Oklahoma
engages counties, schools, businesses, churches and individuals to cooperate as regulated
nodes. � https://www2.aueb.gr/users/vsiris/publications/p30_interledger_approaches.pdf �One
DLT project INTR modeled on that received a no action reaction from the SEC is ,
Pocketful-of-Quarters. The developer sought to bridge the gaming and blockchain worlds by
creating digital tokens that can be used interoperably on a virtual platform. The
cross-platform currency also offered greater flexibility to developers over how they build,
distribute, monetize and cross-market games, ultimately empowering them to create rich, new
multiplayer experiences without losing creative and economic control to publishers. This
gaming interoperability design can be easily repurposed to be used to interconnect disparate
and siloed ecosystems or platforms with a CBDC.
https://www.prnewswire.com/news-releases/pocketful-of-quarters-officially-launches-with-first
and-only-compliant-and-interoperable-video-game-currency-for-the-metaverse-301485928.ht
ml
https://www.sec.gov/divisions/corpfin/cf-noaction/2019/pocketful-of-quarters-inc-072519-2a1-i
ncoming.pdf “(T)here will be a correlation between the purchase price of Quarters and the
market price of accessing and interacting with Participating Games; and PoQ will market and
sell Quarters to gamers solely for consumptive use as a means of accessing and interacting
with Participating Games” .https://www.sec.gov/corpfin/pocketful-quarters-inc-072519-2a1
�INTEROPERABILITY-The transfer can be facilitated by a third user, or fiduciary connector
(INTR), maintaining accounts in both ledgers A and B. The idea is that the sender will transfer
value to the connector in ledger A, and the connector will transfer the respective amount to
the recipient in ledger B. Transferring and/or trading (or exchanging) value between chains.
With transfer, value is portable, i.e., it moves from one ledger to another. This is achieved by
having the ‘‘original’’ value (tokens) in the first ledger frozen or locked (or destroyed) and the
‘‘new’’ value (tokens) in the other ledger unfrozen or unlocked (or created). With trade (or
exchange), value (tokens) on different ledgers are exchanged simultaneously, i.e., the
transactions that move value (tokens) from one account to another on the same ledger occur
in an atomic manner. Unlike the transfer of value, the exchange of value is dependent on the
exchange rate of the tokens being traded.�Transferring information or generic messages
between chains, in a way that the information or messages on different chains are
cryptographically linked. This is particularly useful in Internet of Things (IoT) applications to
immutably record information on multiple ledgers in a manner that satisfies some dependency
conditions and can allow correlation of custody, payment, service, information, and product
transfer events.�
CBDC?
Existential problems of climate catastrophe and economic collapse caused by technological

innovations should be central in affecting design and policy choices related to any CBDC.
�Our existential future is likely dependent upon financial and technological innovations to
reduce atmospheric pollution that should be undertaken now. Over 11,000 scientists and
numerous global assemblies warn that planet Earth is facing a climate emergency without
enough being done. An immense increase of scale in endeavors to conserve our biosphere is
needed to avoid untold suffering due to the climate crisis. Climate change threats are a
national and a global security emergency analogous to a world war.�Melting the ice caps may
prove to be the greatest existential threat in the history of human civilization, which should
make all other lesser concerns secondary. But the burden of reversing CO2 buildup is falling
on the nations disproportionately. If it will protect the planet’s largest rainforest, Brazil wants
to be paid upfront, but the United States wants to see results first before it advances funds.
The United States and Brazil differ on how to finance. The Brazilian government has
presented a new official goal for fighting deforestation in the Amazon -- a first for the
administration of President Jair Bolsonaro. But critics say it’s hardly enough, yet for reversing
the accelerating destruction of the Amazon rainforest, finding the needed money might be the
best bet for solving the climate-driven and anthropogenic extinction problems. President
Biden has mobilized his entire administration to take on the challenges from every angle in a
strategic, integrated way. Slowing climate change will require a comprehensive and
coordinated “all hands on deck” approach.�All Hands on Deck- The Creation of the Bank of
England, a Financial Technology and Organizational Precedent for Dealing with Existential
Crisis . �England’s crushing 17th Century defeat by France, the dominant naval power,
became the catalyst for England rebuilding itself into a global power. However, the ability to
construct this fleet was hampered both by a lack of available public funds and the low credit
of the English government in London. To induce subscription to its bond program , the Bank
of England was incorporated.�The assets that England needed to rebuild its navy, so as to
defend itself from France were there all along. It took the right law, organization, and a new
financial technology, capable of attracting the needed capital, in order to have the needed
funds pour into the coffers of the Bank of England .�On 5-8-2022, the global cryptocurrency
market cap was $1.57 Trillion. Without intrinsic value or backing from defined assets, the
investor network which upholds cryptocurrencies’ value could divest. The value could all go
away tomorrow, without even a bankrupt asset to be divided to show for it. But what if this
1.57T market cap could be repurposed using a new species of final technologies and
organization and invested to save the rainforests? � With a coordinated marketing campaign
and a regulatory effort, funds derived from digital assets could be used for purchasing the
rain forests from Brazil in order to help deal with global climate change. �A Malthusian analysis
concerns itself mostly with variables of food and geography. Published studies identify
atmospheric pollution as the primary reason for an impending collapse and implicitly
indicates more carbon sequestration and a negative carbon footprint as the cures. Recall that
rationing and engaging the populace in an all-out defensive effort are the techniques of total
war. �President Biden is correct that an all hands approach is needed to combat and reverse
CO2 pollution. Ration cards in the WWI and WWII were a crude example of a track and trace
management of the supply chain, implemented to ensure that the maximum effort was
expended on the war effort. A platform using DLT and AI with incentives and disincentives,
and one that protects legal and civil rights, could be deployed, one that can be quickly
activated as the policy makers and population obtain the resolve to intervene in order to
reverse what seems an inevitable environmental collapse. At the very least a rationing
approach is an insurance policy to de-risk and reduce the likelihood of such an impending
collapse.� �
benefits of a CBDC?
A STATE REGULATED DISTRIBUTED LEDGER TECHNOLOGY MANDATE (Oklahoma

Distributed Ledger Technology Asset Offering “DLTAO” ) �Fiduciaries and Trusts- Contrary to
the design of the thousands of “trustless” crypto projects, in a Proof of Trust (PoT) system
peers can express opinions about each other and declare trust links within the system. The
distributed ledger is the system of redundant recordings or validator nodes for an individual,
institution, business or government entity, i.e. records asset and information transfer
between participants. The ideal ecosystem design does not run with a Proof-of-work (PoW)
system like Bitcoin or a Proof-of-stake (PoS) system like Nxt. Instead, transactions rely on a
consensus protocol design in order to validate account balances and transactions on the
system. The consensus design works to improve the integrity of the system by preventing
double-spending. Trusted community institutions run the validator nodes. �Trak$- A
programmable digital dollar and a smart contract ecosystem combining identity, consent and
reversibility (Self>Trak$, Smar>Trak$ and Hoop$). Trak$>ATM LLC, is an INTR subsidiary,
which will supply physical kiosks for digital asset processing, payment, and tracking; a
public-private owned, cooperative utility providing electronic fund/info transfer, tax
remittances, payment, and tracking for the unbanked. INTR has designed and tested
multiple minimum viable products in the SEC Fin Hub sandbox. INTR was well on its way in
April 2022, to having a state law passed which would help clarify for the Oklahoma, federal
and tribal regulators a system for government’s using the managerial services and software
of vendors supplying digital ledger technologies assets offering services, or as a fiduciary and
agent of the state taxation authority to collect taxes.
https://tulsaworld.com/news/state-and-regional/govt-and-politics/oklahoma-house-looks-to-cry
ptocurrency-technology-to-address-medical-marijuana-issues/article_4215457a-a483-11ec-8
768-b3141dd2772b.html Oklahoma House Bill 3279, the Oklahoma Digital Ledger
Technology Asset (DLTAO) Act passed overwhelmingly in the House with a 75 to 12
bipartisan vote. http://www.oklegislature.gov/BillInfo.aspx?Bill=hb3279&Session=2200
�Relevant provision from OK HB 3279 (DLTAO ACT):O. Tax remittances, withholding,
reporting, or payments shall be determined by reference to the smart contract, and the
ecosystem operator shall collect the same as an agent on behalf of individuals, businesses,
government regulators, and taxing authorities.� Regulatory Compliance as Key Performance
Indicators� 2001- INTR granted federal charter intertribal agency rights.�2002- INTR certified as
Community Development Entity by US Treasury.�2016- INTR launched Trak$ ATM as a pilot
project.�2018- INTR General Counsel’s Office participated in drafting legislation for the state of
Oklahoma Legislature’s Joint Committee on Medical Marijuana.�2019- March- Ok Tax Comm
authorized INTR to collect cannabis taxes.April 2019- SEC releases “Turnkey Jet” No Action
INTR-OPT filed an application for No Actionwith OK Dept. of Securities (ODS).�Aug 2019-
ODS referred INTR to SEC, then entered Corp Fin/Fin Hub No Action sandbox.�Dec 2021-
INTR presented an informal distributed ledger tech (DLT) demo to Jonathan Ingram, author of
SEC Turnkey Jet no action position.�Feb 2022- INTR presented a formal DLT demo to SEC
director Valerie Szczepanik.�Mar 2022- INTR General Counsel drafted Oklahoma Distributed
Ledger Technology Assets Offering (DLTAO) Act which passed with overwhelming bipartisan
support (75 to 12).�Apr 2022- HB 3279 assigned to Senate Commerce Committee, Chair
accepted for hearing and vote. � INTR’s government affairs team withdrew HB 3279 from
contention after the banking and cannabis lobby posed questions. The bill was withdrawn
from the Senate Commerce Committee where it had been assigned.
https://www.news9.com/story/62311237b446e00188a70be7/oklahoma-lawmakers-look-to-cre
ate-nations-first-marijuana-banking-system The goal now is to involve more the banking,
technology, and legal communities and integrate the lessons learned and reintroduce the
modified DLTAO Act in the next session.
https://www.cannabisbusinesstimes.com/article/does-oklahoma-have-answer-to-cannabis-ba
nking/ �INTR was modeled after the Federal Reserve and to be a part of its system. INTR has
a duty to conform to the Federal Reserve’s policies. Within the intertribal statute controlling
INTR it states: “Upon determination by the Indigenous Nations Tribal Reserve Board that
such action will be useful for the purposes for which it is established…it may… become a
member of the Federal Reserve System.”��
_________________________________________________________________________
Industry
Other: Intertribal Community Development Entity
Country
State
Oklahoma
Email
Indigenous Nations Tribal Reserve (INTR): Regulatory Compliant Fiduciary and Intermediary
--The INTR ecosystem was designed with permissioned and interconnected, interoperable
“hoops” for use by citizens, governments and industries to support and enhance “... monetary
stability, financial stability, and a safe and efficient payment system.” INTR has potential
public and private benefits as a payment and logistical utility incubator. INTR was founded in
2001 and has pursued an Indian Country pilot project using distributed ledger technologies
(DLT) for financial inclusion of Native Americans and their surrounding low-income
communities beginning in 2016. We were persuaded by Vice Chair Lael Brainard’s numerous
presentations on Indian Country and digital assets to contact the Federal Reserve. The
gracious and kind responses from Vice Chair Brainard, the Minneapolis Center for Indian
Country Economic Development and Megan Cruz of the St Louis Branch came swiftly and all
directed INTR to respond to the CBDC paper with comments./// “Provide benefits to
households, businesses, and the overall economy that exceed any costs and risks” INTR’s
comments report on a multi-year evolution of designing and de-risking a minimum viable
product for an Indian Country Credit Program using DLT. We have jumped through many
hoops designing, then positioning to launch an optimal regulatory system for using DLT in
order to provide for integration, interoperability and cross-jurisdictional cooperation. The free
market encourages the creation of the right intermediaries. Non-monopolistic and existing
legal and financial systems work best: licensed fiduciaries using regulated banks are a
natural choice for trusted intermediaries. ///“Yield such benefits more effectively than
alternative methods” Analogous to a digital form of money, INTR’s ecosystem consists of a
programmable convertible virtual currency (CVC) (Trak$), a digital contract escrow account
(Smar>Trak$), and a DLT identity account (Self>Trak$) combination, with transaction
reversibility and alternate dispute resolution or arbitration (Hoop$).///“Complement, rather
than replace, current forms of money and methods for providing financial services.” Instead of
joining the thousands of unregulated token launches, INTR sought the direct guidance from
the SEC Fin Hub/Corp Fin beginning in 2019, and from the Oklahoma Department of
Securities (ODS) and Tax Commission (OTC) beginning in 2018. INTR found its design in
these agencies’ legal and fintech sandboxes (digital dollar, tribal casino, industrial hemp,
medical marijuana regulation and taxation, 501c3 donations, poker chip payment avatars,
social media, cooperatives, and real estate/construction contracts ). ///“Protect consumer
privacy”: INTR has designed, tested, and demonstrated with the guidance of state, tribal, and
federal tax and securities regulators, a payment and tracking incubator, which uses a
convertible virtual currency (CVC) and digital contracts within interoperable and
permissioned “hoops” for identity protection. These interconnected circular designs might be
useful to the Federal Reserve in evaluating an interoperable ecosystem for a CBDC, which
extends and complements “...existing means of payment..” We have experimented and
adjusted the design to reflect tribal, state and federal securities, tax, and financial
regulators’ guidance on “...how to ensure a CBDC would preserve monetary and financial
stability…” ///Protect against criminal activity: We have observed others' attempts to create
both regulated and unregulated convertible virtual currency (CVC) designs (Libra, Ethereum,
EOS, Ripple, Bitcoin, USDT, USDC, etc.) INTR vetted and incorporated at least a dozen
foreign jurisdictions’ DLT regulatory designs on “...how to preserve the privacy of citizens and
maintain the ability to combat illicit finance.” We have employed and investigated many tech
providers, cryptocurrencies, and tested multiple DLT minimum viable products and designs.
Much of what we found does not protect, rather the intended effect of these developers has
been to disrupt and to destroy long-standing legal relationships./// Broad support from key
stakeholders: After working out the details of a payment and tracking system within the ODS
and SEC FinHub sandboxes, INTR introduced HB 3279, the Oklahoma Distributed Ledger
Technology Assets Offering (DLTAO) Act with bipartisan passage in the OK House (75-12).
We withdrew the bill from OK Senate consideration for reintroduction next session. We
determined that the stakeholders need to determine and better integrate the banking and
Federal Reserve perspectives. (Throughout these comments, we will quote from the
language of OK HB 3279, as the proposed law bears on the issues raised for comment.)�
An iterative and alternative approach exploring a CBDC’s potential benefits in a pilot project:
banking the unbanked in Indian Country could positively achieve the Federal Reserve’s
CBDC goals. ///INTR’s charter goals overlap those of the Federal Reserve as we seek:
“...how a CBDC could improve the safe and efficient domestic payments system.” INTR’s
charter assignment is to “define and safeguard” an Indian Country fintech integration so as to
bank the unbanked by using U.S. bank depositories for asset backing of the CVC. INTR
proposes to use its CVC and DLTAO ecosystem designs to help demo and explore a United
States CBDC design for potential properties, costs and benefits beginning with the Idigenous
unbanked in Central Oklahoma. ///A Federal Reserve CBDC would be a liability of the Federal
Reserve, but commercial banks might not receive enough support were a CBDC only
administered by the Federal Reserve. Thus, a CBDC by definition would tend to replace,
rather than complement current forms of money and methods for providing financial services.
INTR’s intermediary approach with the unbanked will allow commercial banks to be used as
depositories for purchasing and backing a CBDC. ///"Move fast and break things!” was the
mantra of early tech innovators, but the federal securities regulators, financial agencies, and
the U.S. Congress have pushed back against lawless tech firms. Benefitting the public
interest and the Federal Reserve’s remit is INTR’s charter and statutory mandates. There are
potentially great social and economic benefits in moving deliberately in accordance with the
Rule of Law in order to protect the U.S. dollar and a stable monetary policy using DLT. Our
evolutionary and iterative designs involve studying DLT failures. Regulatory agencies helped
INTR’s securities, organizational, and tech designs; now we seek the Federal Reserve’s
regulatory guidance./// In the DLTAO Act, HB 3279 drafts, we embedded federal securities
laws into Oklahoma law through reference to INTR’s no action features and by inclusion of
the officially announced SEC no action positions. The reasons for proposing HB 3279 are:
to provide a DLTAO regulatory framework, to thwart financial and criminal corruption, to
collect taxes, to incubate DLT, and for financial inclusion of the unbanked.///A larger purpose
is served by adapting a law first approach to distributed ledger technology (DLT) regulations.
Typically, DLT transactions are immediately validated and cleared, then settled shortly
thereafter, automatically without a central authority. A more optimal DLTAO ecosystem
design should modify this unregulated and un-permissioned protocol with recourse,
reversibility, and dispute resolution. Our design optimization calls for closed, but
permissioned, and interoperable “Hoop$”, and uses a licensed fiduciary (INTR) and a stable
token, Trak$, which is a programmable U.S. dollar avatar backed by deposits in U.S. and/or
state financial institutions.///The regulatory design strategy is intended to establish an optimal
economic development utility incubator for solving universal and intractable problems such
as dispute resolution, financial inclusion, tax evasion, and money laundering. To evolve such
a universal capability one would do well to seek chaotic use cases that are complex, and
then overlay a minimum viable legal, organizational and DLT product design solution. If the
design involves a digital asset, the next step is the SEC Fin Hub sandbox. The
multi-jurisdictional, tribal casino, cannabis/hemp regulation and tax remittance,
cryptocurrency, and money laundering problems appeared to us as the worst regulatory
problems with the most difficult DLT design challenges. We have sorted out the factual,
legal, organizational, and tech details for several of those use cases and formally
demonstrated the same by written submissions and live presentations in multiple instances to
SEC Corp Fin/Fin Hub staff and to the SEC Fin Hub director, Valerie Szczepanik, on
February 23rd, 2022.///Such an ecosystem as described in the OK DLTAO Act and
presented to the SEC would “...not favor any policy outcome…” but could enable federal,
tribal and state governments collaboration and cooperation in creating a CBDC minimum
viable product for testing. An Indian Country pilot might provide a study for more efficient
underwriting, tax, securities, and financial compliance using DLT for custody, payment,
services and product/services tracking. Working together, multiple jurisdictions could integrate
a federal, state, local, and tribal compliant digital payment landscape for the future, while
fitting within the current SEC securities’, UST, OCC, FinCEN, FDIC, and Federal Reserve
monetary policies’ envelopes.�
inclusion?
Banking the Indigenous Unbanked: “MENDING THE HOOP”�A pre-Columbian economic
system, which some Natives referred to as the “Hoop” was long established before being
broken. There are over 33,000 enrolled tribal members living in Central Oklahoma. Many are
unbanked and nearly all live outside of their tribal jurisdictions. Indigenous Nations Digital
Villages or “Indigivils” can be launched using a combination of tablets, apps, and special
ATM’s to bank the unbanked in remote places. Indigivils first launch is as a pilot project in
Oklahoma and Cleveland Counties, which are not tribal lands included in the McGirt v.
Oklahoma decision, but are rural, suburban and urban, former “Unassigned Lands.”///INTR
has authority to operate a Credit Program here in accordance with its tribal charter and the
Oklahoma Indian Welfare Act. Both the statute and charter require INTR to use U.S. and
state banks as depositories. INTR and its community partners proposed the Oklahoma
Distributed Ledger Technology Assets Offering (DLTAO) Act, which was on its way to
passage in April 2022. If the law passed, it could clarify for Oklahoma and its tribal
governments a federal securities and BSA compliant system for governments using DLTAO
vendors to bank the unbanked.///In articulating the collaboration of tribal and state in the
proposed DLTAO Act, we have welcomed the leadership and words of support coming from
the Federal Reserve's Vice Chair, Lael Brainard. She appeared and presented before our
Oklahoma tribal communities in October 2021 at Oklahoma City: ``As Native communities
tackle these impediments to financial inclusion, collaborative efforts across a range of
public-sector, private-sector, and nonprofit organizations can be helpful. As part of our
mission to build a strong, inclusive economy, the Federal Reserve has a role to play in
supporting economic growth and financial inclusion in Native communities.”
https://www.federalreserve.gov/newsevents/speech/brainard20211013a.htm
COLLABORATION TO HELP THE UNBANKED BY EXPLORING CBDC
DESIGNS--Electronic Fund and Information Transfer System Interchange: Integrate a federal,
state, local, and tribal compliant digital payment landscape for the future, while fitting within
the current US Treasury, SEC, and Federal Reserve monetary and securities policies. Define,
integrate, and safeguard Indian Country distributed ledger technologies (DLT) within U.S.
financial institutions to design, demonstrate, and explore a United States central bank digital
currency (CBDC) creation for potential properties, costs, and benefits.
https://www.federalreserve.gov/newsevents/speech/brainard20220218a.htm///Distributed
Ledger Technologies(DLT) to Bridge the Indigenous Financial and Digital Divides Over 16
percent of Indigenous households were unbanked in 2019—three times higher than the
national average. Unbanked Poor Problems: credit readiness, homebuyer education, lack of
local bank branches, trust property as collateral, Native small businesses,financial literacy,
and personal financial management skills. FinTech Solutions: Digital Assets Processors,
Distributed Ledger Technologies, Smartphones/Tablets, Trak$ ATM’s, and Internet Access
Indigenous Nations Digital Villages or Indigivils: Public/private sector cooperative associations
can grow distributed ledger technology (DLT) networks for financial and digital inclusion by
using available resources: technologies, organizations, institutions, and existing laws. Indian
Country fintech utility incubator for financial and digital “…collaborative efforts across a range
of public sector, private-sector, and nonprofit organizations…” �Colonization Begins (1492):
Breaking the Hoop� • Indian Removal Act (1830): Remove Indians to Indian Territory
(eventually becoming Oklahoma).� • Worcester v. Georgia (1832): Marshall Court upheld
Indigenous self-governance rights, but Jackson refused to enforce and began the Trail of
Tears, forced removal of tribes to Indian Territory (Oklahoma). • Curtis Act (1898): Congress
limits tribal self-governance in Oklahoma and takes away their lands again. �Reversing
Colonization & Mending the Hoop �• OIWA (1936): Resurrected Oklahoma Indigenous powers
of self-governance. �• INDIAN SELF-DETERMINATION ACT (1975): Rejuvenated tribal
governments by rejecting and countering previous bad policies. �• IGRA (1988): Regulates
Indian gaming to rejuvenate Indian Country. � • POTUS (1999-2022): Presidential Memos on
Tribal Consultation by Clinton, Bush, Obama, and Biden.� • NABDA (2000): Encourages
public/private partnerships and innovation.� • McGirt v. US (2021): SCOTUS rules that portions
of Oklahoma remain Indian land.
Regulatory strategies demand that law code comes first and predetermines computer code.�
DLT can be designed with or without a central authority and by individuals or entities with no
basis to trust each other. These networked back, decentralized, trustless systems like
Bitcoin are intrinsically anarchic, unstable, and are not the needed design solutions for a U.S.
CBDC, which could help with price stability or implementing U.S. monetary policies.
Unregulated cryptocurrencies present legal and economic challenges of fluctuation,
anonymity, and money laundering. At a minimum, the ideal ecosystem enforces regulated
and stable transactions acceptable to the SEC, FinCEN, OCC, FDIC, and the Federal
Reserve, thus requiring reversibility and trusted intermediaries or fiduciaries for AML, KYC,
BSA. INTR acts through licensed and bonded fiduciaries and can serve in a central
intermediary role determining who can set up a node and confirm transactions in a given
permissioned ecosystem. �The more INTR was guided by regulators in its DLTAO design
criteria, the more we explored an emerging concept which we discovered had gradually
broadened into an “internet of regulation”. These regulatory strategies demand that law code
comes first and legal code must dominate computer code. �When the Oklahoma DLTAO Act
was introduced in the OK House, there was immediate pushback against anyone suggesting
monopolistic tech or government centralized control. OK HB 3279 has been influenced by
public opinion and numerous corrections were made to satisfy critics. In addition to the HB
3279, multiple local, state, federal and tribal governments and agencies, including the SEC
and branches of the state of Oklahoma government, have been contributing to our iterative
DLTAO design evolution.�The optimal CBDC scenario appears to indicate an ecosystem of
trust. The ideal CBDC could require either directed or independent intermediaries serving as
licensed fiduciaries or trustees in the public interest overseeing distributed ledger offerings.
DLT ecosystems should have as their prime motivation, the reinforcement of
trustworthiness and incorruptibility within the financial system. Using DLT to support and to
effectively implement monetary policy in the pursuit of the Federal Reserve’s
maximum-employment and price-stability goals, the following criteria are central
considerations. �To Create Value or Issue Bank or Asset Backed Assets not Simply
Vanishing Virtual or Network Backed Assets��To Transfer and Record Value or the Ownership
of Real Assets Based Upon Immutable Identity and Authenticated Agreements �To Reverse
Those Transfers of Value or Ownership of Tangible and Intangible Assets and to Resolve
Disputes Between Parties to Transactions��To Allow Owners of Assets to Exercise Certain
Rights and Duties Associated With Ownership, and to Record the Exercise of Those Rights
and Duties in Accordance With Choice of Law, Venue, and Jurisdiction�� PROOF OF WORK
CONSENSUS DOES NOT SERVE THE NEEDS OF A CBDC�INTR exercised its capability to
act as a fintech utility incubator and intermediary with the recent passage of HB 3279 in the
OK House (DLTAO Act). The CVC sandbox designs demoed to the SEC for casino and
cannabis tax remittance and AML were a starting point for drafting the DLTAO Act. The
ecosystem was designed with a programmable digital dollar and flexible logistical and
payment tracking features tied to custodian/product/event/services. The purpose of selecting
the use cases of federally legal industrial hemp and state-lawful, medical cannabis taxation
and regulation in Oklahoma, was to find the most confused regulatory challenge for which to
design a DLT solution. Then INTR took the best parts of that rigorous design to organize a
regulatory solution in the form of a state statute integrating federal, state, and tribal laws. �
�We experimented and found it impossible for certain tech designs to conform to the law. A
U.S. CBDC using a decentralized cryptocurrency ecosystem and a trustless “Proof of Work”
consensus mechanism like Bitcoin uses would negatively “... affect the Federal Reserve’s
ability to effectively implement monetary policy.”��Poor Proof of Work Performance
(Millisecond) Transactions�Scalability is an often- cited concern of current blockchain
technology. Bitcoin handles 7 TPS on average with greatly delayed confirmation times.
Ethereum is much faster with 25 TPS. which pales in comparison to the 1,700 TPS achieved
by VISA.�� Trustless Proof of Work Wastes Energy �The current estimated annual electricity
consumption of Bitcoin is estimated at 40.5 TWh, an amount above the annual consumption
of entire countries, such as Argentina or Belgium.��
stability?
The choice of CBDC designs will determine its negative or positive effects on financial
stability �Insofar as it is possible, the goal should be to preserve the financial stability status
quo with the use of any CVC or CBDC using DLT. The problem is that many of the
cryptocurrency projects are disruptive and were particularly designed to compete or interfere
with the U.S. central bank. The Federal Reserve promotes stability and reduces systemic
risks and has done a remarkably good job if one looks at the challenges presented in 2008.
Those features which helped to overcome that near meltdown should be bolstered and not
disrupted. The advent of the first cryptocurrency project was Bitcoin in 2008 and it was
specifically directed as an alternative to fiat currency and central banking. A CBDC with
optimal design capabilities would dampen the effects of these disrupters and facilitate
positive stability to counteract negative imbalances through:��Monitoring- The ideal registry,
custodian, and events correlations allow the granular monitoring of specific dollars, banks,
people, locations, transfers, and industries and could be done in real time. Supervision at
Micro and Macro Levels- Within an optimal DLTAO ecosystem, if a given commodity or
service price level becomes unstable in a region, for example the price of asparagus grown
in Central Valley, that event could be identified immediately, correlated and reported to the
party with the need to know. This would reinforce the Fed’s capability and “...promotes the
safety and soundness of individual financial institutions and monitors their impact on the
financial system as a whole, while helping to serve the Federal Reserve Charter purposes of
“... consumer-focused supervision and examination, research and analysis of emerging
consumer issues and trends.” � Cryptocurrencies and Stable Coins Provide No Consumer
Protection and Have High Run Risk: Most cryptocurrencies and stable tokens are not asset
backed nor do they have guaranteed or audited deposits. The regulated stable coin must be
asset backed within insured U.S. depository institutions, which are subject to appropriate
supervision and regulation, at the depository institution and the holding company
level.��Payment System Risk: Wallet providers would be subject to appropriate federal
oversight. In addition, any DLTAO ecosystem operator as supervisor of CVC issuance must
meet appropriate risk-management standards. The state of Oklahoma legalization of medical
cannabis presented regulatory chaos and provided the opportunity for us to design a
complete DLT solution for an intractable regulatory problem. The DLTAO Act was drafted to
reduce the chaos of an unregulated cannabis supply chain. Engagement in US and Abroad-
The design elements could be broadened to include most other logistical and payment
challenges. �Relevant provision from OK HB 3279 (DLTAO ACT): �AS INTRODUCED��An Act
relating to technology; creating the Oklahoma Distributed Ledger Technology Assets Offering
Act; providing legislative findings; defining terms; authorizing state to develop and use
distributed ledger technologies; requiring certain software; requiring certain security and legal
requirements; permitting use of certain smartphone applications; authorizing additional uses;
requiring certain software features; limiting use of convertible virtual currency; prescribing
value of convertible virtual currency; providing requirements for digital and smart contracts;
requiring a digital identity and wallet; prohibiting use of convertible virtual currency as an
investment; requiring use of decision tree; requiring separate digital contract to charge a fee;
prescribing procedure for payment; requiring ecosystem operator to collect fees and taxes;
requiring ecosystem operator to perform certain accounting; prescribing method of
compensation; requiring ecosystem operator to provide certain information; requiring the
Oklahoma Tax Commission and Office of Management and Enterprise Services to make
certain determinations; authorizing the Tax Commission, Office of Management and
Enterprise Services, Secretary of State, and State Treasurer to promulgate rules; allowing
payment of taxes from certain sources; permitting Tax Commission to appoint agents for
certain purposes; creating requirements for distributed ledger technology asset offering
agents; creating requirements for distributed ledger technology asset offering ecosystem
operators; authorizing the Tax Commission and Office of Management and Enterprise
Services to promulgate rules to validate transactions; allowing certain contracts; allowing use
of memorandums of understanding; allowing certain working groups; prohibiting certification
as a class action;��
The ideal CBDC is not disruptive, but it harmonizes with existing regulatory and financial systems.
Why is digital currency not widely used? lack of regulation unstable value slow transactions
stigma from use in money laundering, tax evasionAn optimal CBDC can be used readily as digital
contracts built to protect users and the law. regulated and protected by international, federal, state,
and tribal laws always worth $1 and 100% reserve backed in US banks or as a CBDC closed loop
payment mechanisms that are fast, efficient, and safe prevents cybercrime, money laundering, and
tax evasion Regulated Convertible Virtual Currency Reportedly, cyber criminals will steal over
$6 Trillion in 2021, exceeding the GDP of Japan. $USD backed, smart money can be used with a
mobile app or card so as to prevent cybercrime and to collect taxes. Profits should fund sustainable
community development in rural, low-income, and minority communities. Problem: US agencies
struggle with digital currencies as governments, consumers, and businesses seek a safe, usable option.
Solutions: select regulators opinions on CVC’s- An optimal design is that of a regulated, reserve
backed, stable digital currency intelligently built to protect privacy, law, people and their rights.“…our
current payment mechanisms, domestically and internationally, have inefficiencies, those
inefficiencies are the things that are driving the rise of bitcoin.” - Former SEC Chairman Clayton
(November 23, 2020). Despite its recent rise, Bitcoin price volatility, slow transactions, lack of
regulation, high power needs, and illicit activity problems, all limit mainstream use. Satoshi Nakamoto
ushered in the “Internet of Value”. Mark Zuckerberg advocated for the adoption of Libra and Diem for
his personal “Internet of Money”. A CBDC with an intelligent design could incubate an “Internet of
Regulation” capable of reinforcing legal norms. “…(P)rivate digital currency-based payment
systems could magnify concerns surrounding illicit activity and consumer risk” - Federal Reserve
Governor Brainard (February 5, 2020). CBDC transactions must be federally reported. The
ecosystem operator as a fiduciary and intermediary, ideally collects and remits taxes as it flags and
reports illicit activities. Encryption and distributed ledger technology eliminate common consumer
vulnerabilities “…if we really think the crypto world is going to be part of the future, it needs to come
inside of the public policy envelope.” -Gary Gensler, SEC Chairman (October 15, 2018) According to
US Treasury Secretary Janet Yellen “…regulating institutions that deal in bitcoin...is certainly
important.” (February 18, 2021)REGULATORY COMPLIANT DLT From 2016 to 2021, the
United States Securities and Exchange Commission has provided guidelines for intelligently designing
a CVC. SEC Commissioner Hester Peirce observed that “...the opportunity to develop multiple
regulatory solutions to a single problem, is a feature of the United States’ own system” (July 30,
2019)USE CASE | LAW | ORGANIZATION | TECH● Since 2016, INTR has modeled, developed,
and integrated legal, DLT, and organizational sandbox designs to explore a programmable digital
dollar design for the unbanked, casino, cannabis, and crypto use cases in order to comply with federal,
tribal, and state policies.● INTR is designed to enable federal, tribal, and state governments to
efficiently ensure legal, tax, securities, and financial compliance by using DLT for custody, payment,
and product/services/event tracking solutions.● We adjust our ethical, organizational, and tech
protocols with key agencies' guidance and regulations, to include S.E.C. Fin Hub, the U.S.T. and the
Federal Reserve. Proof of Trust and an Optimal CBDC. The Proof of Trust protocol permits
transactions to be gathered sequentially and recorded; cryptographically validated in chronological
order; and allows the resulting ledger to be accessed by different servers. Unlike the thousands of
unregulated, network-backed crypto- INTR has not issued any tokens or posted a public web site and
has only moved value in the SEC sandbox in demos before Corp Fin and Fin Hub staff lawyers and
directors. INTR’s “Trak$” CVC design will be asset backed and guaranteed in U.S. banks.
The Rule of Law is the socio-economic tool lacking from multiple unregulated
cryptocurrencies. �Traditional societal, legal, and economic values seem almost everywhere
absent from the Internet. These simple tools that we use every day to enforce the law,
protect consumer vulnerabilities and to attain the benefit of any contractual bargain are
identity, informed consent, and dispute resolution. Any CBDC connected to the Internet
should be a regulatory design with effective and reliable protections for consumers. If there
is to be a CBDC with correlative rights and duties, a new covenant for an American version of
World Wide Web citizenship should be explored. If we begin migrating deliberately onto the
Internet our brick-and-mortar laws, customs, and norms, the substantive and procedural laws
should be easily enforceable within and throughout the Internet by regulators and the courts.
�Many of these promoters and developers with their thousands of unregulated
cryptocurrencies have announced a goal of anarchy calculated to disrupt and dominate
domestic and international economic relationships. The stated purpose has been to replace
economic reality and trust with a trustless virtual society whose starting point is computer
code. While in the SEC sandbox, INTR was guided to create the basic tools for mitigating
adverse impacts of a CBDC on the financial sector. Those tools do not begin with computer
code, but are customary, legal and inherent in our everyday lives within civil society and are
found in our legal codes and precedents. � Digital Contract to Verify Consent-
Smar>Trak$�Example: – Defines consent to agreement or contractual conditions under which
corporate bond transfer occurs and uses a decision tree for specifying agreed to
terms��Business Rules or Governing Laws Agreed to within any Contract are Entered upon a
Decision Tree and are Embedded in the Distributed Ledger & Executed with the Transaction
�Mutual Consent is Given by the Parties to the Agreement upon an Easy to Read Decision
Tree Format which is Verifiable and Signed �Encoded in Programming Language Reflects
the Consent of the Parties to the Enforceable Agreement, to Include Provisions for Breach,
ROI, Liquidation, and Bond Discharge Terms��Digital Contract to Verify Identity-
Self>Trak$��Ledger is shared, but participants require privacy and governments require identity
reporting for Travel Rule compliance. Solution is to use bonded and licensed fiduciaries as
trusted intermediaries for Regulatory and Contractual Compliance and Certainty��Regulatory
needs – Transactions to be regulated – Identities of the parties must be linked to a
transaction and known by a fiduciary as intermediary so as to Comply with Banking and
Securities Laws��Transactions must be authenticated and identities verified with 2FA,
biometrics, etc. Identities are Protected by Distributed Ledger Technologies �The use of
cryptography is overseen by licensed and bonded fiduciaries engaged as trusted
intermediaries supervising all suspect transactions for compliance, and are essential to these
regulated processes, thereby fulfilling commercial and regulatory expectations so as to
reduce transaction risks and to increase voluntary adherence to the Rule of Law��Provisions
relative to a regulatory tool kit quoted from OK HB 3279 (DLTAO ACT): �I. Every distributed
ledger technology asset offering ecosystem shall be designed in such a way that it becomes
a public utility for tax remittance, payment, custodian and product or service information
transfer and revenue sharing, and to become autonomous and disintermediated by using
programmable smart contracts managed by algorithms and encoded with relevant state,
county, local, tribal, or federal laws and regulations for taxation, accounting, escrows,
remittances, custody tracking, and other applications.�J. The initial use case shall be a
distributed ledger technology asset offering ecosystem which shall provide an integrated
logistics, payment, and tax recording and remittance system for the use of government taxing
and regulatory authorities that will also provide for customer payment and custody transfers
using escrow and smart contracts for services and goods at the retail and wholesale levels
among producers, merchants, and customers.�K. Every distributed ledger technology or
fintech vendor shall tailor its technology to comply with and conform to the state's records
laws and regulations for dispute resolution, evidentiary proceedings, money services
businesses, tax revenue remittance, tax reporting, securities, and escrow.�
AN OPTIMAL USE CASE FOR A CBDC DESIGN AND LAUNCH TESTING: Banking the
Indigenous Unbanked:� �A minimum viable product for a payment and data network using
specially configured ATM’s and distributed ledger technologies for the Indigenous unbanked,
should have the least regulatory friction and the greatest government and financial community
support. The social media responses, focus groups, mainstream media and legislative
feedback from introducing HB 3279 (OK DLTAO Act) indicate that everyone wants cash left
in the system. �A cash dispensing and acceptance capability launch will require physical
locations with ATM branches which take and dispense cash. The long-term objective is a
CBDC design. We might have created a minimum viable product (MVP) design for a CBDC
in the initial DLTAO Act phase. However, this phase involving building out ATM’s and their
physical branch locations should further reveal the optimal design and deployment which will
allow cash transactions.�According to the paper, a CBDC should be “... privacy-protected,
intermediated, widely transferable, and identity-verified.” The intermediated model
suggested in the paper would best facilitate INTR’s existing privacy and identity-management
design frameworks, allow innovation; and reduce disruptions to U.S. monetary policy. “(T)he
private sector would offer accounts or digital wallets to facilitate the management of CBDC
holdings and payments.”�If the unbanked are to be included financially, cash transactions can
be cleared and settled automatically but reports must be filed with OCC or FinCEN of cash
transactions exceeding $10,000 (daily aggregate amount), and suspicious activities reported
that might signal criminal activity (e.g., money laundering, tax evasion)�INTR would ideally be
in a position, vis-a-vis, state operations to support state and federally chartered commercial
banks by making deposits in those institutions for backing the CVC with bank assets. The
proposed OK DLTAO Act provides for deposits for asset backing in local banks. Moreover,
tribal government or international financial operations would best be backed by the Federal
Reserve issued CBDC. The proposed bill received the greatest group opposition from the
State Banking Department at the last hour before the matter was to go to the Oklahoma
Senate Commerce Committee vote. � This opposition emerged after multiple attempts were
made over several years to inform the state agency concerning the nature of OK HB 3279
and those engaged in its advocacy. �Relevant provision from OK HB 3279 (DLTAO ACT):�
“(M)aking cashless purchasing easier with biometric identification and database matching and
providing for the availability of easy digital asset payment systems, which can convert cash,
bank debit account or checking deposits, and credit cards to a digital asset representing as
a programmable digital dollar,”�
CBDC?


Relevant provision from OK HB 3279 (DLTAO ACT): � A. For convertible virtual currency
designed for the state and its political subdivisions, an entity operating an ecosystem, and
any entity affiliated with the ecosystem operator, shall not use any proceeds from the
convertible virtual currency sales, purchases, transfers, or conversions to develop the
ecosystem, applications, or platforms referenced by this act, which shall be fully developed
and operational at the time of any convertible virtual currency transfer or conversion.�B. The
convertible virtual currency designed for the state and its political subdivisions shall be
exclusively marketed to customers and immediately usable for its intended function or
functions at the time it is purchased, sold, transferred, or converted and not with any potential
for the increase in the market value of the convertible virtual currency.�C. The ecosystem
operator shall restrict sales, purchases, transfers, and conversions of the convertible virtual
currency to ecosystem digital wallets only.�D. Any customer who holds convertible virtual
currency designed for the state and its political subdivisions may only transfer or convert the
convertible virtual currency at the face value of One United States Dollar ($1.00) per
convertible virtual currency to another ecosystem-approved wallet.� �E. The operator of the
ecosystem shall sell, purchase, transfer, and convert the convertible virtual currency designed
for the state or its political subdivisions at a price of One United States Dollar ($1.00) per
convertible virtual currency throughout the life of the program, and each convertible virtual
currency shall represent an ecosystem obligation to convert or transfer the convertible virtual
currency at a value of One United States Dollar ($1.00) per convertible virtual currency.�F.
Convertible virtual currency designed for the state or its political subdivisions shall be fully
backed by United States dollar assets deposited in United States financial institutions.�G.
Selling, buying, converting, or transferring convertible virtual currency designed for the state
or its political subdivisions for less or more than One United States Dollar ($1.00) shall be
technologically impossible.� � A. Digital contracts or smart contracts used by this state and its
political subdivisions shall be programmed for accountancy, identity, regulatory permissibility,
and legality, credit verification, product location, work performance, customer status,
agreements, and various relationships as conditions precedent to escrowed funds release.�B.
Smart contracts shall track performance from inception to completion and legally satisfy the
release from escrow, which initiates a convertible virtual currency transfer.�C. The ecosystem
network provided for the benefit of state agencies, political subdivisions, and tribal-level
entities on a voluntary basis shall be controlled and regulated by an electronic funds transfer
system interchange.�D. Anyone who interacts with the ecosystem shall have a digital identity
and wallet which shall be a precondition to initiating a convertible virtual currency transfer.�E.
Any transfer of convertible virtual currency shall be in accordance with the Travel Rule as
defined in Section 4 of this act.�F. Customers shall agree with a conspicuous electronic
signature declaring that they are acquiring the convertible virtual currency for a consumptive
purpose and not as an investment, nor with an expectation that the convertible virtual
currency shall earn profits based upon the activities and efforts of third parties.�G. Convertible
virtual currency functionality shall always be associated with a digital contract, which shall
determine the terms of how, when, where, and to whom any convertible virtual currency is
transferred or converted by an ecosystem operator.�H. Before any transfer, purchase, sale, or
conversion of convertible virtual currency is finalized, the customer shall first enter decision
tree terms to show mutuality of consent between customers.�I. To form a smart contract or to
obtain any services from the ecosystem, customers in a supply chain must agree to terms
and fees for using the smart contract software, which may be established by the participating
state agency, political subdivision, or tribal entity and the ecosystem operator who provides
various services in exchange for the customer paying the fees to the ecosystem operator, as
set forth in a smart contract agreement for services rendered as determined between the
parties or by operation of the participating government agency, tribal entity, or political
subdivision.�J. Customers may purchase digital contracts and the negotiation of the charged
fee in another digital contract, which is the smart contract, escrow, and accounting tool that
determines the income going to the ecosystem operator for its services and that defines the
ecosystem operator-to-customer and any controlling law or regulation affect
Properly configured Distributed Ledger Technologies (DLT) have great promise as "truth
machines" to provide privacy and could help deal with federal, state, and tribal government
designs and regulation of a CBDC to prevent illicit financial activities. �Currently, there are
many controversies, illegalities, and abuses concerning cryptocurrencies and blockchains.
There have emerged from blockchain businesses a plethora of Ponzis, scams, and money
launderers. Securities status and Banking Secrecy Act legalities are proper concerns for
governments and their citizens. INTR’s goal is to combine the best existing legal and
managerial practices, and to operate in accordance with the European Union’s (EU)) General
Data Plan Regulation (GDPR). (“The request for consent shall be presented in a manner
which is clearly distinguishable from the other matters.”) It should be clear to any participant
what data processing activities are intended to be carried out, which grant the subject an
opportunity to consent to each activity, separately and individually.� � � �Relevant provision from
OK HB 3279 (DLTAO ACT) concerning how a CBDC could provide privacy to consumers
without providing complete anonymity and facilitating illicit financial activity?�: 3)�holding down
compliance costs and allowing legal transactions at a lower price point, and�(4)�increasing
logistical velocity and improving quality and quantity in supply chains by reducing delivery
time, increasing specific product availability, and facilitating predictive, just-in-time production,
processing, and merchandising,�d.�enhancing the stability of any legal market by:�(1)�using the
cashless, electronic fund transfer of digital assets for all transactions between all parties
within the specified community, including employees, to maximize micropayment capabilities
and to create a maximally productive and legally adherent business community,�(2)�reporting
shrinkage and lost product in the supply chain at any point and identifying
culprits,�(3)�complying with the Anti-Money Laundering and Know Your Customer provisions of
the federal Bank Secrecy Act, and the Suspicious Activity Reports of the United States
Treasury Financial Crimes Enforcement Network,�(4)�increasing data collection for business
owners and policymakers at a lower cost, thus reducing administrative compliance overhead,
and�(5)�automating periodic data reporting volume and tracking data from point-of-sale
systems, thereby providing policymakers and regulators with real-time data that predicts black
market emergence,�e.�generating statistical data for decision-making by:�(1)�allowing designated
agency or authorized political subdivision personnel to create surveys and order data
sets,�(2)�allowing digital asset micropayments to obtain survey reporting participation, thereby
reinforcing research efficacy,�(3)�establishing and collecting Health Insurance Portability and
Accountability Act of 1996 (HIPAA) compliant, self-reported, voluntary patient reviews, and
correlating and tracking specific products for their physiological and psychological efficacy,
thus enabling patients, health care providers, labs, processors, and producers to better
calibrate and correlate their related choices, and�(4)�giving policymakers empirically based and
broad statistical samples based on surveys,�f.�optimizing the remittance, accounting, and
reporting of tax revenue by:�(1)�tabulating financials for businesses and regulators and making
data available to business owners and government agencies in real time and on a
need-to-know basis, while using data privacy best practices,�(2)�allowing regulators to calculate
business or activity density, estimate illegal activity, and model taxation rates to compete with
and minimize black market activities,�(3)�monitoring consumer price sensitivity to allow for
appropriate modification of taxation policy, and�(4)�keeping retail prices below the threshold
consistent with best practices for preventing illegal activities,�
Relevant provisions from OK HB 3279 (DLTAO ACT): �BE IT ENACTED BY THE PEOPLE OF
THE STATE OF OKLAHOMA:�SECTION . NEW LAW A new section of law to be codified
in the Oklahoma Statutes as Section 12001 of Title 74, unless there is created a duplication in
numbering, reads as follows:�This act shall be known and may be cited as the "Oklahoma
Distributed Ledger Technology Assets Offering Act".�SECTION . NEW LAW A new
section of law not to be codified in the Oklahoma Statutes reads as follows:�The Legislature
makes the following findings concerning the necessity for the Oklahoma Distributed Ledger
Technology Assets Offering Act:�1. For the immutable recording of identity, contracts, and
payments, as well as protocols that govern the production, distribution, and consumption of
goods and services in a digital economy, distributed ledger technology assets offering
ecosystems afford the most efficient, effective, and transparent method of achieving such,
necessitating a proactive strategy to create, maintain, and advance the regulation of Internet
activities;�2. Especially configured and government-regulated blockchain and distributed
ledger technologies have emerged as critical solutions to many Internet crimes, cyberwarfare,
tax revenue collection, product diversion, state and non-state acts of terrorism, money
laundering, foreign interference with information technologies, and corruption problems; and
in view of such, the State of Oklahoma has the potential to foster an Internet of regulation and
to create new forms of decentralized platforms and distributed applications that have
advantages over the current centralized Internet platforms and applications;�3. The State of
Oklahoma has the power and opportunity to realize its potential to become a global leader
and a center for companies and entrepreneurs that seek to utilize distributed ledger
technology systems to power blockchain- and distributed-ledger-technology-based business
models, social media, and governmental systems, all of which will drive innovation within the
state and give the State of Oklahoma an economic opportunity and global advantage to
develop local economies, create new jobs, and export locally developed technologies;�4.
Oklahoma's many sovereign entities and governmental units are not optimally integrated or
united in law enforcement, Internet regulation, or first-responder efforts. Distributed ledger
technology assets offerings, digital contracts, and immutable identities can enable precise
financial auditing and the coordinated tracking and tracing of the activities of criminal
elements, cyber incursions, and organized crime, making it more difficult for these criminal
and terrorist elements to be able to hide their activities. These same capabilities will
augment, facilitate, and integrate the protection of public safety and can immediately help first
responders to identify and meet the needs of the citizenry, especially in victim identification,
triage, treatment, search-and-rescue functions during natural and man-made disaster events,
such as pandemics, tornadoes, and floods, and also will assist in detecting and preventing
foreign military cyber and signals intelligence operations;�
CBDC should be designed as legal tender. �Exceptions could be made to limit the types of
purchases and the nature of debtor payment could be controlled so that a CBDC would be
difficult to use for crime. �Moreover, having the capability of converting the cash transaction to
a commodity using a CVC has ramifications for long term capital gains versus short term. The
interface between the convertibility of the asset from currency to commodity seems to have
broader ramifications for fiduciaries and financial products. INTR presented the following
donative and commodity use case to the SEC Fin Hub on 2/23/2022.�Dona>Trak$: Digital
contract that tokenizes a tribal casino customer’s donative tax deduction on interest earned
on assets escrowed in an attorney trust account. Interest is derived from storing a prepaid
value using the convertible virtual currency (CVC) Trak$ as a commodity and as an IRS
501c3 donor credit recorded as a digital contract (Dona>Trak$). Escrowed by a tribal casino
on behalf of a customer. Escrow services offered by the Oklahoma Bar Foundation (OBF) for
member attorneys as a tax advantaged transaction deposited into a trust account pursuant to
the OBF program known as- Interest on Lawyers Trust Accounts (IOLTA). The donor
acquires the CVC or Trak$ as part of a distributed ledger technology assets offering, with the
CVC used as the digital dollar avatar backed by U.S. dollars in U.S. banks. �Such an
arrangement might drive funds into public purposes and establish reserves and equities
which lend to financial stability.�� Although the DLTAO Act was written agnostic of any cannabis
use case, when it was revealed that the ecosystem had particular relevance to regulate
cannabis, a groundswell of interest ensued. The bill became highly controversial and motives
surfaced relating to those engaged in tax evasion (one estimate was that as much as
$100,000,000 in cannabis taxes were not being paid). �OK HB3279 benefits: �promotes
consumer protection and community development through consumer-focused supervision
and examination,� � research and analysis of emerging consumer issues and trends, �
�community economic development activities, � �and administration of consumer laws and
regulations�
NO. �Beginning in April 2019, INTR submitted interest bearing digital dollar designs to state
and federal securities regulators as part of no action applications. We proposed a token
which would attract more holders and it would be backed by assets like Treasuries and
blue-chip stocks so that it could gain in value to offset inflation. Both securities agencies, the
S.E.C. Fin Hub and Oklahoma Department of Securities, rejected a digital dollar design
which accrued in value or had an ROI. �Why not? The basic CBDC should not compete with
bank interest rates. The CBDC can be an avatar for the U.S. dollar and operate like cash and
not pay interest, otherwise it could compete with not only banks but US Gov’t securities. The
U.S. digital dollar’s value should be neutral and truly reflective of the U.S. cash dollar design,
A key function of the Federal Reserve is to “...facilitate U.S. dollar transactions and
payments…” The U.S. dollar does not pay interest and a CBDC that pays interest works
more like a bond or stock than it does a currency. �How? The measure of the dollar’s
purchasing value as it relates to the CPI and inflation calculator is a natural function of fiat
currency inflation and the Federal Reserve has a predictable mechanism for the control of
inflation by adjusting interest rates. �Other CBDC related products which accrue interest
could be devised which involve tokenization to increase access. For example, treasury bonds
could be tokenized and purchase of treasuries is an existing strategy of many to hedge
against inflation. To give greater access to the retail sale of treasury bonds by tokenization
and DLT asset offerings could be a product that the U.S.T. and the Federal Reserve might
consider. � The root idea behind INTR’s internet of regulation approach is to not disturb
existing systems, like the cash dollar or digital dollar systems. INTR would support the
Federal Reserve function of fostering a payment and settlement system safely and efficiently
through services to facilitate transactions and payments.� Coders and data architects should
be led by lawyers and behavioral economists so as to mimic existing economic systems in
order to achieve stability, control, and to avoid disruption. The best practice in designing
virtual economic systems is to have the major premise be the fact/law/policy and the minor
premise is the tech. This can be described as a neural-jural-computational process and
consists of migrating the relevant law(s) onto the Internet and embedding the law codes as
neural networks and only then does one apply the computer coding. �
There should be considered a limitation on transaction packet size to thwart hacking and
identity theft.
INTERCONNECTION AND TRUST MECHANISMS �An intermediary firm can operate as an

interconnecting trust mechanism that defines where the immutable state of the interconnected
transactions is recorded. With hash-lock and time-lock mechanisms, that immutable state is
recorded on the ledgers with the interconnected transactions. This is similar to bridging and
sidechain approaches, where, however, some nodes (the verifiers-INTR) need to view and/or
process the whole or a subset. This intermediary is referred to as a DLTAO ecosystem
operator in accordance with OK HB 3279. �Relevant provision from OK HB 3279 (DLTAO
ACT): �5. The unalterable recordings of revenue collection and product tracking, by any state,
county, or local governmental unit or agency of the State of Oklahoma, should occur through
an ecosystem operator that has had prior successful participation in state and federal
no-action processes pertaining to securities registration, exemption, regulation, and
compliance requirements for persons or entities using distributed ledger technology assets
offerings. In addition, an ecosystem operator should have a demonstrated capacity to assist
in the incubation of distributed ledger utilities to avoid any monopolies forming;��6. The
anticipated benefits of the development and use by the State of Oklahoma and its political
subdivisions or agencies thereof of an integrated logistics, information, custodial, and
payment tracking ecosystem, which uses hack-resistant distributed ledger technologies and a
convertible virtual currency include:�a.�keeping customers' and any government citizens' or
licensees' data secure and confidential, but available to ecosystem participants, stakeholders,
regulators, and law enforcement communities on a transparent and need-to-know basis, as
allowed or required by relevant laws or agreements between cooperating customers,
persons, or parties, �13. "Distributed ledger technology asset offering agent" means a person
who is appointed by a distributed ledger technology asset offering ecosystem operator and
who is a licensed attorney with at least fifteen (15) years of law practice, in good standing with
the Oklahoma Bar Association, and is appointed as counsel by the submission of entry of
appearance documentation to the Oklahoma Department of Securities, the Office of
Management and Enterprise Services, and the Oklahoma Tax Commission;�17. "Distributed
ledger technology asset offering ecosystem operator" or "ecosystem operator" means a
person or entity which employs at least one licensed Oklahoma fiduciary as its principal agent
and which has general supervisory control over the subject ecosystem and provides to its
customers smart contracts for electronic funds transfers, tax remittances, contract forms,
escrow, custody, and goods and services tracking that become obligations for customers to
pay the ecosystem operator in accordance with the terms of a designated and immutable
smart contract;� Prior to the acceptance by a state, county, or local governmental unit or
agency of a vendor's bid or offer to contract, the prospective ecosystem or distributed ledger
technology asset offering ecosystem operator shall show proof of having successfully
participated in a state or federal convertible virtual currency and payment gateway
demonstration and no-action processes. and�2. Demonstrate the proper procedural protocol
publicly or privately in a test of the distributed ledger technology to the satisfaction of the state
or federal securities regulators' compliance review processes.�D. Preferences should be given
to ecosystem operator applicants which have obtained United States Treasury, United States
Department of Agriculture, and government charters, or certification as community
development entities or credit programs which have maintained such status for at least ten
(10) years and which are headed by licensed Oklahoma fiduciaries.� A distributed ledger
technology asset offering ecosystem operator shall:�1. Conduct its business with honesty and
integrity;�2. Communicate with all stakeholders in a fair, clear, and non-misleading manner;�3.
Conduct its business with due skill, care, and diligence;�4. Identify and manage any conflict of
interest that may arise;�5. Have effective arrangements in place for the protection of
stakeholders' and customers' funds;�6. Have effective administration arrangements;�7. Maintain
all of its systems and security access protocols to appropriate international standards; and�8.
When an ecosystem operator maintains a website and is required to make public disclosures,
make public any information or provide notice to the public on its website as required by law.�
Yes. �The storage of value on a digital wallet is not dependent upon the Internet and can be
transferred to another customer's wallet using currently available technologies. To avoid
double spending, INTR’s Trak$ can be transferred in this way using a QR code, bar code,
RFID or NFC capability. The transferred value could be held in the wallet and redeemed for
cash or deposited into a commercial bank account at the leisure of the customer. Then at
such time as Internet services are resumed. The redemption or further transfer can occur., or
any other required regulatory reporting can be accomplished. �
sale? If so, how?
Yes. �Use Case- Bank handling letters of credit(LOC) �Bank wants to offer DLT services to a
wider range of clients including startups �Currently constrained by costs & the time to
execute�DLT provides common ledger for letters of credit �Allows bank and counter-parties to
have the same validated record of transaction and fulfillment�But if dispute arises, then there is
recourse based upon relevant choice of law or by agreement�Increase speed of execution
(less than 1 day) �Vastly reduced cost�Dispute resolution and reversible transactions�Licensed
and Bonded Escrow Agents and Fiduciaries Oversee Compliance��Use Case - Corporate Debt/
Bond�Bank Holding a Corporate Debt Would Like to �What?�Pay vendors quickly for
transactions validated by the client �Allow the corporate client to see the payment is
made�Provide government with oversight of the process�Reverse Transaction Based Upon
Fraud or Mistake��How?�Distributed Ledger Technology provides a common ledger for
recording the corporate debt/bond,�Available to bank, corporate client, vendors and
government �INTR provides mechanisms for consensual settlement and dispute
resolution��Benefits?�Speeds up vendor payments bigger net discounts�Eliminates risk and
accelerates decision making�Owning bank can spread the cost across each
market�Transaction reversibility and Travel Rule adherence �Fiduciaries ensure contractual and
regulatory expectations��Relevant provision from OK HB 3279 (DLTAO ACT): � I. To form a
smart contract or to obtain any services from the ecosystem, customers in a supply chain
must agree to terms and fees for using the smart contract software, which may be established
by the participating state agency, political subdivision, or tribal entity and the ecosystem
operator who provides various services in exchange for the customer paying the fees to the
ecosystem operator, as set forth in a smart contract agreement for services rendered as
determined between the parties or by operation of the participating government agency, tribal
entity, or political subdivision.�J. Customers may purchase digital contracts and the negotiation
of the charged fee in another digital contract, which is the smart contract, escrow, and
accounting tool that determines the income going to the ecosystem operator for its services
and that defines the ecosystem operator-to-customer and any controlling law or regulation
affecting or specifying contractual relationships.�K. The digital contract or smart contract shall
determine how the ecosystem operator compensates the customer and how the customer
compensates the ecosystem operator for goods and services. The contents of a digital
contract may be determined by reference to existing terms administered by the ecosystem
operator as an agent of a participating state agency, tribe, or political subdivision, but any
participation by a tribal entity must be voluntary and as part of a memorandum of
understanding or other appropriate agreement as provided by this act or by federal, state, or
tribal law. A digital contract and payment to the customer by the ecosystem operator may
include, but is not limited to, customer efforts as measured by volume of transfers or
conversions, payment for the customer filling out a survey, or a referral fee for additional
customers brought in by a customer. Services the ecosystem operator may provide to
customers for which the operator is compensated may include such matters as identification,
transfers, conversions, agreements, escrow, consent, due diligence, custody, taxation, or
other matters.�L. The ecosystem operator shall extract fees pursuant to the controlling law,
regulation, agency rule, or digital contract account's defined terms, debited from the
business's or customer's bank account as payment for the ecosystem operator's services.
The defined terms for those services shall be found in the digital contract accounts or the
relevant law or regulation affecting the specific agency, political subdivision, or tribal entity.�M.
The ecosystem operator's debits and credits shall be entered onto the immutable ledger in
the form of a customer credit or debit to their digital wallets or corresponding bank accounts
using automated clearinghouse services and application program interface.�N. Compensation
shall be paid to or by the ecosystem operator in United States dollars. Any fees the
ecosystem operator charges for transfers, conversions, escrows, tax remittances, or other
services performed in assisting in the execution of customers' transactions, or digital
contracts entered between customers, shall be based upon a negotiated fee schedule, which
shall be calculated, accounted for, tracked, and collected from any transaction between the
customers, and a deduction shall be debited from the customers' accounts pursuant to an
agreement as memorialized in the smart contract account. Such fees charged may differ
depending on matters such as the type of transaction…”�
An effective CBDC will be interoperable to securely and efficiently interconnect diverse

distributed ledgers.�Interoperability between closed and permissioned digital silos becomes of
paramount importance for guaranteeing a universal, unified, and non-segregated realm for
distributed ledgers and multiple interoperable ledgers. An interledger solution is one that
allows the interconnection of multiple ledgers, with flexibility for supporting innovation.
Interledger approaches include 1) atomic cross-chain transactions, 2) transactions across a
network of payment channels, 3) the W3C Interledger Protocol (ILP), 4) bridging, 5)
sidechains, and 6) ledger-of-ledgers.�All nodes have some level of access to the ledger. Trust
is based on explicit factors in the system (e.g., transactions happening between the peers,
behavior observed in the network), or on other implicit elements, such as business
relationships between peers or any other criteria relating to the underlying application
supported by distributed ledgers. All nodes agree to a protocol that determines the “true state”
of the ledger at any point in time. The application of this protocol is sometimes called
“achieving consensus.” �Unlike Ripple/XRP, Bitcoin, or Nxt, which are anonymous, and are
inflexible unless forking, have no asset backing, do not protect their users, and are
completely without recourse: the optimal ecosystem uses escrows as digital contracts and
has central authorities who are licensed and bonded professionals and fiduciaries.
Fiduciaries can intermediate to resolve disputes based on the Rule of Law and can reverse
transactions if there are unlawful or mistaken actions taken by permissioned customers.�The
bridging approaches consider a consensus mechanism, such as Proof-of-Stake, Delegated
Proof-of-Stake, or Proof-of-Authority among the bridge nodes used. The current, optimal
interoperable capability involves Proof of Trust and can include paying fees to these bridging
nodes for the interconnection services that they provide. Our pilot project in Oklahoma
engages counties, schools, businesses, churches and individuals to cooperate as regulated
nodes. � https://www2.aueb.gr/users/vsiris/publications/p30_interledger_approaches.pdf �One
DLT project INTR modeled on that received a no action reaction from the SEC is ,
Pocketful-of-Quarters. The developer sought to bridge the gaming and blockchain worlds by
creating digital tokens that can be used interoperably on a virtual platform. The
cross-platform currency also offered greater flexibility to developers over how they build,
distribute, monetize and cross-market games, ultimately empowering them to create rich, new
multiplayer experiences without losing creative and economic control to publishers. This
gaming interoperability design can be easily repurposed to be used to interconnect disparate
and siloed ecosystems or platforms with a CBDC.
https://www.prnewswire.com/news-releases/pocketful-of-quarters-officially-launches-with-first
and-only-compliant-and-interoperable-video-game-currency-for-the-metaverse-301485928.ht
ml
https://www.sec.gov/divisions/corpfin/cf-noaction/2019/pocketful-of-quarters-inc-072519-2a1-i
ncoming.pdf “(T)here will be a correlation between the purchase price of Quarters and the
market price of accessing and interacting with Participating Games; and PoQ will market and
sell Quarters to gamers solely for consumptive use as a means of accessing and interacting
with Participating Games” .https://www.sec.gov/corpfin/pocketful-quarters-inc-072519-2a1
�INTEROPERABILITY-The transfer can be facilitated by a third user, or fiduciary connector
(INTR), maintaining accounts in both ledgers A and B. The idea is that the sender will transfer
value to the connector in ledger A, and the connector will transfer the respective amount to
the recipient in ledger B. Transferring and/or trading (or exchanging) value between chains.
With transfer, value is portable, i.e., it moves from one ledger to another. This is achieved by
having the ‘‘original’’ value (tokens) in the first ledger frozen or locked (or destroyed) and the
‘‘new’’ value (tokens) in the other ledger unfrozen or unlocked (or created). With trade (or
exchange), value (tokens) on different ledgers are exchanged simultaneously, i.e., the
transactions that move value (tokens) from one account to another on the same ledger occur
in an atomic manner. Unlike the transfer of value, the exchange of value is dependent on the
exchange rate of the tokens being traded.�Transferring information or generic messages
between chains, in a way that the information or messages on different chains are
cryptographically linked. This is particularly useful in Internet of Things (IoT) applications to
immutably record information on multiple ledgers in a manner that satisfies some dependency
conditions and can allow correlation of custody, payment, service, information, and product
transfer events.�
CBDC?
Existential problems of climate catastrophe and economic collapse caused by technological

innovations should be central in affecting design and policy choices related to any CBDC.
�Our existential future is likely dependent upon financial and technological innovations to
reduce atmospheric pollution that should be undertaken now. Over 11,000 scientists and
numerous global assemblies warn that planet Earth is facing a climate emergency without
enough being done. An immense increase of scale in endeavors to conserve our biosphere is
needed to avoid untold suffering due to the climate crisis. Climate change threats are a
national and a global security emergency analogous to a world war.�Melting the ice caps may
prove to be the greatest existential threat in the history of human civilization, which should
make all other lesser concerns secondary. But the burden of reversing CO2 buildup is falling
on the nations disproportionately. If it will protect the planet’s largest rainforest, Brazil wants
to be paid upfront, but the United States wants to see results first before it advances funds.
The United States and Brazil differ on how to finance. The Brazilian government has
presented a new official goal for fighting deforestation in the Amazon -- a first for the
administration of President Jair Bolsonaro. But critics say it’s hardly enough, yet for reversing
the accelerating destruction of the Amazon rainforest, finding the needed money might be the
best bet for solving the climate-driven and anthropogenic extinction problems. President
Biden has mobilized his entire administration to take on the challenges from every angle in a
strategic, integrated way. Slowing climate change will require a comprehensive and
coordinated “all hands on deck” approach.�All Hands on Deck- The Creation of the Bank of
England, a Financial Technology and Organizational Precedent for Dealing with Existential
Crisis . �England’s crushing 17th Century defeat by France, the dominant naval power,
became the catalyst for England rebuilding itself into a global power. However, the ability to
construct this fleet was hampered both by a lack of available public funds and the low credit
of the English government in London. To induce subscription to its bond program , the Bank
of England was incorporated.�The assets that England needed to rebuild its navy, so as to
defend itself from France were there all along. It took the right law, organization, and a new
financial technology, capable of attracting the needed capital, in order to have the needed
funds pour into the coffers of the Bank of England .�On 5-8-2022, the global cryptocurrency
market cap was $1.57 Trillion. Without intrinsic value or backing from defined assets, the
investor network which upholds cryptocurrencies’ value could divest. The value could all go
away tomorrow, without even a bankrupt asset to be divided to show for it. But what if this
1.57T market cap could be repurposed using a new species of final technologies and
organization and invested to save the rainforests? � With a coordinated marketing campaign
and a regulatory effort, funds derived from digital assets could be used for purchasing the
rain forests from Brazil in order to help deal with global climate change. �A Malthusian analysis
concerns itself mostly with variables of food and geography. Published studies identify
atmospheric pollution as the primary reason for an impending collapse and implicitly
indicates more carbon sequestration and a negative carbon footprint as the cures. Recall that
rationing and engaging the populace in an all-out defensive effort are the techniques of total
war. �President Biden is correct that an all hands approach is needed to combat and reverse
CO2 pollution. Ration cards in the WWI and WWII were a crude example of a track and trace
management of the supply chain, implemented to ensure that the maximum effort was
expended on the war effort. A platform using DLT and AI with incentives and disincentives,
and one that protects legal and civil rights, could be deployed, one that can be quickly
activated as the policy makers and population obtain the resolve to intervene in order to
reverse what seems an inevitable environmental collapse. At the very least a rationing
approach is an insurance policy to de-risk and reduce the likelihood of such an impending
collapse.� �
benefits of a CBDC?
A STATE REGULATED DISTRIBUTED LEDGER TECHNOLOGY MANDATE (Oklahoma

Distributed Ledger Technology Asset Offering “DLTAO” ) �Fiduciaries and Trusts- Contrary to
the design of the thousands of “trustless” crypto projects, in a Proof of Trust (PoT) system
peers can express opinions about each other and declare trust links within the system. The
distributed ledger is the system of redundant recordings or validator nodes for an individual,
institution, business or government entity, i.e. records asset and information transfer
between participants. The ideal ecosystem design does not run with a Proof-of-work (PoW)
system like Bitcoin or a Proof-of-stake (PoS) system like Nxt. Instead, transactions rely on a
consensus protocol design in order to validate account balances and transactions on the
system. The consensus design works to improve the integrity of the system by preventing
double-spending. Trusted community institutions run the validator nodes. �Trak$- A
programmable digital dollar and a smart contract ecosystem combining identity, consent and
reversibility (Self>Trak$, Smar>Trak$ and Hoop$). Trak$>ATM LLC, is an INTR subsidiary,
which will supply physical kiosks for digital asset processing, payment, and tracking; a
public-private owned, cooperative utility providing electronic fund/info transfer, tax
remittances, payment, and tracking for the unbanked. INTR has designed and tested
multiple minimum viable products in the SEC Fin Hub sandbox. INTR was well on its way in
April 2022, to having a state law passed which would help clarify for the Oklahoma, federal
and tribal regulators a system for government’s using the managerial services and software
of vendors supplying digital ledger technologies assets offering services, or as a fiduciary and
agent of the state taxation authority to collect taxes.
https://tulsaworld.com/news/state-and-regional/govt-and-politics/oklahoma-house-looks-to-cry
ptocurrency-technology-to-address-medical-marijuana-issues/article_4215457a-a483-11ec-8
768-b3141dd2772b.html Oklahoma House Bill 3279, the Oklahoma Digital Ledger
Technology Asset (DLTAO) Act passed overwhelmingly in the House with a 75 to 12
bipartisan vote. http://www.oklegislature.gov/BillInfo.aspx?Bill=hb3279&Session=2200
�Relevant provision from OK HB 3279 (DLTAO ACT):O. Tax remittances, withholding,
reporting, or payments shall be determined by reference to the smart contract, and the
ecosystem operator shall collect the same as an agent on behalf of individuals, businesses,
government regulators, and taxing authorities.� Regulatory Compliance as Key Performance
Indicators� 2001- INTR granted federal charter intertribal agency rights.�2002- INTR certified as
Community Development Entity by US Treasury.�2016- INTR launched Trak$ ATM as a pilot
project.�2018- INTR General Counsel’s Office participated in drafting legislation for the state of
Oklahoma Legislature’s Joint Committee on Medical Marijuana.�2019- March- Ok Tax Comm
authorized INTR to collect cannabis taxes.April 2019- SEC releases “Turnkey Jet” No Action
INTR-OPT filed an application for No Actionwith OK Dept. of Securities (ODS).�Aug 2019-
ODS referred INTR to SEC, then entered Corp Fin/Fin Hub No Action sandbox.�Dec 2021-
INTR presented an informal distributed ledger tech (DLT) demo to Jonathan Ingram, author of
SEC Turnkey Jet no action position.�Feb 2022- INTR presented a formal DLT demo to SEC
director Valerie Szczepanik.�Mar 2022- INTR General Counsel drafted Oklahoma Distributed
Ledger Technology Assets Offering (DLTAO) Act which passed with overwhelming bipartisan
support (75 to 12).�Apr 2022- HB 3279 assigned to Senate Commerce Committee, Chair
accepted for hearing and vote. � INTR’s government affairs team withdrew HB 3279 from
contention after the banking and cannabis lobby posed questions. The bill was withdrawn
from the Senate Commerce Committee where it had been assigned.
https://www.news9.com/story/62311237b446e00188a70be7/oklahoma-lawmakers-look-to-cre
ate-nations-first-marijuana-banking-system The goal now is to involve more the banking,
technology, and legal communities and integrate the lessons learned and reintroduce the
modified DLTAO Act in the next session.
https://www.cannabisbusinesstimes.com/article/does-oklahoma-have-answer-to-cannabis-ba
nking/ �INTR was modeled after the Federal Reserve and to be a part of its system. INTR has
a duty to conform to the Federal Reserve’s policies. Within the intertribal statute controlling
INTR it states: “Upon determination by the Indigenous Nations Tribal Reserve Board that
such action will be useful for the purposes for which it is established…it may… become a
member of the Federal Reserve System.”��
_________________________________________________________________________
Steven Hack
Industry
Individual
Country
State
Texas
Email
Don't do it !!!!!
Don't do it !!!!!
inclusion?
Don't do it !!!!!
Don't do it !!!!!
stability?
Don't do it !!!!!
Don't do it !!!!!
Don't do it !!!!!
Don't do it !!!!!
CBDC?
Don't do it !!!!!
Don't do it !!!!!
Don't do it !!!!!
Don't do it !!!!!
Don't do it !!!!!
Don't do it !!!!!
Don't do it !!!!!
Don't do it !!!!!
Don't do it !!!!!
Don't do it !!!!!
sale? If so, how?
Don't do it !!!!!
Don't do it !!!!!
CBDC?
Don't do it !!!!!
benefits of a CBDC?
Don't do it !!!!!
_________________________________________________________________________
Edward W Twohig
Industry
Individual
Country
State
Massachusetts
Email
Protection of the "commons"
Of all the “COMMONS” of a Government or society, the most critical to the other commons
and functions “of the people” “by the people” ”for the people” is money and the monetary
system. It is the duty of the Government to create money as a “common” of all the people.
All forms of money, coin,paper or digital, should be created by Government, or its central
bank, equally for all citizens. The inequality in the distribution of money would be alleviated
by the payment of value to the Government for the money used in the private sector. �The
circulation of money within the economy should be through financial intermediaries in the
private sector. Money provided to the private sector for payment of Government expenditures
are equally on behalf of the people in common. Money provided as the medium of exchange
within the private sector is not, and can not be, to the equal benefit of the people. The use of
money as a medium of economic value and a measure of wealth over time accrues unequally
in the private sector. Therefore the value over time, as “interest” should be paid, by the
private sector, to the Government so as to distribute that value equally to the ‘commons.’��All
money should be provided by the central bank ( government ) as deposits to the private
sector through financial institutions licensed to accept deposits. Deposits from individuals or
the Government should bear an equal rate of interest. The Government, through its central
bank, in the interests of economic well being, would maintain control of volume and purpose
of money in circulation. The expertise and independence of a central bank would ensure
provision of money to productive sectors, both national and regional. The amount of money in
circulation would be controlled by Government expenditure or advances to the private sector
and by withdrawal from the private sector by taxation or sale and repurchase of Government
bonds. Efficient money circulation and payments in the private sector by banks or other
intermediators would be regulated by the Government. The intermediators would pay a value
for the use of the money to the people through interest on advances by the central bank.
The value paid for the use of the money by a borrower would include that base value plus
risk, overhead and profit.��A single source of central bank creation of coin, paper or digital
money would ease control of the volume of money in circulation. The sale and redemption of
Government securities would enable timely adjustment of the money supply. Payment for
value for the use of money from the private sector would reduce taxation. The taxation base
might then be moved from production to consumption and more socially useful bases. �
inclusion?
By eliminating the fallacy that the availability of money controls these goals. Government
can create and supply any quantity of money and withdraws any quantity by taxation or by
the sale of bonds.
stability?
By eliminating debt and the profit motive from the creation of money. During downturns when
money circulation is beneficial the tendency to repay deby removes money from circulation
By reducing financial speculation
Absolutely
CBDC?
By establishing an international trading currency as was an option at the Bretton Woods

conference.
All countries have been suffering from the finalisation and neoliberal policies of the 1970’s.
They should all secure money creation for the people and an international currency for trade.
Forget “complete anonymity”. The illicit activity that has caused the current concentration of
wealth and economic problems have resulted from too much anonymity.
Of course.
The USE of CBDC should bear interest. CBDC money created in the public sector and put
on deposit in the private sector should bear the same rate of interest that reflects a value
for use.
No. If interest is charged for the money that should be sufficient.
Firms with at least 50% equity should be eligible to have CBDC on deposit. The
intermediaries should be regulated so as to support economic goals. Mortgage loan and
small business serving entities should be established locally to encourage locally deposits
and mortgages. All intermediaries should have speculative practices regulated.
sale? If so, how?
All intermediaries should provide the means for ease of use of all central bank or Goverment
created money, whether coin, paper or digital.
CBDC?
benefits of a CBDC?
_________________________________________________________________________
Industry
Individual
Country
State
Illinois
Email
The fact that central banks will have direct control of our currency, and there would be ZERO
privacy or rights to our personal $
yeah - get rid of the effort and dissolve the federal reserve, as you are all completely
un-elected and incompetent and yet at the same time have the most power in the world.
inclusion?
Negative since you would completely outlaw all other forms of fiat currency
stability?
CBDC?
sale? If so, how?
CBDC?
benefits of a CBDC?
_________________________________________________________________________
Richard C. Vasquez
Industry
Other: Law
Country
State
California
Email
rvasquez@vbllaw.com
Primary risk is making it a surveillance tool which in a violation of the letter and spirit of of the
constitution. Individuals who earn should have the right to spend their savings as they please
without fear that they are being monitored. Moreover, government officials have historically
fallen victim to their humanity and imperfections by using any tool they can lever to achieve
their political aims. The sanctions regime being practiced on other countries and their citizens
is an example: without any court order or due process, government officials should have no
ability to sieze or restrict how individuals spend their savings and earnings. A CBDC is a
gateway tool to enact a social credit system, which is antithetical to constitutional values.
Allow private parties to compete in the market for business of a stable coin, as is being done
with @circle's USDC starting to win over the original stable coin Tether. The market will
decide which is the best stable coin, and competition will spur continual innovation.
inclusion?
No. Anyone can access private stable coins, which are 100% inclusive. To the extent they are
not, competitors will rush in and offer more inclusive products.
Only as an excuse for the power grab. The Federal Reserve doesn't require a stable coin to
achieve those mandates and to the extent they are not being achieved (like now), a CBDC
would not help.
stability?
It would disintermediate banks, if CBDCs were enacted and Fed policy was implemented
through direct payments to citizens. That's not the function envisioned for the fed by its
creators.
Yes. By disrupting the innovation of allowing private stable coins to compete and develop
features valued by the marketplace.
None worth considering, given the potential for mischief, privacy intrusion, and denial of
liberty to individuals.
No. The public's access to central bank money comes indirectly through banks, interest rate
setting and direct asset purchases, as well as Fed speaker sentiment. Cash will be preserved
through the private sector via stable coins and actual cash.
CBDC?
The Lightning and Liquid networks over Bitcoin (faster, cheaper, greater inclusion) is the most
obvious and best choice, as well as stable coins.
The US should be the freedom leader. China will be the CBDC leader and continue to provide
an exemplar of how to invade privacy and curtail freedom. The US dollar can thrive as the
indirect monetary unit behind private stable coins, provided the US continues to allow the
lion's share of the innovation, ownership and businesses built on the strong foundation of
Bitcoin and stable coins.
The above are the primary risks. Additional risks are that congress or a future president turns
a less bad CBDC into a worse anti-liberty tool in the name of addressing tax evasion, money
laundering or other excuses.
While I expect claims to be made about how privacy could be programmed in, the reality is
government operates through human beings who then get access (example IRS scandal
during Obama administration). Practically impossible.
Not sure. But I would never get to this question, which is implementation.
It shouldn't exist. It shouldn't crowd out private stable coins.
Again, this seems like a trojan horse for a bad idea. Besides, who pays the interest?
Taxpayers? Why?
It took 16 questions before the author of the questionaire started contemplating limiting
citizen's rights.
What's the point of entangling intermediaries? The sole favorable point for a CBDC would be
by-passing banks, costs and efficiency.
Not sure.
sale? If so, how?
No. I prefer private stable coins and no governmental tracking.
Private stable coins and $BTC do this.
CBDC?
The government doesn't need to be in the business competing against a competitive private
sector.
benefits of a CBDC?
Not that I desire to contemplate.
_________________________________________________________________________
Industry
Individual
Country
State
Michigan
Email
i think that the federal reserve should contintue on the path they are on it seems to be
working well for the us at this time.
i dont have any coments at this time
inclusion?
not com ment at this time
nothing at this time.
stability?
nothing at this time
no coment
no comment
no comment
CBDC?
no comment
no comment
no comment
no comment
no comment
no comment
no comment
no comment
no comment
no comment
sale? If so, how?
no comment
no comment
CBDC?
no comment
benefits of a CBDC?
no comment
_________________________________________________________________________
Gary Krause
Industry
Individual
Country
State
Virginia
Email
CBDC is not Bitcoin so the risk of unsound money continues.
Yes. Bitcoin.
inclusion?
yes. CBDC will enabled censorship of money which is net negative for the world. Bitcoin is
accessible world-wide.
It will be totally in control of the Fed so it will allow you to continue to print and debase our
currency. Please research the history of price controls (aka "price stability") and review the
outcomes.
stability?
It would result in the same financial instability we experience with the USD.
Yes.�CBDC allows censorship of financial institutions and individuals in the financial sector.
This is in direct opposition to the permissionless/borderless/censorship resistant property of
Bitcoin.
Not adopting CBDC is the best mitigation.
yes, but only with Bitcoin since it is a neutral global currency with protections far superior to
anything the Fed or the US Govt. can create.
CBDC?
Bitcoin. It's already happening and can't be stopped. Lightning Network.

It shouldn't. The US should reject any CBDCs and lead the way with bitcoin adoption.
Yes. Adopt Bitcoin.
See the Fourth Amendment of the Constitution.
It could be abandoned in place for the securest single purpose computing network in the
history of man. Bitcoin.
No. Bitcoin should.
No. Because CBDC shouldn't exist.
sale? If so, how?
CBDC?
They shouldn't impact CBDC because CBDC shouldn't exist.
benefits of a CBDC?
Yes. Consider scrapping the CBDC in favor of adopting Bitcoin as a standard. It is far
superior and already established.
_________________________________________________________________________
StrongAuth, Inc. (dba StrongKey)
Industry
Technology Company
Country
State
California
Email
arshad.noor@strongkey.com
A potential benefit not mentioned in this paper is the degree of competition the Federal
Reserve could introduce into the financial services market through the introduction of a
CBDC. �When the internet was commercialized more than forty years ago, there were
hundreds of companies innovating and attempting to establish themselves to serve
consumers. Over the years, we see a dramatic reduction in choices and concentration of
market power among just a handful of companies: Microsoft vanquished companies like
Netscape, WordPerfect, Lotus, etc. and effectively became a monopoly in many segments of
the software industry. We are also, currently, witnessing this in the “internet search”, as well
as the oligopolies of mobile operating systems, cloud service providers, etc. The
extraordinary concentrations of market power by some companies is not always due to
superior products and services; evidence shows that some of these companies abused their
monopolies in one product to require buying an unfavorable one from the company - a
practice known as “bundling”, while others simply violated anti-competitive laws.��If one has
been paying attention to business practices of financial institutions over the years, as well as
press releases from the Consumer Financial Protection Bureau (CFPB), it is apparent that
financial institutions are not exempt from anti-competitive or illegal practices to appease their
shareholders.��Through the introduction of a CBDC and a well-formed policy that supports
regulated nonbank service providers, the Federal Reserve can preserve a competitive
marketplace for the delivery of financial services. Forcing innovative software companies to
partner with a regulated depository institution is a barrier to encouraging competition –
especially when the software company might have better risk-mitigation technology than
financial institutions. By defining policies and requirements by which service providers can
enable retail transactions with CBDC in the regulated nonbank financial service industry
(without the need to partner with a regulated depository institution), the Federal Reserve can
bring many innovative and cost-effective solutions to the market.��Secondly, the U.S. is
witnessing inflation rates unseen in four decades. As the Federal Reserve starts using tools it
possesses to reduce inflationary pressures, it must wait – sometimes for months – to see if its
deterrents are having any effect. Retail CBDC accounts that pay interest pegged to the rate of
inflation, will be a powerful addition to the Federal Reserve’s arsenal with the ability to provide
minute-by-minute feedback on consumers’ reactions.��A risk under-emphasized by this paper
is that of the Federal Reserve not introducing a CBDC in light of countries like China having
introduced one already, and more than 100 others – including US allies – exploring the
introduction of a CBDC. The Russian-Ukrainian war has highlighted how sanctions imposed
by western countries are causing a rise in transactions with “crypto currencies”, with news
reports indicating that some countries are negotiating the purchase of oil and commodities
denominated in yuan and rubles. To the extent countries like China and others make their
CBDCs easier to transact with, notwithstanding the US dollar’s strengths, the perception of
the US Dollar appearing “stodgy” could rob it of its unique position in the world. While having
a US CBDC does not alleviate issues created by sanctions, not having one encourages the
use of alternate digital currencies for financing transactions. A US CBDC that makes
transacting in digital currencies easier will continue to keep the dollar preeminent in
international transactions.
Innovative technology – the internet, cheaper and faster computing devices, mobile
communications, open-source software – created the impetus for digital transactions that
enabled faster, cheaper and better access to financial services. However, some entrenched
players continue to hold outsize market-share in some segments, while frequent Consumer
Financial Protection Bureau (CFPB) press releases highlight actions of some of these
companies that cause consumer harm. Signs of intense lobbying to prevent the Federal
Reserve from introducing a retail CBDC only serve to preserve such entrenched interests.
�Some parts of the world are using legislation to break down walls entrenched interests have
built around financial records that can aid consumers in getting better products and services
from the market. The Second Payment Services Directive (PSD2) in the European Union and
Consumer Data Rights (CDR) in Australia, for example are forcing banks to allow software
companies who have the consent of consumers, to download financial data from the banks’
databases and compete with the banks to provide better products and services. While the
U.S. has no such “open banking” regulation, some software companies are eagerly awaiting
the CFPB’s proposed rule for “Consumer Access to Financial Records”, which hopes to open
up the walls built by U.S. financial institutions. However, this is not enough.��Technology is
enabling the creation of digital currency all over the world. While public key cryptography that
enables transaction authenticity, confidentiality and integrity was introduced more than three
decades ago, and the programmability of software data structures such as linked lists were
known for more than sixty years, an innovative paper on blockchain combined elements of
both technologies, while adding other capabilities, to solve certain technical problems in a
unique manner. Blockchain gave rise to an explosion of investment – and speculation –
around its capability. While the philosophical debate around blockchain is likely to continue for
years to come, knowledgeable software companies can take advantage of this concept,
combine it with traditional – and proven – data security capability to deliver innovative
financial services to consumers at lower cost.��In a world where a coffee bean farmer in East
Africa can communicate instantly with almost any wholesale or retail buyer in the world over
the internet, it is archaic to force money to move through systems and infrastructure built for a
different age. As responsive as the private sector is with the availability of products and
services to serve such consumer needs in the digital age, the last few decades have provided
the world sufficient evidence that the private sector can make decisions endangering the
world politically, economically and financially when driven purely by the profit motive.��As well
as existing products, services and financial technology have served the world in the past,
anything short of a full-fledged retail CBDC from the Federal Reserve will serve to only
handicap the CBDC’s potential and to serve entrenched, and potentially, nefarious interests.
The future demands better.
inclusion?
Indeed, it could. The net effect would be positive if the following conditions were met:�� 1.
CBDC must be legal tender; � 2. USG agencies at all levels must enable support for CBDC
to be received from, and disbursed to consumers where such transactions are appropriate;�
3. The retail ecosystem should be encouraged to transact in CBDC through independent,
royalty-free standards rather than technology-vendor driven associations. Mobile phone
manufacturers should be given incentives to include such standards into their devices to
enable rapid adoption. To the extent it is feasible, the Federal Reserve should coordinate the
creation and deployment of such vendor-independent, royalty-free standards with other
like-minded nations and the Bank of International Settlements (BIS) so CBDCs are not
“balkanized”;� 4. The Federal Reserve should allow for the creation of regulated,
non-depository service companies whose primary purpose is to enable transacting in CBDC –
functioning much like payment processors in the credit-card industry - facilitating transactions
without holding currency. Companies focusing on financial inclusion must be fast-tracked
towards participating into this ecosystem as long as they meet security and privacy control
requirements;� 5. An identity policy and scheme must be defined and implemented to enable
undocumented residents of the US to participate in the CBDC ecosystem. Even if they are not
legally authorized to reside/work in the US, they are here. With an appropriate balance of
policy, security, privacy and anti-money laundering (AML) controls, it is feasible to craft
solutions that permit them to transact with CBDC without exclusionary controls – or keeping
them out of the digital age and subjecting them to usurious money-lenders in the analog
ecosystem.��If any of these conditions cannot be satisfied, desired financial inclusion goals will
remain unmet.
Maximum employment and price-stability is a function of many variables not exclusively under
the control of the Federal Reserve. Interest rates and money supply are important
determinants – but more depends on qualitative factors beyond the control of the Federal
Reserve, such as:�� • Access to education and training;� • A “level playing field” that ensures
equal access to opportunity in many sectors;� • A reasonable safety-net that permits new
entrepreneurs to take moderate risks with starting new businesses;� • USG agencies truly
supporting small businesses rather than paying lip-service and buying from giant suppliers
through small business resellers that add little value to the transaction.��Before the internet was
invented, one could only envision the types of applications, tools and services that
connectivity might foster. We have since learned that almost anything is possible once such
an ecosystem is available and when creative minds develop new applications, tools and
services.��A US retail CBDC is in the same place as the Advanced Research Projects Agency
(ARPA) experiment with the intergalactic computer network was half a century ago: lots of
promise and trepidation, but with limited ability to visualize the potential for positive change.
Much as ARPA moved ahead to build the internet, the Federal Reserve should move ahead
to create a retail CBDC. With appropriate privacy controls, macro-data generated from
applications, tools and services that support the CBDC will provide the Federal Reserve with
new tools that might better effect monetary policy. Nothing ventured, nothing gained.
stability?
Any new form of money with the backing of the Federal Reserve is bound to create waves –
not just in the US, but around the world.��Much as our ancestors evolved from using shells and
beads, we must plan to evolve from paper and coin in the digital age. While many
transactions appear to be digital in the current environment, much of the technology and
infrastructure that underpins today’s digital environment was created many decades ago. It
does not have the end-to-end authenticity, confidentiality and integrity controls that are
necessary to support a trustworthy store of value or a means of exchange. A truly trustworthy
digital currency must be designed from the ground-up to serve the rest of the 21st century
and beyond.��This is where a CBDC can help. It represents an opportunity to “reboot” digital
payments to learn from our mistakes of the last few decades and create something better to
serve humankind for the future. Notwithstanding the friction that exists within banking
regulations and schemes across the world, the U.S. Dollar enjoys extraordinary trust
everywhere. The world has taken note of the extraordinary wealth the internet has created for
the U.S. While the internet may not have been primarily responsible for these economic
benefits, the Gross Domestic Product (GDP) of the U.S. alone went from less than $4T to
more than $20T in the last 40 years – the years the internet was commercialized and made
available to the world.��Could the CBDC create such wealth for adopters around the world? It is
too early to tell, but a few self-sufficient countries are not waiting to find out – they are
plunging into it for better or for worse. The vast majority, however, are waiting for the U.S. to
make its move. If any nation has the creativity, resources and regulatory framework to make a
success of it, in the eyes of many nations, the U.S. does. Given the ubiquity of the internet,
mobile devices, availability of capable software technology, the U.S. has a once in a
generational opportunity to create a framework that can bring more financial stability to the
world – not just for the U.S. alone:�� • In the hope that nations that “hitch their wagon” to the
U.S. CBDC will see similar growth in GDP as the U.S. did with the internet, some countries
will choose to align their financial regulatory frameworks more closely with the U.S. financial
system;� • As a global, inter-operable CBDC ecosystem grows, authoritarian countries will
find themselves increasingly isolated from the prosperity that will accrue to a rules-based
ecosystem. While China will have the heft to build a CBDC ecosystem in conjunctions with
other authoritarian nations, kleptocrats and despotic leaders, nonetheless, crave the
imprimatur of the U.S. Dollar with their ill-gotten wealth; such individuals and nations will find
themselves with fewer options in a financial ecosystem that is significantly tightened to
support a U.S. CBDC;� • International trade will become easier and less expensive as more
companies and individuals transact with the U.S. CBDC directly;� • Innovative software
companies from all over the world will be encouraged to create products and services that
interact with U.S. CBDC, thereby bringing innovation faster and cheaper to the world, rather
than in regional pockets.��Might a U.S. CBDC create sufficient prosperity on earth that some of
the problems we see currently evaporate? It is probable; however a half-hearted attempt that
preserves inefficiencies of the current financial system will only exacerbate the divide from the
“haves” and the “have nots”. Only a “rebooted” digital payments infrastructure that builds
authenticity, confidentiality, integrity and agility into its foundations will be able to deliver
benefits the new ecosystem promises to deliver. CBDC represents that opportunity.
It is important to acknowledge that failures within private money ecosystems caused the
2007-2008 global recession. But for taxpayer bailouts, the US might have fared worse
consequences than it did. While policies enacted since then will (hopefully) mitigate a similar
recurrence, the ecosystem needs invigoration that can prepare us for the rigors of the 21st
century. �By offering a CBDC, the Federal Reserve can unleash a wave of innovation and
competition that benefits consumers all over the world:�� 1. The velocity of money will
increase, leading to consequential economic benefits for all. While most consumers and
businesses currently have the ability to move money electronically, not only are the costs
higher than they need be, but the more economically disadvantaged participants in the
economy bear higher costs for those financial transactions. With a ubiquitous CBDC that can
be transacted at lower costs, more people will be encouraged to use it – replacing cash,
checks and/or money orders – that will increase the number of transactions;� 2. New
financial services will be spawned that benefit more consumers at lower costs. Large
companies that invest in creating systems to manage financial products and services are
encumbered with legacy products that are, sometimes, unable to evolve rapidly to changing
market conditions and needs. Smaller companies with innovative ideas and solutions are
hindered by their inability to access consumer financial data and/or connect to the Federal
Reserve (since they are not depository institutions); this prevents them from bringing their
innovation to serve the financial market. With access to retail CBDC through a transparent
framework, companies that meet the Federal Reserve’s regulatory requirements will be able
to enabled to bring their innovation to market faster;� 3. Global pandemics will cause milder
economic disruptions to nations where CBDC exists. As rapidly as Congress passed
legislation to distribute cash to individuals adversely affected by the recent pandemic’s
lockdown, the State of California alone lost more than $10 billion through fraud as it
attempted to distribute money to unemployed Californians through the Employment
Development Department (EDD). The Internal Revenue Service (IRS) also reported nearly $2
billion in fraud related activities in 2021 alone from the pandemic relief funds. With a CBDC
designed to operate on stronger and more secure infrastructure and applications, it is
possible to not only distribute relief funds rapidly to registered and authorized retail CBDC
accounts, but it is also possible to eliminate such fraud with appropriate technical security
controls.��Undoubtedly, the introduction of CBDC will cause short-term disruptions to some
incumbents since their applications are unlikely to have the most advanced security capability
(authenticity, confidentiality and integrity) that eliminates/minimizes fraud. However, as
ecosystems adapts to CBDC, with applications that have the appropriate security and privacy
controls, we will see vast improvements in the financial sector.��CBDC offers a singular
advantage that no stablecoin can offer – the full backing of USG, with a mandate to benefit all
residents/citizens of the US. This alone may serve as a disincentive for private money
speculation (who may presume that taxpayers can be counted on to bail them out because
“banks are too big to fail”). With a retail CBDC backed by a Central Bank that will not fail, an
alternative network for digital money will exist; as such, private money will bear the full risk of
speculative investments without burdening taxpayers.
It is our opinion that the goal of the Federal Reserve should be to focus on the benefits that
residents/citizens of the USA will derive from the introduction of CBDC, without regard for the
adverse impact of CBDC on the financial sector. While the Federal Reserve must certainly
make sufficient information available to adopt CBDC (as it is doing so with the FedNow
Service), it is impractical to expect that every company and financial institution will do so.
Some companies may simply choose not to adopt CBDC for a variety of reasons, while “rent
seeking” and unethical institutions are bound to lose with the introduction of the CBDC. They
is simply unavoidable as technology evolves. For those who cannot adopt CBDC for lack of
resources, the Federal Reserve must focus on enabling the bottom 80% of institutions within
the financial sector should be provided open-source tools, lower costs, incentives and support
to adapt to the requirements of CBDC.
Absolutely! We are witnessing a global phenomenon where consumers are seduced to

eliminate the burden of carrying cash from their lives; but, this leaves them forever beholden
to private companies for transactions. Given that private companies must primarily focus on
shareholders rather than the general public, this can have disastrous consequences for
society as cash eventually disappears from the economy. While electronic payment
transactions are, indeed, more convenient for a majority of transactions, the Federal Reserve
has an obligation to preserve the general public’s ubiquitous access to a central bank
electronic money so they may always have an alternative to private electronic payment
services.
CBDC?
Since the Bank of International Settlements (BIS) is already committed to Nexus, an instant
cross-border payments infrastructure is a given. However, the goal of Nexus is to enable
cross-border payment flows within existing payment infrastructures. While this will deliver
cross-border payments within 60 seconds (if all goes well), it does not envision the possibility
of new products and services that a U.S. CBDC might enable in an environment where
multi-CBDC economies are available.��Before the internet was invented and commercialized,
the world had a communications system that was “instant”: Morse code, Telex
communications, etc. When the internet came to be, early products and services merely
transplanted existing communication applications and schemes to the internet to make it
faster and cheaper. However, the richness of what the internet enables today took decades of
innovations.��The same is true of CBDC. Not only must we introduce a retail U.S. CBDC, but
we must also participate in efforts to foster multi-CBDC. We cannot imagine what will result
two decades from today unless we unleash the creativity that it will engender.
Given that the introduction of CBDC by China is the one that matters, it is paramount that the
USA introduce a CBDC expediently. What is at stake is not the payments ecosystem or the
preeminent position of the U.S. Dollar, but the very soul of democracy.��Based on events of the
last two decades, it is evident that China will not transition to a democracy in the near future.
However, its ability to surpass the USA as the world’s largest economy is strengthened with
the introduction of the Chinese CBDC (among other contributing factors). The moral, political
and economic consequences of a bloc of authoritarian nations upstaging a bloc of democratic
nations cannot be overstated. And, if the most powerful of authoritarian nations shows
leadership in an important segment of the global economy, it has the potential to create the
nexus for a new world order in which the U.S. may not play an influential role.��By creating an
inter-operable retail CBDC, based on a governance model supported by like-minded
democratic nations, the United States will continue to offer the world an alternative. Given the
current strength and position of the U.S. Dollar, it is imperative that the U.S. not be left behind
in this race for ideology.
Much as the creators of the internet could not foresee all its benefits and drawbacks before its
inception, it is impossible to foresee everything with the introduction of a U.S. CBDC.
However, important lessons can be learned from the failures of some parts of the internet -
the Federal Reserve should put in safeguards from the outset to prevent similar mishaps.
Specifically:�� 1. Notwithstanding the Internet Engineering Task Force (IETF) establishing
royalty-free standards for establishing the authenticity, confidentiality and integrity of
messages at the application layer nearly three decades ago – Secure Multi-purpose Internet
Mail Extensions (S/MIME) – the vast majority of the internet ignored these standards even as
the capability became ubiquitous within electronic mail messaging systems two decades
ago.�The Federal Reserve must mandate the use of technical standards that guarantee similar
security controls within CBDC transactions – from end-to-end within applications – not just at
the network layer as it is performed currently;�� 2. The vast majority of attacks to applications,
systems and networks originate in the use of “shared secret” authentication schemes and
protocols. Passwords, one-time passcodes (OTP), knowledge based authentication (KBA)
are some examples of “shared secrets” which result in scalable attacks that compromise
everybody when a single attack is successful.�The IETF, once again, established royalty-free
standards – X.509 Public Key Infrastructure Certificate – for the use of passwordless
authentication based on public key cryptography, more than two decades ago. While
deployed in some scale within government agencies, this capability is largely ignored in
consumer facing applications even within banking and fintech sectors. This has resulted in
more than 10,000 data-breaches with more than 11 billion sensitive data records
compromised over this period.�Newer protocols – Fast Identity Online (FIDO) – using public
key cryptography have more recently become ubiquitous on all desktop/laptop and mobile
platforms, and have been successfully demonstrated in multiple NIST National Cybersecurity
Center of Excellence (NCCoE) projects as providing high-assurance authentication. Updated
guidance from the Federal Financial Institutions Examination Council (FFIEC) in 2021,
reference one such NIST NCCoE project – Multifactor Authenticator for e-Commerce - as an
example of how to mitigate authentication risk for higher risk transactions with FIDO
technology.�The Federal Reserve must mandate the use passwordless authentication using
public key cryptography for all CBDC transactions; this will provide assurances that the single
largest cause of data breaches is eliminated from CBDC infrastructure;�� 3. It is fashionable
these days to assume the “cloud” provides an answer to all of one’s information technology
needs. However, it is our opinion that the “cloud” poses an enormous risk to something as
critical as the CBDC infrastructure. Not only have attackers shown that Uber, Capital One,
Twitch and many other companies can be completely compromised in the cloud, but the Bank
of England’s July 2021 Financial Stability Report identifies the cloud as presenting a risk to
financial stability. The Governor of the Bank of England, Andrew Bailey, has gone on record
that “secrecy” and “opacity” are prevalent in cloud deployments, and that cloud security is “of
particular concern”.��While we believe that the cloud offers some capabilities that can be taken
advantage of within information technology deployments, this must be done so with
applications that have been designed from the ground-up to ensure sensitive data and
transactions remain impervious to attacks in the cloud. The Federal Reserve must mandate
that applications prove beyond reasonable doubt that sensitive data and transactions can
never be compromised in a cloud.
With the right balance of policy, procedures and technical controls, the Federal Reserve can
balance the conflicting goals of consumer privacy with its objectives to prevent illicit financial
activity. Specifically, the Federal Reserve can mandate that:�� 1. Participants are “on
boarded” into the CBDC ecosystem only after specified “know your customer” (KYC) controls
are satisfied;� 2. Participant accounts (of the Sender/Payer) in the CBDC ledger are
anonymized (through encryption and tokenization), while transactions involving those
accounts remain publicly visible – particularly to the IRS and law-enforcement. Where details
of specific transactions might leak the identity of participants, those details of transactions
must also be anonymized;� 3. Companies creating software facilitating CBDC transactions
maintain a company-wide “transaction trail” of anonymized transactions that remains publicly
visible;� 4. Very small transactions – say, $20 or less – of a certain frequency within a
defined period, may remain completely anonymous (for the Payer and Payee) if the policy
chooses to support higher levels of privacy in the transaction trail. It should be noted,
however, even completely anonymous transactions might be traceable if the software
facilitating such CBDC transactions adheres to KYC regulations with appropriate controls to
prove compliance to such regulations; � 5. Companies creating software facilitating CBDC
transactions are required to implement end-to-end security within the application software
without having to rely upon network and system controls to provide that security. It would not
be amiss for the Federal Reserve to require such software to be independently tested and
certified to meet specific control requirements before being permitted to participate in the
CBDC ecosystem;� 6. When transactions need to be made visible to law enforcement and/or
other regulatory authorities, this must be done through digitally signed warrants that are
placed within the software company's transaction trail whose transactions are audited. Where
necessary and justified, select details of the warrants may be anonymized; however, such
anonymized search warrants must be subject to due process as prescribed in the Freedom of
Information Act (FOIA).
While monetary and transition risks cannot be discounted, it is crucial to recognize that CBDC
– unlike all other forms of money that preceded it – completely depends on computer
technology to maintain the confidence of the general public. As such, the importance the
Federal Reserve must accord to cyber risks cannot be overstated. The technology industry
has the distinction of being the only segment of the economy whose products and services
are unregulated in the U.S. As a consequence, more than 10,000 publicly disclosed
data-breaches have occurred in the US with more than 11 billion sensitive records disclosed.
This is simply unacceptable! �While the answer to question #11 provides examples of
mandates the Federal Reserve may specify to mitigate risk, given the significance of the
CBDC initiative, it must go further and ensure that CBDC security supersede all other factors
– especially “user experience” (aka UX) factors – when establishing the CBDC. To this end,
the Federal Reserve should review Atlantic Council’s Strategy Paper on “A Nonstate Strategy
for Saving Cyberspace” and adopt elements of the specified strategy where appropriate.
Additionally, this author has published an opinion on forbes.com titled “Disruptive Defenses
are the Key to Preventing Data Breaches”; while the tactical measures specified in the article
might appear daunting on the surface, based on more than two decades of work in cyber risk
mitigation, this author advocates technologists to incorporate the specified measures into
their applications as a “standard operating procedure”.
Without a doubt!
Yes, it should.��The U.S. is currently witnessing inflation rates unseen in four decades. Savers
– especially, retired ones – are most affected as inflation eats into the value of their cash
holdings. If the Federal Reserve had a tool to guarantee that savers’ cash holdings are not
devalued during inflationary times, it will incentivize consumers to hold cash leading to a
reduction in inflationary pressures in the market. While private financial institutions could,
technically, offer interest rates that were equal to, or better than inflation rates, they generally
do not because they have neither an incentive nor a mandate to do so unless compelled by
competitive forces. CBDC accounts that pay interest is a natural solution to this problem.��With
Federal Reserve issued retail CBDC accounts, consumers can be paid interest on their
CBDC holdings, pegged to the rate of inflation (adjusted at a frequency determined by
Federal Reserve policy). As inflation rates move up or down, interest on CBDC can move
commensurately. The higher the inflation rate, the greater the incentive for consumers to
move their non-cash holdings to CBDC – thereby decreasing inflationary pressures in the
market. This incentive will also work during recessionary periods should inflation rates
become negative.��Secondly, the Federal Reserve will have the ability to receive “real-time”
feedback automatically as it sees its holdings of CBDC go up or down depending on inflation
rates in the market – it will not have to wait for weeks or months to learn if its inflation fighting
tactics are having any effect on markets.��An approach for paying interest on CBDC is as
follows:�� 1. Upon the creation of CBDC, the Federal Reserve creates a CBDC account within
its ledger, similar to its Cash account;� 2. It debits its Cash account by some chosen value –
say 25% of its holdings – and credits its CBDC account with an equal amount of CBDC;� 3.
As consumers enroll for Retail CBDC (rCBDC) accounts and transfer their cash to their
rCBDC account from external sources, consumers’ rCBDC accounts are credited while their
cash accounts are debited at external sources. Commensurately, Federal Reserve’s Cash
account will be credited with consumers’ transfers while its CBDC account is debited;� 4.
When interest accrues within consumers’ rCBDC accounts, the Federal Reserve’s CBDC
account is debited, crediting consumers’ rCBDC accounts when paid;� 5. As the Federal
Reserve’s CBDC account dwindles, it continues to debit its Cash account and credit its CBDC
account;� 6. When increasing numbers of consumers enroll for rCBDC accounts, the Federal
Reserve should see positions of its Cash and CBDC accounts change, eventually achieving a
state of equilibrium within a narrow range reflecting the ebb and fall of demand for cash and
CBDC;� 7. Assuming rational investors, inflation rates should also achieve equilibrium
barring adverse natural and political events.��Introducing rCBDC accounts and paying interest,
pegged to the rate of inflation, would be the financial equivalent of shifting (no pun intended)
from manual transmission controls to automatic transmission in automobiles – the speed of
the vehicle (rate of inflation) automatically adjusts the gear (interest rate) at which the vehicle
(economy) operates.
The introduction of a U.S. CBDC is bound to create some disruptions. Market participants will
naturally want to observe how CBDC are received, and how the technical infrastructure will
perform. Since the CBDC's primary function is to offer a cash-equivalent instrument to enable
smoother and less expensive transactions (while enabling inclusion and being green), the
Federal Reserve should, initially, limit the amount of CBDC held by single end-users to meet
the instrument's primary goal. As markets adapt to CBDC, the Federal Reserve should
increase quantity limits based on the performance and stability of the technical
infrastructure.��It is not inconceivable that the amount of CBDC that can be held by a single
consumer will become another tool in the Federal Reserve's arsenal to effect monetary policy.
It would be natural to allow the Federal Reserve to vary this amount to effect monetary policy
as it it does currently with interest rates.
Any company that can meet and comply with the regulatory requirements of the CBDC
initiative should be permitted to serve as intermediaries for CBDC. There is neither a
monopoly on creativity nor competence, and the Federal Reserve as well as the U.S., will be
best served with many participants choosing to serve different markets with their
ingenuity.��Since non-depository institutions are unlikely to hold CBDC or have similar
privileges as depository institutions, the Federal Reserve should create a different regulatory
structure to govern non-depository institutions without compromising on security and privacy
controls.
Yes, it should. But, it need not be introduced on Day 1. Offline transactions will require many
participants to adapt to different kinds of communication protocols. Depending on the devices
that will choose to implement CBDC for online/offline transactions, the control requirements
are likely to be different and this will require more time for adoption. It is recommended that
the Federal Reserve adopt offline capabilities on a graduated deployment schedule to
moderate expectations and disruptions to CBDC introduction.
sale? If so, how?
Given the significance of a U.S. CBDC introduction, it will be prudent to set expectations to
the market that security must take priority over convenience. �Despite some of the most
advanced security technology being available for decades, private companies have persisted
in using the weakest security and privacy controls within their applications, and are singularly
responsible for the thousands of data breaches and billions of sensitive records being
compromised. It does not matter if the company is a million, billion or a trillion dollar company:
they have all been breached. This sorry state of the internet is simply because the vast
majority of private companies have prioritized convenience over security.��When it comes to
cybersecurity, it is our observed opinion that private companies respond to the stick more
than the carrot. Consequently, if the Federal Reserve intends to build a stable and secure
CBDC infrastructure for the long-term, it should stipulate strong security and privacy controls,
and create the appropriate infrastructure to enforce those requirements.
CBDC represents a transition to a new ecosystem. Since almost every country is

investigating an introduction of its own CBDC, it behooves the Federal Reserve to work with
the BIS and establish global standards to facilitate interoperability. The standards must be
open, royalty-free and available to anyone in the world – without cost – to implement.��New
standards are definitely likely. However, there are many existing standards that can be
updated to meet the challenge. Given that cryptography will play a central role in security
CBDC, the design must incorporate algorithm agility and state-of-the-art security controls. In
light of the data breaches of the last two decades, an abundance of caution is not
unwelcome.
CBDC?
One cannot predict everything accurately in the technology world – everything is a matter of
probability. As such, the Federal Reserve must make the assumption that principles and
standards are the most important arbiters of success in an environment of continuous
change. We have many tools in today's technological arsenal that can be applied to build a
safe and secure technological ecosystem for CBDC; all that is required is the discipline to
learn, adapt and apply the chosen principles/standards to craft the solution.
benefits of a CBDC?
Software design, architecture and languages are like “hair styles of the geek world”. Every
generation of software developers believes that the only viable technology to solve a specific
problem is whatever is in fashion this year – and this is usually a function of the marketing
messages of technology companies that invent a specific widget. As a consequence, we are
at a point in technology history where we are living in software techno-babble. Senior
executives responsible for delivery of information technology solutions are at the mercy of
billion/trillion-dollar giants and have little understanding of what their application developers
are doing. By the time, the company is in the news for the latest security breach, those
programmers have long departed.��The Federal Reserve would be wise to emphasize its focus
on principles and standards. And, build a regulatory environment with the resources to
enforce those principles and standards.
_________________________________________________________________________
Sean Boyle
Industry
Individual
Country
State
California
Email
Excessive financial surveillance goes against the spirit of the US constitution. It is up to all of
us, and now it is especially up to YOU, to repeatedly reject changes that move our system in
the direction of authoritarian tyrrany.
inclusion?
If a CBDC uses total financial surveillance, people may opt to use something else that grants
them privacy. Thus, by using financial surveillance, you would completely forefit any influence
over employment and prices.
stability?
Absolutely, unless you want to cede that to another entity. The general public will use money
one way or another. Don't give them reasons to abandon yours.
CBDC?
Not at all. Take note of their successes and mistakes, but i strongly believe that this is not a
"competition." China is not "winning" because their CBDC came first. The winner is the one
who executes BETTER, not FASTER and certainly not more technologically. Paper cash
serves Americans well and it should not be brushed aside lightly.
It can't. It's money. This is America. Freedom has costs. You can accept the costs, or you can
become tyrants. There is no middle ground here. You can't half-surveil transactions.
Paper money fosters cyber resiliency. Do not stop issuing paper money.
Issue paper money.
sale? If so, how?
CBDC?
Quantum resistant cryptography is currently being developed with oversight by NSA and
NIST. This could mean that everything about the CBDC will need to be redesigned from
scratch in 10-20 years.
benefits of a CBDC?
_________________________________________________________________________
Asher Hopp
Industry
Country
State
California
Email
CBDC's will, with absolute unequivocal certainty, be used as a weapon against those who
use it. The government will spy on CBDC users. The treasury and IRS and law enforcement
will use the CBDC network for asset seizure. The state department will leverage the CBDC
network to attack people who they don't like.��CBDC's represent the greatest form of pure evil I
ever seen from the United States of America. I've encouraged all of my family and friends to
switch to Bitcoin and keep as few dollars as possible because of the government's reckless,
immoral, and abusive financial policies. You are not to trusted.
There are no benefits to CBDC's outside of the government's quest to centralize authority and
become more powerful. As government expands, liberty contracts.
inclusion?
CBDC's have no positive impacts for civilians, the only benefit of CBDCs is for central
authorities to exert dominance over poor people. If the US moves forward with its plan to get
everyone on their CBDC, billions of people will revolt against the dollar and move to
decentralized options. This is the worst idea the government has ever had. The second
amendment is more critical than ever in these times due to your proposals.
Keynesian economics has been thoroughly debunked, and some bureaucrats in suits in DC
moving numbers around on a spreadsheet is not the right way to create jobs or improve
productivity. The demand side of the equation needs to be organic - the supply side of the
equation needs your talents. If you are a Federal Reserve employee reading this message I
encourage you to quit your job and pursue actual productive employment in a trade vocation
instead of continuing to weaponize authoritarianism against anyone who tries to save their
earnings.
stability?
A CBDC will create massive financial instability as long as it exists, but after everyone revolts
against this extreme tyranny and moves to decentralized currencies which are not subject to
political manipulation such as Bitcoin we will usher in a new era of world peace, and Fed
employees will need to re-train for vocational jobs.
A CBDC will mark the beginning of the complete destruction of the US financial sector as
nobody who is a customer of the US Dollar system is excited about the enhanced
surveillance and authoritarianism you have proposed with your CBDC plans. When everyone
stops using the USD because of the corruption and ineptitude of your CBDC plans, there will
be no participants left in the dollar-denominated financial sector.
Terminating the Fed's plans to move forward with a CBDC and asking Congress to pass a
law permanently banning any and all forms of CBDC is the most effective way to mitigate
adverse impacts of CBDCs.
Bitcoin is a peer-to-peer electronic cash network. Electronic cash will exist in perpetuity in the
form of Bitcoin while the Federal Reserve cannibalizes whatever value is left in the US Dollar
with extremist and authoritarian CBDC policies.
CBDC?
Without a CBDC all commerce and trade can be denominated in commodities such as gold,
oil, Bitcoin, or any other physical asset. Delegating price control authority to the Keynesian
cultists who lead the Fed Reserve, who have never worked in a vocational profession, is
dangerous to our Democracy and must be resisted.
The Federal Reserve should be abolished and the US Government should be prohibited from
manipulating domestic or foreign economies. We need a new bill of rights which includes the
Separation of Money and State. The Federal Reserve's track record is atrocious and your
activities have destroyed so many lives.
The Federal Reserve has not adequately evaluated or provided public reports on the potential
impacts of adopting Bitcoin as our national currency and reserve unit of account. Continuing
to ignore Bitcoin will imperil the United States, and future generations will spit on the graves
of inept bureaucrats who did nothing to advance the adoption of Bitcoin in the United States.
Without providing complete anonymity, CBDC's cannot improve privacy. Since 2001 the US
government has, without mitigation, encroached further and further into mass surveillance
regimes against its own citizens. CBDCs are the next step in your path towards subjugating
the citizenry. If US laws force me to use CBDC's for any aspect of my daily life, I will
expatriate myself to a less authoritarian jurisdiction and stop paying taxes to the IRS.
100% of the cyber risks of your CBDC proposal are unavoidable. Without using a
decentralized proof-of-work mechanism the CBDC will always be subject to exploitation. It is
a system built to fail. In the last 2 decades every major bank and US government entity has
been hacked. CBDCs will be no different.
CBDC's should not exist.

sale? If so, how?
CBDC?
benefits of a CBDC?
_________________________________________________________________________
Guy Malone
Industry
Other: Bitcoin
Country
State
New Mexico
Email
Americans know that the main governmental interest in CBDCs is to surveil and censor
individuals who do not conform to the current regime's goals. We will not accept money that
can be turned off based on our "Social Credit Score" or actions (i.e., protests, support for
minority causes) that show our dissent and possible disgust with governmental policies.
Yes, if Americans used Bitcoin daily. All of the "potential benefits" of CBDCs are really the
benefits of Bitcoin, which CBDC designers are now simply copying, yet adding risk of censure
to our transactions and not solving - or even addressing - the problems of inflation.
inclusion?
stability?
CBDC?
sale? If so, how?
CBDC?
benefits of a CBDC?
_________________________________________________________________________
Gilbert A Blomdahl
Industry
Individual
Country
State
Wisconsin
Email
My experience is based on using Coinbase for a few years.�Hackers as it is digital anything is

possible with super computers, etc. Example: I purchased some odd new cryto on Coinbase
and a few thousand disappeared in a matter of an hour and there customer service had no
clue. �Complexity of the digital wallets and ease of use for non computer person.
Perhaps not open sourced or only partially.�Simplify and speed up transactions when using
digital wallet.�Regulate the banks and dealers and FDIC insure deposits
inclusion?
Seems they are all into crypto already so it would just make it more official making more
people at ease with it and trust it.
Wouldn't have to print it, less costly.
stability?
Positive because they are already allowing it and it is find but the dealers or handlers need to
be regulated as that is where the hacking is occurring.
Might better stop illegal money laundering.
Regulation just not too many. Similar to banking regulations but more in digital sense. They
already do physical currency through digital machines and statements so the transactions
shouldn't be that hard.
Yes it is still important because if infrastructures are destroyed in a nuclear war or other such
as Solar Flare events. Needs to be a plan how that is protected.
CBDC?
Illegals will take advantage of what they can and abuse is or will occur.
May want to combine somehow as a world currency but dictator type countries may not play
well.
Protect infrastructures from being destroyed in a nuclear war or other such as Solar Flare
events. Needs to be a plan how that is protected.
The digital world is the wild west so choose wisely and think about it very carefully.
Not sure.�Hackers�Scam artists�
Maybe
Yes if it is held
No
Federal reserve and Banks and crypto exchanges
IDK
sale? If so, how?
Yes, By way of ID chip provided by the us gov replacing the SS# in the form of cell phone sim
card or smart device.
Not sure�Yes�
CBDC?
Alot
benefits of a CBDC?
All�Sorry not much help with this.

_________________________________________________________________________
Industry
Other: Opinion
Country
State
Illinois
Email
inclusion?
stability?
CBDC?
sale? If so, how?
CBDC?
as it stands now, people are so subdued to accept what ever the software tells them that
there will be so much unethical management of finances that people will be getting nickled
and dimed to death. Even now in my town the cash registers (or the operators thereof) are
consistently making minor errors (or perhaps they are intentional I don't know , but its
happening all over the place and I steadily have to vocalize my disapproval and demand my
nickels and dimes sometimes even refusing the purchace altogether) that is to say the clerks
aren't going to pay attention and it seems that the undertone of the marketing techniques are
to get one to be diverted and distracted and to hurry, hurty, hurry so as to not question a few
cents or a dollar, or to imply cheapskatedness on the customer who admonishes the store's
policy for such unethical behaviour or incompetent software or inaptitude of proficiency on the
operator of aforementioned technology. my reply is if its not that big of a deal in regards 5o 17
cents ot 43 cents or a dollar , then why doesn't the store reverse the error in the customers
favor and/or reduce the cost of their stock items ? Furthermore if it costs to use then screw
that why not just use a credit card or a debit card. Hence the other factor, what backs it? It
seems to me is that it is Marlboro miles and Camel dollars were seen to be a tactic of
unscrupulous advertising targeting specific groups is not crypto currency the same. It seems
to me that ole Philip Morris would be entitled to an outcome of favorable litagation on the
grounds of all the malarkey that they and their customers were forced to endure in the form of
excessive taxations, which the aforesaid malarkey is now being accepted and utilized as
common procedural protocol. Also the U.S. dollar is core in U.S. economic trade policy.� If
implemented digital intermediaries should be subject to Federal Reserve oversight. The dollar
is the standard set for currency, it stands on the credibility of the Federal Reserve. The dollar
is a tool that even though its glow of unprecedented superiority as a medium for exchanging
goods and services and to be used for debts both private and public can cause some persons
with delequency it still, nevertheless is also effective in preventing unethical conduct and
corruption via stipulations and strings and hoops . Also was not the big allure is that it is
untraceable. That people could buy nuclear weapons, drugs, and modern day pizza gate
slaves with it via "the dark web"? � I concede that it is true that to ensure groundbreaking
innovation we must work together (that is the consumer who's bartering and mediations of
commerce�and tax dollar revenues are the backbone and bone marrow of The United States
of America's and the global economy and merchants as well as goverement), snd when
regulation fails to keep pace with innovation , vulnerable communities often suffer the falter.�
thank you.
benefits of a CBDC?
_________________________________________________________________________
Industry
Academia
Country
India
State
Email
inclusion?
stability?
CBDC?
sale? If so, how?
CBDC?
benefits of a CBDC?
_________________________________________________________________________
Mark Field
Industry
Country
State
Illinois
Email
The biggest risk is the decimation of the current banking industry, and the catastrophic result
to every community across America if the Fed allows a CBDC to bypass the longstanding
partnership between existing banks and the Fed, thus depriving all communities of
much-needed local capital with which to fund local credit needs.
FedNow will actually resolve many of the “benefits” discussed in the papers put forth thus far,
particularly once the “cross-border” transaction processes are perfected for FedNow. If
someone has access to an online currency, then they would also obviously possess sufficient
technology to be able to hold a free online account at a community bank and would therefore
be able to access FedNow for instant, irrevocable, electronic payments.
inclusion?
Not unless a way is figured out to operate that process “offline”. If an unbanked person has
the access and the desire to be online, then they can already use a bank account to initiate
payments. Otherwise the net effect on the unbanked population will be neutral. You will
never see 100% participation, no matter what you do, as some people will not trust any bank,
and some will not trust government to keep from spying on them through their banking
relationships.
If the public is encouraged to hold CBDC, then those funds will no no longer be “in circulation”
and the multiplier effect/creation of money benefits of having those funds lent and re-lent by
the local banks in American communities of all sizes cannot take place. That will impair
economic activity and will restrain proper growth.
stability?
Risk is added to the process if the central-server-based service is hacked or is subject of a

“denial of service” attack and people cannot then spend those dollars. Likewise, if one
person or entity can control a large block of CBDC, the potential increases to disrupt markets
if they later move to liquidate their position. Both issues would be negative.
The financial sector cannot withstand the Fed encouraging people to divert their funds onto
the Fed’s balance sheet and away from community banks. A CBDC would never become the
criminals’ currency of choice, anyway, so there will always be a place for the other types of
digital and crypto-based currencies as well as plain, old-fashioned cash. A
government-sponsored CBDC will also affect the financial sector by giving people a false
sense of security in utilizing ALL digital currencies, thus causing some folks to unexpectedly
lose value when they wander into other riskier digital currencies and inevitably suffer large
losses.
The best possible tool the Fed can use is its existing public-private partnership with banks to
assist in “minting” and “redeeming” digital currency, just like the role that banks currently play
in distributing coin and paper currency from and to the Fed on behalf of all consumers and
businesses. Any effort that the Fed may take beyond simply offering a basic digital
representation of currency and coin will adversely affect the financial sector.
Consumers never differentiate between “central bank money” and “commercial bank money”,
so if the use of one or more payment apps becomes widely accepted among merchants and
consumers alike, cash transactions will continue to diminish. There will always be those who
do not trust banks OR the government and they will continue to collect and use cash.
Consumers do not need “central bank money”. They need banks.
CBDC?
FedNow will actually enable most of the benefits in this area without a CBDC even being
necessary. Instant and irrevocable. Let’s see how that works in the marketplace before
jumping into a CBDC.
The U.S. will continue to be the flight-to-safety, go-to place regardless of how soon we enter
the digital arena. This is because of the decentralized partnership that exists between
existing commercial banks and the Fed that provides for the most stable, most successful,
and most resilient economic system in the world. International markets will not flock to a
CBDC issued by a lesser government just because they have a digital representation of their
currency available before we do.
Do not issue one.
Make sure that no law enforcement or governmental agency, or any other party, has access
to the records of the CBDC central ledgers or the records of the banks who are actually doing
the “minting” or “redeeming” of digital dollars, without first undergoing a rigorous “due process
of law” procedure. Nothing should be allowed to be disclosed without a preponderance of
probable cause and an official court-issued subpoena.
Hackers will hack. A central server will attract them like insects to a light at night. Hire
reformed hackers to hack back at the perpetrators.
Not if that means that it will be absolutely required from the onset that every person in the
country and every merchant be immediately required by law to accept CBDC even if they do
not possess the technology necessary to process such payments. It will take time to build out
the infrastructure necessary to accommodate such transactions.
NEVER. That would put the Fed in direct competition with every bank account in the country,
vying for retail consumers’ deposits and decimating the primary funding source for local loans
in communities across the country.
Yes. No one entity or identifiable grouping of entities should ever be able to sway the
perceived value of a digital US dollar by influencing the volume of digital dollars that may be
“bought” or “sold” within a short period of time. No one should EVER be allowed to go “short”
or “long” on the digital dollar.
ONLY FDIC-insured, legally chartered and properly regulated banks should ever be
considered as an intermediary to distribute the digital dollar. The CBDC should only be taking
the place of coin and currency in our lives, and not become a Trojan horse tool used to
fundamentally change the banking industry and consolidate the country’s economic power
within the structure of the Fed. By keeping the current public/private partnership with banks
in place for distribution, it will minimize the unintended consequences that will certainly occur
if that process is opened up to other, non-bank intermediaries.
This is the only way it will be helpful to the unbanked population. People with digital access
have no reason to be unbanked at this time.
sale? If so, how?
Yes. The same way FedNow will be. Through an “app” provided by their local bank.
The apps that will be provided by local banks will allow for payments across all platforms, and
if a CBDC is properly designed, it should be easily “redeemed” by the bank, which can then
convert it to a FedNow, RTP, Same-Day ACH, or Regular ACH transaction, depending on the
needs of the consumer.
CBDC?
The thousands of existing free-market-based and privately-owned banks will stay up with or
ahead of such technological advances, and will continue to provide access to those
technologies to the consumer.
benefits of a CBDC?
Similar to current cryptocurrencies, there must be anonymity to the end user when transferred
from one bank to another, similar to how crypto moves from one “exchange” to another. Only
upon discovery of seriously-suspected criminal activity should there be the ability to
determine the identity of the user of those funds as they pass from one bank to another. And
the proper due-process of law should then govern whether or not records should be turned
over to any law enforcement agency or other governmental body. Banks know their
customers. Customers should be protected unless laws are being broken.
_________________________________________________________________________
Intellect Design Arena Limited
Industry
Technology Company
Country
State
New Jersey
Email
tapan.a@intellectDesign.com
Risks of a CBDC -> While paper currency can be counterfeited maybe its too early to
comment on how easy or how hard it is to create fake CBDC ? What if the Fed / Us Treasury
loses their private key which is used to create the CBDC ? Have any studies of this been
done ? We should commission a team of (ethical) hackers to try and create fake
CBDC.��Potential Benefits--> Since CBDC is "digital currency" can we program it to be used
only for some SIC Codes. For instance prohibit its use for Gambling or Drugs in any way ?
Can we program it to give alerts on its "whereabouts" ??��From a payments perspective,
already payments are mostly real time and mostly digital and mostly free. So the only
additional benefit of a CBDC is a) reduction in Fraud b) reduction in fake / counterfeit
circulation. Both these aspects need to proven via a POC or PILOT
Financial Inclusion in the US for sure, should not be dependent on the launch of a CBDC.
Other countries in Africa and APAC ( for instance India ) have achieved very high levels of
Financial Inclusion by having a very well developed network of "Microfinance Institutions".
inclusion?
Financial Inclusion in the US for sure, should not be dependent on the launch of a CBDC.
Other countries in Africa and APAC ( for instance India ) have achieved very high levels of
Financial Inclusion by having a very well developed network of "Microfinance Institutions".
Based on this research paper, it appears that the US Fed does not intend to have "interest
bearing CBDC". However, for effective Monetary Policy implementation, the Fed needs to
control inflation, interest rates, money supply and buy-sell bonds( open market operations ).
But all of these mechanisms will become difficult if the CBDC is not widely held and if it is not
interest bearing
stability?
Would the 2008 Mortgage Crisis have been averted if CBDC's were in use?�The Pandemic
and the Invasion of ukraine have caused inflation to rise at record levels across the world.
Many central banks have had to raise the rate. Would a CBDC have prevented this ?��Yes,
CBDC, being digital, will afford greater control, better reporting and real time actions. To that
extent, CBDC will help in tracking finacial instability much faster. However many aspects
need to be tracked to ensure financial stability- Stock markets, bond markets, FX markets,
government debt situations, mortgage markets, global macro economic indicators, spikes in
sectoral economic activity etc to ensure financial stability.��CBDC will help ONLY if it is more
widely held and ultimately replaces CASH altogether. Otherwise a parallel ( dark?) economy
in cash will continue and we cannot track / trace that.
Depending on whether a CBDC Pays interest or not, it might affect the banks ability to raise
deposits if people prefer to move their holdings from bank deposits into CBDC and thereby
also reduce the banks' ability to grant loans and thereby impact the "money multiplier effect"
of banking.
Yes. �There should be one of two models�Model 1--> Entire country moves to CBDC - including
retail customers and cash / cheques are sunset. The trend in many economies is one of
declining usage of cash and cheques�OR�Model 2--> Where CBDC is used ONLY FOR
INTERBANK SETTLEMENT and for settlement of FX , Securities Markets ( Money
Settlement part ) etc. In this model, retail customers, SME and Corporates continue to work
with existing commercial bank digital dollars.
CBDC?
Cross Border Digital Payments - ( Low Value Retail ) already there are numerous fintechs such as
WISE, Remitly etc that have made these economical and quick. Would a retail client attach any more
value to anything more faster, is extremely unlikely.Cross Border Digital Payments - ( High Value
Corporate Transfers ) in the B2B space especially for Trade Finance, FX settlements, Inter company
transfers etc - this is a white space today. While Swift GPI claims to enable X-Border payment finality
( for a significant %age of payments ) in under 30 minutes, still there are avenues for improvement
here. However, this can only happen if both the central banks operate on a CBDC basis. We are already
seeing some innovation in IXB - Immediate Cross Border payments across the US and Eurozones by
leveraging two domestic real time payment rails ( SCT Instant and TCH RTP ) along with an FX
provider to convert USD-EUR. And this is happening even without CBDC.Moot point is , today
the cost of correspondent banking is very high. According to a 2016 Mckinsey report, "
Approximately $5 trillion are sitting dormant in nostro accounts around the world — tying up capital
that could be used in more productive ways ".According to Research conducted by East & Partners
on behalf of Visa Inc. in June 2019, looking at cross-border payments across 20 countries, the finding
was that the average cost of maintaining a single nostro account was approx $30,000 and the total cost
across all nostro's across these 20 major countries was over $25m.In the absence of a US CBDC or
a DLT based coin that can be used for cross border settlement, these costs are unlikely to go away.
Already JPMCOIN ( Onyx initiative of JPMC ) and Visa B2B connect aim to use a digital currency to
enable rapid cross border settlement in real time. So the absence or presence of a US CBDC is not got
to alter market dynamics. The US Might as well join the bandwagon and have its own digital currency
rather than be left behind.
The global economy is closely interlinked. Overseas nations have investments in the US and
US firms have made investment in other countries. So if other countries ( as of now only
Bahamas has a live CBDC ) are launching CBDC's, the US must closely follow the market
and be prepared to have its own CBDC.
Most of the risks are raised.
Current Cash based model is completely anonymous and can be used for illicit transactions.
CBDC, being digital, should be programmeable so that a) On movement from Wallet A to
Wallet B, if the rules prohibit the transfer it needs to be stopped. One cannot juxtapose
TOTAL PRIVACY and FULL TRACEABLITY. I think of the objectives of a CBDC should be to
have FULL TRACEABILITY -- how many CBDC coins are in which wallet, what is the ID of
the wallet holder, KYC of the wallet holder and when it moves to WALLET B, the US FED
and FINCEN / OFAC etc need to be made aware / alerted by the SYSTEM / DLT Network.
Since this is Digital currency and can be programmed, it can come pre-loaded with
intelligence to ward of cyber attacks. Also, if the servers are distributed bringing down one
server, should not impact the overall availability. This is one more reason that the FED must
involve the commercial banks as intermediaries and allow them to raise CBDC deposits and
disburse CBDC loans...
YES
Yes because a) it will enable the Fed to better control monetary policy if the CBDC is interest
bearing and also b) because it will allow banks to raise deposits ( in CBDC) and lend ( In
CBDC) creating more availability of the CBDC and c) Retail and SME sector will have more
faith / trust in a CBDC only if it is interest bearing.
No. The end goal should be to go away from Cash and move to a full digital currency. There
are no limits to holding USD Cash. So why have limits on holding CBDC ? In the initial period,
if there are concerns, such a limit may be there, but otherwise, as a long term design, CBDC
should not have limits.
Commercial Banks and Non Bank Financial Institutions subject to regulatory approval should
be allowed to act as intermediaries for CBDC. Think of it like this - PAYPAL allows users to
create Wallets and hold digital dollars. So entities similar to PAYPAL or of a similar structure
could act as Wallet providers, deposit takers etc in CBDC. But they must all be subject to
Financial Fed Rules and policies
If one interprets offline as "Paper instrument" or "Cash" and the ability to say, write a cheque
denominated in CBDC, then that defeats the "digital" nature of CBDC. Mobile penetration
and internet penetration is already very high. 5G networks also now enable very rapid internet
connections and hence having an offline capability, may not be desirable for CBDC's
sale? If so, how?
Yes. Individuals already hold Crypto and other coins in their wallets on mobile apps. So why
not also hold CBDC in their wallet and use it to pay merchants at checkout ?
A DLT based design would be secure and optimum given that other countries and private
players are also considering a similar model.
CBDC?
With regular paper currency and commercial bank "digital" account currency, the challenge of
"technological obsolescence" was not there, now if CBDC is purely digital, there could be
massive repercussions of an underlying tech stack version upgrade…imagine if all
commercial banks, wallet providers, central banks, non bank Depository instittutes had to
upgrade from DLT version x to DLT version x+1 ?
benefits of a CBDC?
_________________________________________________________________________
chris edwards
Industry
Academia
Country
State
Arizona
Email
- negative interest rates�- management fees�- sanctions by govt�- account deletion�- its a
platform for control and manipulation�- digital financial "tech" for average consumer does not
work well, e.g. smart phone pay
- yes. without the fed. res. being intermediary
inclusion?
- what does financial inclusion mean here? do you mean accessibility?�- digital currencies may
work for "saving", but not for bread, nikes, or a garage sale.
- access would be a factor, as it appears this is a complex technology�- maximum

employment/price stability through CBDC is an abstract concept at present - i do not think
many Americans, particularly on the right, would accept this as a payment method.
stability?
- it would be a net negative, as what you are presenting is inherently complex
- in my view the financial sector would be first to prosper from this, as they would move to
implement, and be private contractors for CBDC
- a security tool would be a non traceable ID # generated at each transaction - a PIN #.
- yes. preserve cash payments/cash usage
CBDC?
- they don't need to evolve - keep them the same.

- the U.S. should look after its own - it has not done this. the U.S. is bloody sending 40 billion
dollars to Ukraine while Americans die on U.S. streets from homelessness and hunger.
- yes. ensure the fed is not an intermediary. use public banking.
- the fed and govt worry "too much" about "illicit financial activity"
- funds should be insured. and there should be no way a third party, such as a hospital billing
dept can lobby for access to and then pillage a client account for unpaid medical bills for
example.
- no
- interest is ridiculous now. i have like thousands in a savings account and i make like 29
cents a quarter
- yes, a country could park its currency to evade negative interest rates.
- a public banking firm should be used. its as it they have been outlawed by this country. the
last entity to serve as an intermediary, for example, would be Chase Manhattan Bank - they
are arrogant and inaccessible.
- just use cash.
sale? If so, how?
- there is little ease of use now with contemporary payment systems. the use of cell phone
pay is increasing, yet it is slow, unwieldly, and non functional - it appears CBDC would be the
same.
- use the technology large banking firms and commodity traders use for accurate, instant
transactions
CBDC?
- that they be used for control and manipulation by govt
benefits of a CBDC?
- you didn't do yourself any favors by making this paper so long and complex.�- simplify,
simplify - but I would bet that is too threatening for you.
_________________________________________________________________________
Iowa Bankers Association
Industry
Trade Organization
Country
State
Iowa
Email
jsorensen@iowabankers.com
The Federal Reserve begins its paper with the statement that a healthy, well-functioning
economy requires the nation’s citizens to have confidence in its money and payments
services. Since the latter half of the nineteenth century, Iowa banks have gradually earned
the trust and confidence of the citizens of Iowa. This confidence has been preserved
throughout decades of accelerating change in service delivery channels, new technology
adoption and payments. �Trust often correlates to a customer’s proximity to a given service
provider, especially when it comes to financial services. Iowa’s expansive network of
community banks is a case in point. A 2019 study by Iowa State University, published in the
Journal of Financial Economics, found that growing up in a community with or without a
financial institution has a long-term effect on how you build and manage credit. The
co-author of the research and Chair of Finance at Iowa State University reported that early
exposure to local banking increases financial literacy and trust. �Relationship banking is the
hallmark of Iowa’s community banks. It’s no coincidence that Iowa has more banks per
capita than any other state, while we also boast one of the nation’s lowest rate of unbanked
citizens at 2.6% of our population, according to a 2019 FDIC study. This rate of unbanked in
Iowa is nearly half the national average of 5.4%. A recent study conducted by
WalletHub.com also found Iowa to be one of the most financially literate states in the nation.
�Iowa banks demonstrated the value of relationships during the early, difficult days of the
COVID-19 pandemic. They efficiently delivered $8 billion in paycheck protection program
loans to thousands of small businesses, saving approximately 800,000 Iowa jobs. �The value
of these main street and farm relationships to Iowa’s economy cannot be overstated. Any
discussion of a Central Bank Digital Currency (CBDC) first and foremost should do no harm
to this time-tested method of delivering financial products through intermediary financial
institutions. �
inclusion?
stability?
Contrary to popular belief, a U.S. CBDC is not necessary to “digitize the dollar,” as the dollar
is largely digital today. However, the issuance of a CBDC would fundamentally rewire our
banking and financial system by changing the relationship between citizens and the Fed. As
this work progresses, there is a growing recognition the deployment and use of CBDCs would
be weighed down by very significant real-world trade-offs. The main policy obstacle to
developing, deploying, and maintaining a CBDC in the real economy is the lack of compelling
use cases where CBDC delivers benefits above those available from other options.�Today we
use both public and private money. In developed economies public money, which includes
cash and accounts held directly at the Federal Reserve, make up about 5% of money. The
other 95% of money is private money – funds held as a liability of a private institution like a
bank or credit union. Private money is important to us all because it is created through
productive financial intermediation by banks in the form of lending and hence represents
expansion, and usually a multiplication, in real economic output. The decision to introduce a
CBDC would be a deliberate decision to shift this balance back to public money. If instead,
our objective is to realize the benefit of technological innovation, we should look to leverage
novel developments in private money (like real-time payments systems and well-regulated
stablecoins.) Private sector innovation in banking and payments has made a significant
contribution to establishing the U.S. dollar as the reserve currency of the world and is best
positioned to support it in the years to come. �In a recent IntraFi Network Banking with Interest
podcast, former Federal Reserve Board Governor Randall Quarles said European Central
Bank (ECB) leaders had estimated a CBDC would disintermediate from twelve to twenty
percent of EU deposits. These are bank deposits that would become a liability of the ECB,
while reducing liquidity at private lenders. �Governor Quarles suggested if this model were
duplicated in the United States, disintermediation would cause significant disruption to our
economy, in exchange for very modest benefits. This would also further politicize our central
bank as lawmakers realize the value of a direct financial pipeline to the private sector “with
strings attached”. We agree with the Governor’s assessment. The benefits of a CBDC do
not outweigh the potential disruption to our economy, and runs counter to the principals of a
decentralized free market system. �It’s certainly not hard to envision where money would flow
during a time of crisis if a CBDC, without credit or liquidity risk, were a retail option. Runs on
private sector financial firms would become more likely or more severe, threatening the safety
and stability of the US financial system. �
CBDC?
sale? If so, how?
CBDC?
benefits of a CBDC?
As stated in the Federal Reserve’s Paper, the Federal Reserve Act does not authorize direct
Federal Reserve accounts for individuals, and such accounts would represent a significant
expansion of the Federal Reserve’s role in the financial system and the economy. �At this
time, the presumed benefits of a CBDC seem to be improved cross-border payments,
financial inclusion, and support for the dollars international role. A case can be made that
these improvements will be modest at best and could come at a heavy cost to our economy
by reducing the aggregate deposits in the banking system. This outcome would, in turn,
increase bank funding expense, reduce credit availability and raise credit costs for
households and businesses. �Given the high stakes, it is important we get this right, which is
why IBA supports the Federal Reserve’s thoughtful and considered approach. The Fed’s
discussion paper takes a balanced view of the opportunities and risks associated with issuing
a CBDC in the United States. The discussion paper also sets an appropriately high bar for
action on a CBDC. We believe that the Federal Reserve should not move forward without a
clear analysis that shows the benefits of issuing a CBDC outweigh the risks and that doing so
would not create adverse impacts on consumers, markets, or the economy. This analysis
must necessarily take into account whether a CBDC is the most effective way to realize these
benefits. We also agree with the Fed’s assessment that the introduction of a CBDC would
require Congressional approval in the form of an authorizing law. �As the Iowa Bankers
Association evaluates the likely impacts of issuing a CBDC it has become clear that the
purported benefits of a CBDC are uncertain and unlikely to be realized, while the costs are
real and acute. Based on this analysis, we do not see a compelling case for a CBDC in the
United States today.�
_________________________________________________________________________
Nicholas Anthony
Industry
Other: Non-profit Think Tank
Country
State
Email
nanthony@cato.org
The Federal Reserve’s January 2022 discussion paper touched on a number of potential
benefits, risks, and policy considerations relevant to a central bank digital currency (CBDC).
However, the list of potential risks was particularly understated: only two paragraphs
considered the balance of protecting financial privacy and preventing financial crimes. �As
noted in the discussion paper, financial institutions are already required to report large
sweeps of financial activity in compliance with the government’s attempt to combat money
laundering and terrorist financing. In doing so, the paper appears to be suggesting that a
CBDC would not be different from existing digital money. While it may be true that a CBDC
could be largely identical to existing digital money, there would be a significant difference in
that a CBDC would provide the opportunity to establish a direct line between the government
and the public’s financial activity. In doing so, a CBDC would erase what little financial privacy
still exists in the United States. �In fact, the threat to financial privacy may be the single
greatest risk of a CBDC. And it’s due to the significance of this risk that it is particularly
disappointing that the discussion paper devoted so little time to the issue. The “intermediated
CBDC model”––something which largely appears to be a retail CBDC with extra
steps––described in the discussion paper may be able to be designed sufficiently to prevent a
direct line between the government and the public by using third parties (i.e., banks and other
financial institutions) to interrupt the flow of information. But even here, financial privacy is still
at risk. One of the few constraints on the third-party doctrine is whether the information
revealed was in the ordinary course of business. While financial institutions do not track down
the journey of each dollar bill in the ordinary course of business, a CBDC would likely have a
record of its transactions and make that data available to financial institutions. Therefore, that
newly available data would likely be added to the existing reporting requirements and thus
create a much larger data pool for law enforcement to pull from during investigations. Worse
yet, even if that newly available data is not added to reporting requirements initially, it still
creates a much larger data pool.��So whether it is done directly or in an “intermediated”
fashion, a CBDC poses a significant risk to Americans’ financial privacy. And it’s not just a
risk of quiet observance. The use of the Emergencies Act in Canada to freeze the bank
accounts of protestors earlier this year showed that Americans should be aware of the extent
the government can go to exert control. A CBDC would dramatically increase that risk.
�Suggested Reading��Norbert J. Michel and Jennifer J. Schulp, “Revising the Bank Secrecy Act
to Protect Privacy and Deter Criminals,” CMFA Working Paper No. 007, April 14, 2022,
https://www.alt-m.org/wp-content/uploads/2022/04/RevisingTheBankSecrecyAct_NorbertMich
elAndJenniferSchulp_CMFAWP007.pdf.��Nicholas Anthony, “How Canada Made the Case for
Cryptocurrency, Not CBDCs,” Cato Institute, March 2, 2022,
https://www.cato.org/blog/how-canada-made-case-cryptocurrency-not-cbdcs.��Nicholas
Anthony, “Why Don’t Americans Have Stronger Financial Privacy Rights?,” Cato Institute,
October 28, 2021,
https://www.cato.org/blog/why-dont-americans-have-stronger-financial-privacy-rights.
In a report titled, “Central Bank Digital Currencies: Six Policy Mistakes to Avoid,” Douglas
Elliott and Larissa de Lima warn that officials should be careful not to ignore other policy tools
when thinking about the design of a central bank digital currency (CBDC). At the moment, it
appears almost all of the potential “benefits” of a CBDC would be better left to existing efforts.
�The Payments System��Improving the payments system in the United States is an effort that is
long overdue, but a CBDC would pose little benefit given the existing developments in both
the public and private sectors. First, the Fed itself expects to launch FedNow in 2023––an
effort that is specifically designed to improve the payments system. Though to achieve this
goal, FedNow could even be shut down today and the Fed could simply expand its operating
hours to improve payments speeds. Second, before the FedNow initiative interrupted the
private sector’s progress, the RTP Network was well on its way to successfully introducing
real time payments across the country. Third, stablecoins have offered another
private-sector solution to payment delays by making transactions possible 24 hours a day.
So between the Fed’s own efforts and the innovations in the private sector, it appears that a
CBDC would do little to uniquely improve the payments system. �Financial Inclusion��Financial
inclusion is a worthy goal, but a CBDC is not a worthwhile solution. As far as what a CBDC
might offer that is not already available, it’s unclear what unique benefit it might offer precisely
because there is so much private-sector competition taking place. The Bank On initiative and
adoption of mobile banking are giving underserved communities greater access to the
financial system. The Federal Deposit Insurance Corporation’s (FDIC’s) 2019 survey on
banking and financial services seems to suggest these services are making a real
improvement in the space considering the unbanked households in the United States have
steadily decreased from 8.2 percent in 2011 to 5.4 percent in 2019. By the time a CBDC is
released, that number might be nearly zero. And best of all, options like cryptocurrencies,
cheaper check cashing, and prepaid cards continue to reduce the burden of being unbanked.
�The World Reserve Currency��Preserving the dollar’s world reserve status is also described as
a potential benefit of a CBDC, but this too falls short. Put simply, any improvement to the
dollar is likely to help support its international status. For instance, improving financial privacy
protections, payments speeds, and transparency in monetary governance would likely benefit
the dollar’s international status. It’s hard to imagine how a CBDC is unique in any other way
than in terms of getting the United States a seat in the “digital currency race.” And even then,
it’s not clear that this race is one the United States needs to win. “Going digital” may be an
improvement for some foreign currencies, but those currencies still have many other
problems that prevent them from being used on an international scale. China’s own CBDC
may be the best example of this problem: China may be leading in the digital currency race,
but few people are flocking to it considering the country’s history of human rights and privacy
violations.
inclusion?
A central bank digital currency (CBDC) is unlikely to affect financial inclusion substantially.
Not only have the number of unbanked individuals been steadily decreasing over time, but
the reasons people give for being unbanked are unlikely to be assuaged by a program from
the federal government. �The Bank On initiative, mobile banking, and cryptocurrencies are all
giving underserved communities unprecedented access to the financial system. For instance,
the Federal Reserve Bank of St. Louis found that nearly 4 million accounts were opened in
2020 due to the Bank On initiative––an initiative designed to increase the availability of
low-cost deposit accounts. Mobile banking has experienced similar success: it was the main
way to access one’s bank account for only 9.5 percent of households in 2015, but it rose to
34 percent by 2019. The Federal Deposit Insurance Corporation’s (FDIC’s) 2019 survey on
banking and financial services seems to suggest these services are making a real
improvement in the space considering their growth has coincided with unbanked households
in the United States steadily decreasing from 8.2 percent in 2011 to 5.4 percent in 2019.��With
those factors set aside, it is unlikely that a CBDC would win wide support among the un- and
under-banked population unless it offers credible privacy protections and intermediary-free
services. The 2019 FDIC survey found that trust and privacy were cited as two of the top
three reasons for not having a bank account. A “government bank account” is likely to be an
even less appealing prospect for the respondents––even if it is merely a digital
wallet.��Suggested Reading��Federal Reserve Bank of St. Louis, “Bank On National Data Hub:
Findings from 2020,” December 22, 2021,
https://www.stlouisfed.org/news-releases/2021/12/22/st-louis-fed-releases-the-bank-on-nation
al-data-hub-findings-from-2020.��Paul Calem and Yasmeen Abdul-Razeq, “What Drives
Household Financial Inclusion? Analysis of Data Exposes Myths and Identifies Opportunities,”
Bank Policy Institute, May 3, 2022,
https://bpi.com/what-drives-household-financial-inclusion-analysis-of-data-exposes-myths-an
d-identifies-opportunities/. �Federal Deposit Insurance Corporation, “How America Banks:
Household Use of Banking and Financial Services,” October 2020,
https://economicinclusion.gov/downloads/2019_FDIC_Unbanked_HH_Survey_Report.pdf.��Nic
holas Anthony, “Only Six People Used the Postal Banking Pilot Program,” Cato Institute,
March 30, 2022,
https://www.cato.org/blog/only-six-people-used-postal-banking-pilot-program. �
stability?
Where stablecoins and other nonbank moneys (e.g., cryptocurrency) complement and build
off of the financial sector, a central bank digital currency (CBDC) could undermine it. It
appears to be likely that a CBDC would have a negative impact on financial stability. A CBDC
offered at the retail level poses substantial disintermediation risks. In short, by offering an
option that is safer than the average deposit account, a CBDC would increase the risk of bank
runs in times of stress. Both the Fed and the Bank of International Settlements (BIS) have
recognized this risk in the past, �"Depending on the design and adoption of a CBDC, there
may be broad market structure effects. There is a risk of disintermediating banks or enabling
destabilizing runs into central bank money, thereby undermining financial stability. Today, the
public can (and have in the past) run into central bank money by holding more cash, but such
runs are very rare, given the existence of deposit insurance and bank resolution frameworks
that protect retail depositors. [A] widely available CBDC could make such events more
frequent and severe, by enabling “digital runs” towards the central bank with unprecedented
speed and scale … [If] banks begin to lose deposits to CBDC over time they may come to
rely more on wholesale funding, and possibly restrict credit supply in the economy with
potential impacts on economic growth."��As should be clear from BIS’s account, the Fed’s entry
into the digital currency landscape differs significantly from the private sector initiatives (e.g.,
cryptocurrencies, stablecoins, etc.) in that the Fed’s entry would risk an unprecedented tilting
of the playing field. �Suggested Reading��George Selgin, “Central Bank Digital Currency as a
Potential Source of Financial Instability,” Cato Journal, Spring/Summer 2021,
www.cato.org/cato-journal/spring/summer-2021/central-bank-digital-currency-potential-source
-financial-instability. �Board of Governors of the Federal Reserve System, “Regulation D:
Reserve Requirements of Depository Institutions, 12 CFR Part 204,” Federal Register 84, No.
48 (March 12, 2019, www.govinfo.gov/content/pkg/FR-2019–03-12/pdf/2019–04348.pdf.
�Bank for International Settlements, “Central Bank Digital Currencies: Foundational Principles
and Core Features,” https://www.bis.org/publ/othp33.pdf. �Nicholas Anthony, “Congress
Should Welcome Cryptocurrency Competition,” Cato Institute, May 2, 2022,
https://www.cato.org/briefing-paper/congress-should-welcome-cryptocurrency-competition. �
CBDC?
Every nation in the world could adopt a central bank digital currency (CBDC), but that alone
would not be a justification for the United States to follow suit. Both lawmakers and regulators
must be careful to distinguish between keeping up with the Joneses and learning from the
experience of others. Decisions by other nations should inform the decisions made by the
U.S. government regardless of the subject area so long as the relative conditions are
considered, and no decision is considered a panacea.��To that end, lawmakers should shift
their focus away from trying to win the “digital currency race” and towards strengthening the
dollar. It is unlikely that the majority of people who rely on the U.S. dollar will switch to the
Chinese yuan, Russian ruble, or Nigerian naira simply because those countries offer a
CBDC––especially considering the U.S. dollar system is already largely digital. �Suggested
Reading��Nicholas Anthony, “Congress Should Welcome Cryptocurrency Competition,” Cato
Institute, May 2, 2022,
https://www.cato.org/briefing-paper/congress-should-welcome-cryptocurrency-competition. �
Aside from the many potential practical problems, interest payments on a central bank digital
currency (CBDC) could risk exposing the Fed to a new wave of politicization––especially
when officials try to use negative interest rates and above-market rates to spur spending and
saving, respectfully. In fact, determining the appropriate level of competition with private
financial firms will likely be difficult. First, it’s unclear what market failure the Fed would be
stepping in to solve by paying interest on a CBDC when there are numerous available
interest-bearing alternatives in the private sector. And second, it’s unclear how effective
interest payments would be considering the policy will have to decide whether the upper
bound on interest paid to CBDC holders will take the rate paid to reserve accounts into
account. Failure to do so (i.e., exceeding private-sector interest rates) would likely increase
both disintermediation risks and political risks as industries and the public vie for one policy
over another. �Suggested Reading��George Selgin, “Central Bank Digital Currency as a
Potential Source of Financial Instability,” Cato Journal, Spring/Summer 2021,
www.cato.org/cato-journal/spring/summer-2021/central-bank-digital-currency-potential-source
-financial-instability. �
If a central bank digital currency (CBDC) were to be created in the United States, it should not
be subject to quantity limits at any stage. Although China’s CBDC uses a model in which
users must relinquish increasing levels of privacy in return for higher account balance limits
and others have argued account limits can protect consumers from losses, the United States
should allow consumers to choose what amount best fits their needs regardless of how high
or low that amount is. More so, there should not be reporting thresholds where users are
allowed to exceed certain levels, but are, in turn, reported for doing so. In that sense, the
United States would simply be mirroring China’s model––albeit, in a more roundabout
fashion. �It might not be most productive or even the safest choice to hold one’s money in one
account over another, but it should ultimately be up to each individual person, nonetheless.
Much like with the case against using negative interest rates on a CBDC to spur spending, it
is not the federal government’s role to decide how individuals use their money.
sale? If so, how?
CBDC?
The current trend of technological innovation seems to suggest that a central bank digital
currency will soon be unnecessary. The number of unbanked households continues to fall
each year due partly to the rising adoption of mobile banking; innovations within stablecoins
and cryptocurrency more broadly have presented unprecedented access to the financial
system; and fintech companies continue to make new advances in financial services. In
looking to the future to see what place a CBDC might have, it seems most likely that it has no
place at all. �Suggested Reading��Federal Deposit Insurance Corporation, “How America
Banks: Household Use of Banking and Financial Services,” October 2020,
https://economicinclusion.gov/downloads/2019_FDIC_Unbanked_HH_Survey_Report.pdf. �
benefits of a CBDC?
_________________________________________________________________________
Steven Bonta
Industry
Academia
Country
State
Pennsylvania
Email
Privacy risk is mentioned but insufficiently considered. The flagship CBDC under
development right now is China's digital yuan, whose entire purpose is to eliminate every
vestige of financial privacy in China's increasingly totalitarian, panopticon regime. It is fatuous
to pretend that a digital dollar is anything other than an attempt to "keep up with the Chinese."
But there is absolutely no reason for this; China also has highly efficient cell-phone based
payment systems, like Alipay and WeChat, that in some respects are more efficient than
American check-writing and debit cards -- but again, these have zero privacy features, and
are constantly exploited by the Chinese government to monitor and control people's private
lives. Such measures may be consistent with China's long tradition of absolutism, but are
utterly incompatible with the American system. Our system may be a bit "messier," but freedo
always is, in contrast to the ruthless efficiency of centralized control. And a CBDC, no matter
the professed good intentions, will end up diminishing American financial privacy, if not, in the
longer run, negating it altogether in the name of competing with China. Also note that the
emphasis on need for smoother, more streamlined cross-border movement of currency will
also facilitate the creation of some kind of global currency -- another monumentally bad idea.
The current system has proven more than adequate. In particular, the strength of the dollar
resides less in the speed of its convertibility than on its underlying stability and on
international confidence in its long-term reliability. These are ultimately fiscal and monetary
considerations, not questions of exchange mechanisms.
inclusion?
How could a CBDC fail to be extremely inflationary? It would require, in effect, the at-will
availability of Fed funding for extension of credit by commercial banks and other
intermediaries, i.e., in direct response to consumer demand for money (and in much greater
quantities, of course, than consumer demand for old-fashioned cash). It might have an effect
similar to, e.g., the Fed directly negotiating with the Treasury to purchase newly-issued debt,
instead of buying and selling already-existing securities via traditional open market
operations. Has anyone even considered the monetary moral hazard and inflationary
pressure that retail CBDCs might entail?
stability?
See answer to question 4. My best guess is that it would incentivize much sharper rates of
inflation, in reaction to the unquestionable demand for such a convenient new form of money,
especially where any retail CBDC is concerned.
See answers to 4 and 5.
Any safeguards designed to limit the inflationary risks of such an instrument would probably
also diminish its efficiency and, hence, its attractiveness to consumers. Consumers love easy
money in any form, moral hazards and all -- but that does not mean it is good policy in the
long range.
Yes. Absent hyperinfation, cash (like precious metal and other "old-fashioned" transactional
mediums) will always have features that will make it attractive to consumers, privacy being
one of them.
CBDC?
Impossible to say, but the clear implication in the paper is that we need to keep up with the
likes of China or risk having the dollar's status as the world's reserve currency eroded.
However, the status of the dollar is less dependent on efficiency in narrow, technological
terms than upon underlying confidence in the long-term strength and viability of the U.S.
economy. Some may initially choose the digital yuan for its efficiency, just as many countries
bought into the "One Belt, One Road" initiative -- only to find out that doing business with
China was altogether different than doing business with the West. In similar fashion, the
digital yuan will allow the Chinese government to track financial data all over the world,
including any other CBDCs linked to the yuan. That alone should be a basis for staying out of
any international CBDC system, and advising other countries to do the same. And if
cross-border payments retain some of their present inefficiencies, then so be it.
See answer to question 9. Bottom line: an international CBDC system such as both this report
and the recent BIS report contemplate would amount to yet another foolish codependency
with China, and one the Chinese will be only too happy to exploit.
A better question would be: Are there additional risks not raised in this paper? See responses
to preceding questions on the systemic dangers posed by China's digital yuan.
It would be impossible. Significant concessions in the area of personal financial privacy would
be unavoidable, even if, contra the Chinese, the goal of an American CBDC would be to
enhance convenience while safeguarding privacy.
Emphatically not. At most, it should be a voluntary market alternative that consumers are free
to reject in favor of other forms of payment. Otherwise, whatever privacy compromises end up
being baked into CBDC design features will be forced on people, since everyone, and every
bank account, will then need to be forced to accept CBDC payment, with everything that goes
with it.
No, if its goal is truly to be nothing more than a digital equivalent to Federal Reserve notes.
Also, interest accrual would be still more potentially inflationary than retail CBDCs
themselves.
In theory, this would be a necessary expedient to cap the supply of CBDCs in the overall
money supply (would CBDCs be reckoned as M1? We assume so.). But actually keeping
track of such numbers would be well-nigh impossible, as well as impractical. How, for
example, could a cap be imposed in the issuance of a large commercial loan, as to what
percentage of the loan could be extended in CBDCs?
sale? If so, how?
CBDC?
benefits of a CBDC?
_________________________________________________________________________
The Cato Institute
Industry
Other: Public policy think tank
Country
State
Email
gselgin@cato.org
I believe that the discussion paper does a good job outlining potential benefits of a CBDC. �
I believe that all those potential benefits could be _better_ achieved with private digital media:
(1) "broad access to digital money that is free from credit risk and liquidity risk. This can also
be achieved by Private-Market Digital Currencies (PMDCs), provided their suppliers can have
Fed Master Accounts, and can thereby fully back their digital monies with the Fed's
"wholesale" digital deposits. This option resembles the Fed's "intermediated" CBDC, but with
advantages I will come to. (2) "help to level the playing field in payment innovation for
private-sector firms of�all sizes." I do not believe that a CBDC can serve this purpose as well
as PMDCs can, because a CB can never compete equally private payment-media suppliers.
Despite the DIDMCA, the Fed can cross-subsidize its payments products; it can even supply
media and services at a loss, without itself ever "failing." (To get around the DIDMCA, it only
has to claim some overarching public need.) Finally, the Fed regulates many of its actual and
would-be rivals, including any that has or seeks to have an account with it. (3) "a CBDC might
generate new capabilities to meet the evolving speed and efficiency requirements�of the digital
economy." The key to dynamic innovation is a hotly contested digital currency market. For
reasons I gave in (2), I believe that the Fed's entry into that market will discourage entry by
other firms, thereby reducing the prospects for efficient innovation instead of enhancing them.
(4) "streamline cross-border payments." The main challenges here stem from the reality that
ours is a multi-currency world. The Fed certainly should play a role in overcoming them, but I
do not believe that a CBDC itself supplies a solution better than what private media can
accomplish. (5) "preserve the dominant international�role of the U.S. dollar." The PMDCs or
CBDC than can best do this is the one that is most efficient and versatile, and that therefore
adds the most to the attractiveness of the USD and its various representatives in global
payments. I believe that the Fed can best preserve and enhance the USD's status by
encouraging the fullest-possible development of safe PMDCs. We can thereby do better than
China will with it's alternative, top-down approach. Currency is not so unlike other goods in
this respect as many suppose. (6) "reduce common barriers to financial inclusion and ... lower
transaction costs." DC is inherently free of many of the "common barriers" to financial
inclusion. But here again, I believe that PMDC offers the best prospects. The unbanked are
so for many reasons, ranging from high costs of keeping bank deposits to distrust of banks to
mere distance from bank facilities. "Including" as many of them as possible calls for a variety
of different DC solutions catering to their distinct wants. "Tokenized" DC that can be used by
persons who do not wish to have bank accounts, but who do have mobile devices, can be
especially important. Innovative retail interfaces will also be especially important. Finally, the
lowest cost alternatives are most likely to be ones developed by private entrepreneurs facing
stiff competition. For all these reasons, I believe the Fed should promote safe PMDCs, rather
that enter the market itself.
inclusion?
Of course, CBDC, understood simply as an additional alternative to legacy payments media,

can only enhance inclusion: there may well be some unbanked persons who do not wish to
have or cannot afford ordinary bank deposits who would be glad to keep Fed cheaper
accounts, direct or intermediated. The real questions are whether PMDC's might eventually
be still more effective in banking the unbanked, and whether, by introducing ts own CBDC,
the Fed will also limit the extent of PMDC entry and innovation. I believe that the answer to
both of these questions is "yes." I also believe there are many ways the Fed and the
Congress might encourage private-market suppliers to make a special effort to cater to the
unbanked.
Provided that growth in the demand for it isn't accompanied by disintermediation of

private-market depository institutions, a future CBDC needn't complicate monetary policy any
more than the Fed's ability to issue paper currency does. Steady growth in the demand for
CBDC might then call for like growth in the size of the Fed's balance sheet, other things
equal. But such growth can be readily provided for. �If, instead, the demand for real CBDC
balances increases at the expense of ordinary banks, and particularly if it leads to a very
substantial and sudden disintermediation of bank deposits, the Fed may have to act
aggressively to prevent any resulting decline in total bank deposits from causing money
market rates to spike, and otherwise causing it to meet its monetary policy targets. I discuss
this possibility further in the next section.
stability?
The most obvious financial stability implication of CBDC consists of the risk it poses of a
sudden disintermediation of the legacy banking system. This might happen during a crisis in
which uninsured depositors, and perhaps some insured ones as well, "run" into CBDC. Such
a run is far more likely than a run into paper currency, the hoarding of which is risky and
extremely inconvenient. Today, rather than hoard currency, sophisticated depositors tend run
from banks they distrust to others they trust more, leaving the banking system as a whole
intact. A CBDC option, however, makes running from the whole banking system much more
tempting, especially when there is even a shade of doubt concerning every bank's condition.
�This risk is all the greater if CBDC balances pay a relatively attractive interest rate, as some
proposals contemplate. What;s more, if the interest rate on CBDC ever exceeds that paid on
bank deposits, a disintermediation crisis might occur even in the absence of _any_ distrust of
ordinary banks! In principle, the Fed could avert such a crisis by not paying interest on CBDC
balances, or by paying a relatively low rate only. But many CBDC proponents will argue that
doing so will penalize the very persons they'd most like to see CBDC balances serve. Indeed,
quite a few believe that Fed accounts should pay the same interest rate as banks earn on
their reserve balances--which is necessarily more than what banks can profitably pay their
own depositors (and much less than banks actually pay). �A Fed run by technocrats, subject to
no political pressure whatsoever, could in principal set the rate it pays on CBDC at levels
consistent with preserving financial stability--even including negative rates now and then! But
the real Fed is not in any such privileged position. As it stands, its administered rates are
already set by the Fed Board, rather than the FOMC; and while the Board has thus far
deferred to the FOMC in setting them, it is most unlikely that it will be allowed to take the
same approach to setting the rate the Fed pays on public Fed accounts. In any event, it would
not be prudent for the Fed to pursue a CBDC option that could find it facing an intermediation
crisis with its hands tied. �The scenario is not so farfetched. Earlier this century, Postal
Savings accounts paid a rate of interest set by Congress. During the Great Depression,
interest rates generally collapsed. But the rate on postal savings didn't. Consequently,
depositors moved as much money as they could out of ordinary banks into postal accounts,
adding to banks' already severe problems Had it not been for caps on those postal savings
accounts, every last surviving commercial bank and savings and loan company might have
gone under.
Here I'll just address the stablecoin alternative. Unlike the Fed, a PMDC issuer would have to
cover its operating expenses to remain profitable. Consequently, even if it kept 100%
reserves at the Fed, and earned the same interest rate on those reserve balances that banks
earn, it could not pay the same rate to its DC holders. Indeed, because it would not make
loans or other risky but higher-return investments, it might generally be expected to pay less
than banks can afford to pay on ordinary deposits. So PMDC, or safe PMDC at any rate,
including safe (or "narrow") 100% reserve-backed stablecoins, would not pose the same
disintermediation risk as CBDC.
I believe I've covered these questions above, in discussing the (theoretical, but in my opinion
impractical possibility of varying the return on CBDC balances so as to prevent
disintermediation crises.
The fact that cash _usage_ declines is no reason why the public should ever be denied
access to cash if it wants it: only the Fed itself can deny people access to its paper notes by
refusing to supply them on demand, usually indirectly through banks that act as middlemen.
My understanding is that the Fed has no intention of ceasing to supply paper money.
Therefore the public will always have access to some sort of central bank money, whether the
Fed supplies CBDC or not. Should it ever be "necessary" for the Fed to supply CBDC so that
the public doesn't have to hold private currency or deposits, the Fed itself must be the
reason!��This doesn't mean that people will continue to use paper money for ordinary
transactions. In principle, they might stop using it altogether, as has (almost) happened in
Sweden. But then paper currency would only vanish _because nobody wants it_. And it would
vanish only until someone decided that, for whatever reason, they wanted some. Banks
would, presumably, continue to keep some on hand for the sake of such eccentrics; and if
one didn't, help would, presumably, be only a phone call and an armored truck away.
CBDC?
Domestically especially, everything will depend on how the Fed and other regulators treat
prospective PMDC issuers. IF they take a generous, but still not reckless, approach, they will
create an environment that's as conducive as possible to the entry of safe suppliers of PMDC,
including mobile money services, stablecoins, prepaid token issuers, and other sorts. _The
most important requirement_ here is that these outfits be allowed to join the existing USD
payments network, in which the Fed serves as a supplier of both safe reserves wholesale
settlement services. The Fed can do its part particularly by clarifying and easing its
requirements for granting Master Accounts to licensed banks, especially by readily
accommodating applicants with "special purpose" banking charters. This doesn't mean that it
should impose no conditions on such applicants. On the contrary: it may, and probably
should, insist on strict liquidity requirements, if not on 100% reserve baking of their liabilities.
Such banking should, however, be considered an alternative to deposit insurance, for the
obvious reason that it precludes the sort of risk-taking that supplies the rationale for such
insurance. �
In a word: it should matter less than it seems to. CBDC is one solution to a variety of
problems; but it is neither the only nor the best solution to any of them. That some countries
have resorted to it should impress U.S. policymakers no more than many countries past and
present reliance upon nationalized air carriers and telecommunications systems should
impress them. The question our regulators should be asking isn't, "Should we do what China
(for example) is doing?" but "Can we do better than China?" In the past, we did _a lot_ better
than China by relying less on state-run enterprises and more on private enterprise then it did,
and China, having learned from us, has since had to catch up. I'm pretty sure that we can
now do better than China (and some others that have gone or are likely to go the same
route), and better than we can do with our own CBDC, by tapping the full potential of PMDC's.

There is no reason why it should be. But there is also no reason why it shouldn't, given that
Federal Reserve notes enjoy the privilege: it can hardly mater much in practice. Of course no
PMDC should be given legal tender status.
Discussed above. A difficult problem. All things considered, if there is to be a CBDC, I hope it
will not pay interest., for that is a Pandora's box best left unopened!
If it bears interest, or might become interest-bearing in the future, definitely (see above).
First, a side comment: as used in the discussion paper, the term "intermediary" is misleading,
for the firms in question are more like custodians. They do not borrow from the public to
re-lend to the Fed, by holding balances with it, as true intermediaries might. Rather, the Fed
issues its own liabilities to the public, through agents that manage the public's holdings on
both the public's and the Fed's behalf. A truly "intermediated" CBDC might be a PMDC
fully-invested in wholesale CB digital balances.��Because their role is more one of custodians
than one of true intermediaries, I do not think it quite so important what sort of firms take part
in supplying what the Fed calls "Intermediated" CBDC. The main concern should be there
ability to serve retail customers effectively and efficiently.
An offline DC, whether CB or PM or both, is highly desirable.
sale? If so, how?
CBDC?
benefits of a CBDC?
_________________________________________________________________________
Steven Bonta
Industry
Academia
Country
State
Pennsylvania
Email
Privacy risk is mentioned but insufficiently considered. The flagship CBDC under
development right now is China's digital yuan, whose entire purpose is to eliminate every
vestige of financial privacy in China's increasingly totalitarian, panopticon regime. It is fatuous
to pretend that a digital dollar is anything other than an attempt to "keep up with the Chinese."
But there is absolutely no reason for this; China also has highly efficient cell-phone based
payment systems, like Alipay and WeChat, that in some respects are more efficient than
American check-writing and debit cards -- but again, these have zero privacy features, and
are constantly exploited by the Chinese government to monitor and control people's private
lives. Such measures may be consistent with China's long tradition of absolutism, but are
utterly incompatible with the American system. Our system may be a bit "messier," but freedo
always is, in contrast to the ruthless efficiency of centralized control. And a CBDC, no matter
the professed good intentions, will end up diminishing American financial privacy, if not, in the
longer run, negating it altogether in the name of competing with China. Also note that the
emphasis on need for smoother, more streamlined cross-border movement of currency will
also facilitate the creation of some kind of global currency -- another monumentally bad idea.
The current system has proven more than adequate. In particular, the strength of the dollar
resides less in the speed of its convertibility than on its underlying stability and on
international confidence in its long-term reliability. These are ultimately fiscal and monetary
considerations, not questions of exchange mechanisms.
inclusion?
How could a CBDC fail to be extremely inflationary? It would require, in effect, the at-will
availability of Fed funding for extension of credit by commercial banks and other
intermediaries, i.e., in direct response to consumer demand for money (and in much greater
quantities, of course, than consumer demand for old-fashioned cash). It might have an effect
similar to, e.g., the Fed directly negotiating with the Treasury to purchase newly-issued debt,
instead of buying and selling already-existing securities via traditional open market
operations. Has anyone even considered the monetary moral hazard and inflationary
pressure that retail CBDCs might entail?
stability?
See answer to question 4. My best guess is that it would incentivize much sharper rates of
inflation, in reaction to the unquestionable demand for such a convenient new form of money,
especially where any retail CBDC is concerned.
See answers to 4 and 5.
Any safeguards designed to limit the inflationary risks of such an instrument would probably
also diminish its efficiency and, hence, its attractiveness to consumers. Consumers love easy
money in any form, moral hazards and all -- but that does not mean it is good policy in the
long range.
Yes. Absent hyperinfation, cash (like precious metal and other "old-fashioned" transactional
mediums) will always have features that will make it attractive to consumers, privacy being
one of them.
CBDC?
Impossible to say, but the clear implication in the paper is that we need to keep up with the
likes of China or risk having the dollar's status as the world's reserve currency eroded.
However, the status of the dollar is less dependent on efficiency in narrow, technological
terms than upon underlying confidence in the long-term strength and viability of the U.S.
economy. Some may initially choose the digital yuan for its efficiency, just as many countries
bought into the "One Belt, One Road" initiative -- only to find out that doing business with
China was altogether different than doing business with the West. In similar fashion, the
digital yuan will allow the Chinese government to track financial data all over the world,
including any other CBDCs linked to the yuan. That alone should be a basis for staying out of
any international CBDC system, and advising other countries to do the same. And if
cross-border payments retain some of their present inefficiencies, then so be it.
See answer to question 9. Bottom line: an international CBDC system such as both this report
and the recent BIS report contemplate would amount to yet another foolish codependency
with China, and one the Chinese will be only too happy to exploit.
A better question would be: Are there additional risks not raised in this paper? See responses
to preceding questions on the systemic dangers posed by China's digital yuan.
It would be impossible. Significant concessions in the area of personal financial privacy would
be unavoidable, even if, contra the Chinese, the goal of an American CBDC would be to
enhance convenience while safeguarding privacy.
Emphatically not. At most, it should be a voluntary market alternative that consumers are free
to reject in favor of other forms of payment. Otherwise, whatever privacy compromises end up
being baked into CBDC design features will be forced on people, since everyone, and every
bank account, will then need to be forced to accept CBDC payment, with everything that goes
with it.
No, if its goal is truly to be nothing more than a digital equivalent to Federal Reserve notes.
Also, interest accrual would be still more potentially inflationary than retail CBDCs
themselves.
In theory, this would be a necessary expedient to cap the supply of CBDCs in the overall
money supply (would CBDCs be reckoned as M1? We assume so.). But actually keeping
track of such numbers would be well-nigh impossible, as well as impractical. How, for
example, could a cap be imposed in the issuance of a large commercial loan, as to what
percentage of the loan could be extended in CBDCs?
sale? If so, how?
CBDC?
benefits of a CBDC?
_________________________________________________________________________
Vments
Industry
Other: Consulting
Country
State
New Jersey
Email
steven.wasserman@vments.com
Using a balance of financial institutions reserves held with and backed by the Fed for digital
fiat currency (effectively bank issued stablecoins), these FIs can be authorized to be able to
issue and circulate the digital currency between each other and their customers. The end
customer new digital currency accounts would ideally also be FDIC backed. This could be an
alternative for a retail circulation of funds with comparable credit and liquidity considerations
to how it was described in the paper for Fed direct issued CDBC and corresponding
accounts with them. �A CBDC exclusively for wholesale bank to bank settlement could also be
used to facilitate interbank settlement for when the retail bank issued digital fiat currency is
taken out of circulation for exchange back to “legacy” deposit funds or cash to the retail
customer when the retail digital currency was issued by another FI. This same wholesale
CBDC could also be integrated as an optional settlement method for other existing payment
rail settlement for what these rails can continue to provide clearing data services.�
The Fed could be the oversight body for the retail level bank issued stablecoins in a manner
similar to the relationship and oversight the Fed has for existing bank accounts. �Another
oversight option could be where the fed is just an active facilitator and collaborator in a bank
issued stablecoin network similar to the role they play in the Business Payment Coalition
Exchange Framework Oversight Committee. �
inclusion?
Financial inclusion could be achieved where the bank issued stablecoins could be
interoperable with new types of accounts which have lower or even no KYC requirements, but
which have limitations in terms of maximum individual and/or cumulative transaction and
account balance limits. These new accounts could be either bank or non-bank issued where
non-bank issued accounts would need to be through MSBs as they are today as they reach
and serve the unbanked and underserved. These non-bank entities would not be stablecoin
issuers in this ecosystem design, but could be distributors of the bank issued stablecoins
and/or CBDC.��These types of account could also be used in conjunction with offline use of
these digital fiat funds, where the offline transactions could optionally be totally anonymous or
at least pseudo-anonymous. All online transactions should also be pseudo-anonymous and
follow BSA and AML regulations. The limitations of the anonymous (or lower KYC) accounts
could be kept within AML limits.�
stability?
Since a CBDC would be safer and more attractive than current private non-bank stablecoins
and other non-bank money, it would have a much larger impact on financial institutions which
could loose deposits needed to enable them to continue to have funds for loans. This would
then create a need for loan seekers to seek alternative and potentially unregulated lending
services. If these FI were able to have digital accounts that the CDBC and/or bank issued
stablecoins could circulate through where partial reserves could be used for lending as it is
today, then this would be a better solution.
The tools to consider include structure and software to enable and control new types of lower
or no KYC accounts with limits within AML triggers.��Another set of tools would be software that
supports offline distribution, use, and conversion back to online versions of shadow copies of
all offline tokens that sync with their online issued copies after either device they were
transacted offline connects to the internet.��A library of open source development tools/APIs to
enable all sorts of functions around the issuance, distribution, use, redemption, account
management, and use case specific functions would also be helpful as well.�
Yes, but with similar limits such as those for ATM withdrawals to the lower or no KYC
accounts which could serve as a cash equivalent alternative.
CBDC?
The continued adoption of faster payment solutions in the US along with efforts to enable
these to be interoperable for cross border transactions can bridge the gap until when and if a
CBDC or a bank issued stablecoin network with oversight by the Fed, or Fed participating
overnight body, can evolve starting with how the digital fiat could be an optional method of
settlement to the clearing methods on these faster payment rails.
As the paper pointed out, there is concern about some of these other CBDC efforts, such as
by China, will affect the US dollar’s prevalence as accepted currency outside of the USA. We
do not want to wait and see to the point of being too late to loose some or all of this strength
of the US Dollar which could affect US cross border commerce.��The US should continue its
efforts to at least be ready, willing, and able to move ahead once all requirements, policies,
and testing can be done. It should avoid saying that it no longer sees a need and benefits to
continuing this pursuit, which would have others take more of a center stage which could
have adverse affects that were already pointed out about the adoption of alternative to a US
CBDC or a central bank overseen network of bank issued stablecoins. �
All transaction detailed data, including personal and confidential data, need not be stored in
the CBDC ecosystem other than a pseudonymous id that FIs that onboard customer accounts
that hold CBDC funds. The FIs in turn record the applicable separate KYC information in their
systems and are only accessible to them and the end customers this data belong to plus to
the transacting parties and their FIs where only the necessary information for the receiving
party to verify the sending party is needed.��As described in other responses to this RFC, some
of the end user accounts could have lower or no KYC when the account has applicable
limitations to its use. There would still be a pseudonymous id at least tied to a government
issued identification for less limited account usage, and perhaps just a biometric hashed id of
an anonymous account owner where that biometric id could not be associated to the identity
of the account owner, but could at least be used to control access to use of the account.�
One of the key features should be that each CBDC token can be verified as one that
originated in its ecosystem which has controls over the parties that can issue and hold
reserves, distribute, and/or record transactions in the ecosystem on behalf of their customers.
The access methods and controls for these operators needs to be as secure as possible to
prevent cyber attack and the requirements for access to the operator’s systems needs to be
just as secure to prevent attack from within one or more of the operators.�All transactions
should be credit push and not debit pull as is the case for the real time rails of TCH and
FedNow. �These things do not preclude fraud at the end user level to address account
takeover, synthetic identity, and some of the other types of fraud that we continue to see and
as classified in the Fed’s fraud classifier. �The CBDC ecosystem design could also include a
means of fraud information sharing across FIs, including blacklisted or suspicious accounts
and party identities. It could also provide a means of detecting AML across multiple FI
accounts linked to the same party ids.�The ecosystem design could also include additional
means of identity registration and verification of onboarded end customer payers and payees
that funds are being transacted to. Some key directory functionality could be provided along
the lines of some of the characteristics as described in the white paper from the Directory
Models Work Group of the US Faster Payments council.�
What difference would this really make as long as it would be “good funds” and eventually
available to all (i.e. ubiquitous)?
No in the case of where the account were one held directly with the Fed, which I disagree
with. For intermediated accounts, especially per the bank issued stablecoin approach, these
accounts should be eligible to earn interest comparable to interest available with checking
accounts. Other forms of economic incentives could be provided as well by intermediaries
similar to incentives for debit and credit card usage when they process transactions through
the CBDC ecosystem that they are permissioned operators for.
Only in conjunction with lower or no KYC accounts as descried above.��Cross border

transactions and accounts holding US CBDC that may be in other countries may need to
have applicable limits as well.��The total CBDC (or bank issued stablecoins) in circulation
should be limited along the same criteria of the total of printed paper and minted coins. �
There could be multiple levels of intermediaries in the CBDC ecosystem, much like there is
today, where only those that are currently eligible for having accounts and reserves with the
Fed should be the top level. Then smaller FIs and Fintechs of these top level or Fintechs of
the lower level FIs could be nested sub-accounts where access to the CBDC does not
dis-intermediate the FIs that have the ultimate compliance, including security controls over
access to these sub-accounts in the ecosystem which serves as a “book of record” that
effectively enables a distributed open banking capability in conjunction with the CBDC
ecosystem design.��In Vments FedNow RFC response, there is additional detail provided in the
sub-account design along with other design specifics relative to the ecosystem involving bank
issued stablecoins.�
Absolutely for a number of reasons, including if and when the lights go out as well as for
where internet access may be limited, which can be more prevalent for those that are
unbanked and underserved. �A design that can support this is one where each CBDC token
online includes an optional offline device id that it was downloaded to where it could be
transacted offline and then synced when either party of the transaction connects online.��There
are many other details about the specific of this offline design and issues that it needs to
address which can be provided upon request and are too long to include in this RFC, but
which were included in Vments FedNow RFC response.�
sale? If so, how?
This needs to be an absolute requirement to foster adoption. The use of digital wallets, QR
codes, biometrics, and directories using aliases, can all contribute to ease or use and
acceptance. The offline capability at point of sale should also be considered here, where at
least the merchant can be online to real time validate the offline tokens it accepts, or its
device can at least check for CBDC token watermark type validation plus transacting party
validation against a downloaded blacklist of bad actors, including those that had attempted to
backup, restore, and reuse already used offline CBDC tokens.
The CBDC tokens could be integrated as an optional means of settlement in existing payment
rails where these rails at least continue to serve as clearing for the transaction data optionally
real time settled using the CBDC (or bank issued stablecoin equivalent).��
CBDC?
benefits of a CBDC?
The sub-accounts design described above could be provided through a distributed ledger as
the “book of record” for the minimal transaction information that can be stored and accessible
to the participating permissioned operating parties where the information is pseudonymous
and have just enough to be able to effectively enable a peer to peer transaction between
operators that then transparently facilitate the same through their sub-account intermediaries
and in turn to end customer user experiences. �The intermediary operators would also have
cloud and/or on-premise servers that interface and hence reconcile to the distributed “book of
record”, where these servers can include the data necessary for the operator’s compliance
with all applicable regulations for being such financial services.��An addition and very unique
design consideration is where the CBDC tokens (or bank issued stablecoins) could be issued
into a line of credit account where this affects the reserve requirements versus when these
same tokens are issued into a “cash” account. Then as the line of credit tokens are used, they
become cash to the receiver and part of the balance due the lender, who in turn needs to
adjust their reserves accordingly.��Smart transactions is another design concept where the
cloud and/or on-premise servers described above can record detailed transaction data not
shared in the distributed ledger other than for hash control totals to be able to help validate
that this off distributed ledger data has not changed and is effectively immutable as well as is
the distributed ledger data. This requires applicable blockchain functionality for security and
protection over any of the data being modified versus incrementally adjusted through new
transaction data.��All of the features described within this RFC are included in Vments
ecosystem design which I would be happy to share with those interested to learn more about.
In my response to the original FedNow RFC, I had included several details about the specific
design of the digital fiat token, tiered sub-accounts, smart transactions, and more.�
_________________________________________________________________________
David E McNabb
Industry
Individual
Country
Canada
State
Email
Updated May 13 2022�CBDC access technology risk��Additional regulated controls for CBDC
digital access technology may be necessary for settlements to and from private money and
non-bank money to protect Central Bank money and Commercial Bank money. �Unregulated
digital technology for purchase and redemption of CBDC could create the means for episodes
of unfriendly coordinated destabilizing reverse runs and conventional runs on Commercial
Bank money to and from Central Bank money, causing potential for harm to the operation and
function of Commercial Banks, M1 money and local economies. �It is intended that Central
Bank money stock includes CBDC which, like physical fednotes, are liabilities of the
sovereign central bank and legal tender. By extension of generally accepted accounting
principles such liabilities are digital assets in possession of holders with 'unequivocal certain'
claim rights on the sovereign government. These claim rights are calibrated in the sovereign
unit and shall be accepted when offered in economic episodes as a grant of consideration to
account for payment of debts, settled immediately and on account. �If possession of the
stock of CBDC claim rights is to seamlessly transfer and exchange in local economic
episodes between the stock of CBDC and Commercial Bank money at par and vice versa,
then Commercial Bank money stock may become by extension, similar to expressions of
safe, stable and unequivocally certain CBDC claim rights. Federal Deposit insurance gives
more of such certainty, while those households and businesses in economic episodes retain
accountability for knowing who they are dealing with. An ecosystem of laws supporting the
clearing, possession and holdings of Commercial Bank money claim rights has evolved over
time. Such Commercial Bank claim rights interchangeably support the operation of a safe,
stable and certain sovereign money ecosystem in economic episodes. � �If settled ultimately
or backed by Central Bank money and Commercial Bank money, it follows that private money
and non-bank money digital assets offered as consideration by one counterparty in economic
episodes in private markets and marketplaces, may by extension become an expression of
the safe, stable unequivocally certain stock of M1 money claim rights. It is not hard to
imagine that CBDC and Commercial Bank money accepted without regulated digital
technology access controls may be used instantaneously and perhaps in parallel to settle
immediate purchases and redemptions of private money and non-bank money. Private
digital assets calibrated in the ‘dollar’, the sovereign unit, may become functionally like and
also fungible with CBDC and Commercial Bank money inside and outside sovereign money
ecosystems without regulated digital access controls. Private money enabled by Central
Bank and Commercial Bank money may become like Central Bank and Commercial Bank
money. �M1 money stock digital access technology without access controls could potentially
harm Commercial Banks if access technology is used as a means for unfriendly coordinated
movements of CBDC and Commercial Bank money. Existing limits and other regulated
controls like Anti Money Laundering programs may be insufficient to control CBDC access
technology risk. Uncontrolled digital access technology means (mediums and methods
used) when joined together with unfriendly intentions and coordinated movements of CBDC
and Commercial Bank money, create the potential for harm. �
All of the potential benefits of a CBDC can be better achieved by thinking differently now
about the operation of money and payments in economic episodes. A brief discussion of the
forms of money and the limitations of barter exchange and related coincidence of wants and
work tradeoffs, reveals opportunities for updating the concepts of money and payments, thus
returning intrinsic value to Central Bank money through financial inclusion. A rich vein
overlooked for renewal of the current day operation of money and payments in economic
episodes, exists in the examination of limitations of barter exchange in economic episodes.
New thinking about Central Bank money clearing reserves and new supporting Commercial
Bank retail banking products and advisory solutions will be required for optimal CBDC design.
�Money stock and its representations existed in transactions and relationships before Central
Bank money. For example, money existed as counterparty account positions marked up in
ancient trading ledgers, and as physical commodity reserves wanted in economic episodes
and considered ‘ready money’ with intrinsic value. Sovereign authorized fiat money in the
form of gold and silver coins with intrinsic value were calibrated and circulated by sovereign
nations. After the gold standard backing sovereign fiat money was finally abandoned in the
1970’s, US Federal Reserve notes and coins lost any remaining intrinsic value in and of
themselves, leaving extrinsic value perceived by holders and those who want to hold US
Central Bank money stock. With the removal of any physical limitiation to intrinsic value
derived from the quantity of fiat money metals exchanged or backing sovereign note liabilities,
since then the variation in value of Central Bank money stock, Commercial Bank money stock
and private money stock, has flucuated based on at least the performance of sovereign
economies and the quantity of money stock held and circulated. �Of course in any economy,
even in commodity based barter exchange economies, households and businesses need
each other to satisfy individual wants and tradeoff consideration for goods and services,
beyond what they otherwise could have or do on their own. We get by joining with each other
to achieve what we cannot otherwise give or take or claim or want to do ourselves. In a
coincidence of wants, and apart from the simple physical exchange of goods and services,
counterparties join ready money stock and tradeoff costs of consideration in episodes of
barter exchange, mitigating frictions and uncertainty for advantage and satisfaction. Current
money or "currency" is the joining of "ready money" stock and tradeoff of consideration
mitigating frictions and uncertainty in economic episodes. �The previous understanding of
barter exchanges, and the limited opportunity for scalable, repeatable economic activity,
diversity, leverage and growth in barter exchange episodes having a necessary coincidence
of wants for physical exchanges, was thought to be solved by the introduction of sovereign
fiat money gold and silver coins and later legal tender money liabilities of sovereign nations.
Possession of these circulating fiat money stock things, objects or mediums with marketable
intrinsic value or certain unequivocal cash claim rights on sovereign nations, has the effect of
separating time and place for the right people, with the right goods, to come together for
advantage and satisfaction. Instead possession of money mediums has the effect of
extending satisfaction and wanted advantages into the future, resolving current episodic
frictions and uncertainties from a necessary coincidence of wants and efforts in barter. There
is another side of extending satisfaction and wanted advantages tby possessing fiat money
stock freely at will into the future. The disaggregation and separation of immediate
cooperation by households and businesses in economic episodes is lost. A coincidence of
wants and tradeoff of work efforts previously necessary to mitigate each other's current
economic frictions and uncertainties and achieve different advantage and satisfaction in
barter exchange episodes, is lost and may no longer be required for advantage and
satisfaction in a sovereign economy with sovereign fiat money. �Instead, to achieve different
advantages and satisfaction, a dependence is created on the sovereign nation for an
adequate supply and fair distribution of circulating sovereign fiat money cash claim rights and
on money mediums and things with marketable value calibrated by the sovereign nation. The
possession of intrinsic value of metal coins and circulating fiat money legal tender cash claim
rights, each releases and obviates the need for a necessary coincidence of wants and work
efforts of households and businesses in economic episodes found in barter exchange.
inclusion?
With these historical effects it is no coincidence that some of the benefits of a possible CBDC
respond to the corresponding loss of intrinsic value, and loss of episodic cooperation for
financial inclusion of sovereign fiat money ecosystems. �An earlier submission by your writer
to the call for feedback by the Bank of England reviews a concept of "Rhombus Money" which
is a very preliminary attempt to consider new retail Commercial Bank account with the
support of Central Bank helicopter grant money. I remain available to take a deeper dive with
others into all of these high level and preliminary ideas. �
stability?
CBDC?
sale? If so, how?
CBDC?
benefits of a CBDC?
_________________________________________________________________________
Digital Asset Holding
Industry
Technology Company
Country
State
New York
Email
peter.clifford@digitalasset.com
The development of CBDC represents a generational opportunity to expand the central bank
ledger to additional users, enabling important structural changes and accelerating innovation
without disrupting existing payment rails.�In designing a CBDC, the Federal Reserve should
also consider the following opportunities: �Elimination of depository risk�When CBDC is issued
by and is a direct liability of the Central Bank, citizens holding CBDC no longer have
depository risk to a commercial bank. Through a multi-party technology framework and
practical operating structure, CBDC would enhance the ability of central banks, commercial
banks, and technology innovators to work together using timely, accurate, and auditable
information from a Central Bank-governed system of record of CBDC positions.�A more
resilient and inclusive system�For finance and commerce: In terms of operational resiliency, as
CBDC use becomes widespread in financial markets, atomic swaps and instant settlement
can minimize the current lack of seamless interconnectedness between firms. CBDC could
function as a safety net during a stress scenario, mitigating counterparty risk and reducing the
domino effects seen in the 2007- 2008 financial crisis. Additionally, through shortened
payment chains and accelerated transfers/settlement, true Delivery vs. Payment (DvP)
transactions are enabled without having to rely on a trusted third party.�For individuals: The
extension of the Federal Reserve’s ledger to under- or un-banked consumers would provide
easier access to financial services at lower cost, enable more efficient distribution of benefits
administration, and support continued innovation. Free from the competitive pressures
inherent to commercial institutions, the Federal Reserve could use CBDC to serve the public
good while prioritizing central bank policy objectives. Furthermore, the Federal Reserve would
gain greater insight into the real-time impact of monetary policy decisions on the
macro-economy and the ability to calibrate policy more nimbly. �Enhanced monetary policy
tools�CBDC would enhance the Federal Reserve’s ability to manage reserves and oversee
monetary policy. For example, benefits administration could be streamlined with
programmable money, providing citizens with greater convenience and certainty of receipt.
Examples include extraordinary government payments such as controlled stimulus payments,
as the CBDC framework should be flexible and nimble enough to support unanticipated use
cases. The Federal Reserve would also gain greater insight into the real-time impact of
monetary policy decisions on the macro-economy, with the ability to calibrate policy more
nimbly. �Safeguarding and strengthening the dollar as the world’s reserve currency�The U.S.
should take a leading role in establishing a CBDC aligned to the world’s reserve currency.
The absence of a U.S. CBDC creates a vacuum that would be exploited by other
governments or stablecoins. As faster, cheaper digital payments and expedited settlement
evolve, favoring digital currencies, a currency substitution scenario could arise where another
nation’s CBDC would rise to prominence, replacing the U.S. dollar in international trade.
Depending on which CBDC rises to prominence, at a minimum international payments could
be subject to uncertainty given geopolitical or financial stability risks or, in worst case
scenarios, allow for the currency to be used by bad actors or to be weaponized as another
tool to achieve political goals. �Finally, the Federal Reserve will want to be certain that any
CBDC is scalable, secure and meets rigorous performance standards. This includes being
able to cope with ever-increasing transaction volume without any upper limit on the number of
possible transactions; providing stability and reliability to maintain confidence and smooth
market and payment operations; adapting to unforeseen circumstances or requirements; and
supporting emerging use cases. �
There has been significant discussion about the relative merits of using stablecoins or CBDC.
While digital assets such as stablecoins and tokens have proven their worth for digitized
objects and securities, particularly for cross-border payments, we believe CBDC delivers
significant technological, legal, accounting, and operational benefits for the Federal Reserve
and across the financial ecosystem. �RISK MANAGEMENT �Liquidity and credit: CBDC can
reduce liquidity and credit risk since central bank money could provide finality in the payments
process or in settlement. This functionality is not inherent in the design of stablecoin.
�Currency fragmentation: A Federal Reserve-issued CBDC would be a digital version of the
U.S. dollar, the world’s reserve currency. As a government sponsored digital currency, it
would remove the potential for fragmentation inherent in the creation of multiple
privately-issued stablecoins, which not only might compete with one another but are also
subject to inherent commercial pressures unsuited to a national currency.�Depository risk: A
Federal Reserve--issued CBDC would be a liability of the central bank, removing depositor
exposure to a commercial bank. This cannot be achieved with stablecoins.�STABILITY�Finality
of payment: CBDC allows for atomic transactions on use cases without counterparty risk
(DvP) and enables cross-border PvPs without 3rd parties. There are initiatives, such as the
Regulated Liability Network, that could allow central bank money to interact in the payments
process of commercial banks and other regulated financial institutions to reduce risk.
However, stablecoins that are issued by private institutions typically carry credit risk. �Financial
stability: A Federal Reserve-issued CBDC can be used for benchmarking, underpinning
interbank payment systems and serving as the world’s reserve currency. A marketplace of
multiple privately-issued stablecoins can and should not take the place of a central bank
issued currency. If one stablecoin were to rise to prominence, it would threaten the primacy of
the U.S. dollar/digital currency and undercut U.S. monetary policy.�GROWTH AND
INCLUSION: Through CBDC, the extension of the Federal Reserve’s ledger to under- or
un-banked consumers would provide easier access to financial services at lower cost, enable
benefits to be distributed more efficiently, and support continued innovation free from
competitive pressures. In contrast, the for-profit drivers of private money mean that financial
inclusion is not a priority.�PRIVACY/PROTECTIONS: A CBDC built on smart contracts
embeds rights and permissions, limits data to stakeholders, and enables an observer role to
facilitate oversight. Privacy safeguards are embedded as the CBDC is established and can be
updated over time as needed. �In contrast, privacy standards on most blockchains are
underdeveloped and leak information about transactions and individuals. Stablecoins suffer
from an effective lack of privacy. Since all participants in the stablecoin network can inspect
the history of transactions, data segregation is not achievable and only pseudo-anonymity
can be achieved. This is not sufficient for a national digital currency. �Stablecoins would
benefit from regulatory clarity, and the U.S. President’s Working Group has recommended
that stablecoin promoters be regulated in ways similar to those for deposit-taking institutions
or a money market fund. Until such actions are taken, in and across jurisdictions, stablecoins
and cryptocurrencies will exist outside and apart from the main, regulated financial world of
central bank currency, commercial bank money, and CBDC. Aside from speculation, the uses
for crypto and stablecoins in the broader economy will be limited. �The key arguments against
stablecoins are fragmentation and risk. Issued by non-governmental institutions, there is an
inherent risk that stablecoins will proliferate, creating competing financial instruments that
dilute the value of a central currency and enabling misalignment between commercial
incentives and public policy. We believe that the Federal Reserve should be concerned about
reliance on non-governmental institutions: the creation and management of stablecoins by
private institutions creates potential for currency and infrastructure to be controlled by entities
whose motives and interests may not be aligned with government policy. In short,
government policy cannot be assured by private actors.�Currency, and the infrastructure that
supports it, is too important to be managed by shadow central bank(s). For example, a foreign
issuer of U.S. dollar stablecoins (whether a company or foreign government agency) could be
beyond the reach of our regulators and could fragment and disrupt financial system stability.
An official U.S. CBDC eliminates that risk while still allowing other digital assets such as
stablecoins and digital tokens to play a critical role in payments and capital markets.�
inclusion?
In our opinion, a CBDC would be a significant driver towards achieving financial inclusion. It
would permit the Federal Reserve to extend its ledger to a broader group of participants,
including under- or un-banked consumers, giving them easier access to financial services and
enabling them to participate in the real economy. As referenced by Darrell Duffie in his June
9, 2021 testimony before the U.S. Senate Committee on Banking, Housing and Urban Affairs
Subcommittee on Economic Policy:�A 2020 study by the Federal Deposit Insurance
Corporation estimated that about 7.1 million U.S. households are unbanked. Many additional
households are underbanked. Treasury Secretary Janet Yellen* has stated that a digital dollar
could improve the access of unbanked Americans to basic payment services. �Furthermore, a
2020 McKinsey study on the use of paper money in U.S. payments showed a decline from
51% (2010) to an estimated 28% (2020). If the acceptability of paper currency declines
sufficiently, those without access to electronic payments would be further isolated from parts
of the economy.�CBDC would put a premium on ease of access and use without significant
cost. This can improve the welfare of lower income households who might otherwise have
weak access to the economy or suffer from extremely high payment fees. A CBDC: �Would
significantly improve payment efficiency, making the transfer of money - whether peer to peer,
customer to business, business to business, across banks, and potentially internationally -
more straightforward, faster and cheaper. Payments would involve fewer intermediate
systems and profit-taking service providers along the payment path, and would be available
instantly and around the clock. Remittances could lower fees on the world’s poorest
people.�Could enable programmable money, which would streamline benefits administration
such as controlled stimulus payments. The Federal Reserve could set benefit parameters and
manage use while citizens gain greater convenience and certainty of receipt. �We believe the
Federal Reserve would be best able to invest in the necessary infrastructure to provide direct
access to money, since it is not a profit-driven institution. Since the introduction of a CBDC
could accelerate the decline in use of cash, we recommend that the Federal Reserve
considers design with an eye towards maximizing flexibility to allow the currency to extend
beyond the typical payment and banking scenarios of today to more equitably serve the
un/underbanked. �Liquidity, access and implementation considerations will be critical to this
broader range of users, who may not have the technological or financial wherewithal to make
investments in enabling systems. Open source, smart contract technology would make it
faster and easier to create applications that could be widely accessible using mobile networks
and devices, simplifying access for those underserved by traditional banking services. �* New
York Times DealBook video interview, February 22, 2021 - “Too many Americans don’t have
access to easy payments systems and banking accounts, and I think this is something that a
digital dollar, a central bank digital currency, could help with.” Secretary Yellen.�
Embedding policy goals in CBDC is possible through the use of smart contracts, which could
facilitate:�Direct lending to underserved communities.�Prioritized investments in certain sectors
of the economy (agriculture lending) or geographic zones (for an emergency
response).�Immediate availability of interest rate changes to ultimate beneficial owners,
without the need for action on the part of financial intermediaries. �
stability?
We believe a CBDC issued by the Federal Reserve would serve as another instrument for
implementing and managing U.S. monetary policy, playing the same role as existing U.S.
currency in the U.S. and globally (in international finance and trade) while delivering
significant additional safeguards: �The elimination of commercial bank depository risk, since
CBDC liability would only be of/with the Federal Reserve. �Significant reduction in settlement
risk through transaction atomicity, whereby all legs of a transaction must be successful for the
entire transaction to complete. This certainty of instant settlement also minimizes
counterparty risk.�The ability to streamline benefits administration through programmable
money, which provides citizens with greater convenience and certainty of receipt (e.g.,
controlled stimulus payments, extraordinary government payments).�An additional fiscal policy
lever, if CBDC is interest-bearing. �Greater insight into the real-time impact of monetary policy
decisions on the macro-economy and the ability to calibrate policy more nimbly. �CBDC could
also provide more transparency to holders, enabling them to determine whether and where to
allow their money to be used for lending or leverage (e.g, for ESG initiatives or to avoid
certain industries). Currently, this level of determination is not available to consumers who
hold money in depository institutions, as those institutions can utilize deposited funds for
onward business activities without consent from or disclosure to the owner of any individual
deposit account. Programmable criteria creates opportunity for new, flexible and customizable
uses of funds features, offered by banks or payment service providers. �The potential exists,
however, for the introduction of CBDC to adversely affect the commercial banks’ balance
sheets, limiting their ability to lend or extend credit and adversely affecting financial stability.
That risk, and ways to mitigate it, must be carefully considered as part of CBDC
implementation.�The Federal Reserve will want to identify options to solve the underlying issue
of money moving from deposits to CBDC or to mitigate the effect of that movement on the
bank’s balance sheet in order to preserve the ability of commercial banks to extend credit.
Recent economic models that test deposit scenarios in Germany indicate that in a
non-interest bearing CBDC environment with limits on individuals' holdings, the run risk is
three percent. Various strategies have already been proposed (i.e., enabling banks to issue
bonds to raise high quality credit, substituting one type of bank funding (deposits) with CBDC
(central bank funding)*, or replacing deposit insurance schemes with credit extended to
depository institutions for maintaining CBDC savings accounts). Undoubtedly, even more
options will emerge during the CBDC exploration process. �Ultimately, however, we believe
CBDC will promote competition while leveraging the strengths of the two-tiered financial
system.�“On the equivalence of private and public money”, Brunnermeier and Niepelt, July
2019 �
We have addressed some key differences between CBDC and stablecoins/non-bank money
in Question 2, including the privacy, fragmentation and commercial risks inherent to
stablecoins. �One of the main arguments often made in favor of stablecoins or regulated
tokens (such as the proposed Regulated Liabilities Network or RLN) is that they keep intact
the existing two-tiered banking system. The concern is that the introduction of a CBDC could
destabilize existing depository institutions by allowing (or even incenting) customers to
maintain CBDC balances at the Federal Reserve as opposed to holding balances at
commercial banks. This could adversely affect the financing and lending abilities of depository
institutions and remove incentives for innovation. �We believe that the stability of the existing
financial structure can be maintained while still reaping the benefits that only CBDC can offer,
such as removing depository risk and expanding financial inclusion. Our view is that multiple
systems can exist in parallel, each providing important benefits and playing a critical role in
payments and capital markets. In fact, Digital Asset is an active partner in the Regulated
Liabilities Network (RLN), having recently announced a partnership with SETL to create a
regulated network for tokens. RLN effectively replicates the existing two-tiered banking
system with the creation of a network that supports a common way to represent the liabilities
of different regulated institutions. It is intended to capture and catalyze some of the promises
of digital currency but replicates current rules, regulations and arrangements and leverages
existing public-private sector arrangements.�RLN has been significant in bringing the industry
together to conceive of ths digital form of money as a regulated liability and to the industry
together to problem-solve and accelerate implementation. However, we believe that RLN is a
use case for CBDC, not a substitute for a Federal Reserve issued CBDC, which would offer
substantial additional benefits including the elimination of depository risk. Only CBDC
provides the surety of a digital currency backed by the full faith and credit of the United States
government and sustains the ability and obligation of the U.S. Treasury to set and manage
the nation’s monetary policy.�The technology implementation of a CBDC should provide the
Federal Reserve with flexibility in how to handle, delegate, or assign responsibilities to
intermediaries. This preserves the financial payments two-tier system and ensures that U.S.
banks continue to protect the privacy of their customers while monitoring payments for their
legality. In the first tier, the Federal Reserve provides the system of record for all consumer
accounts and positions. The Federal Reserve:�remains the sole issuer and governs the
system of record of CBDC positions.�sets standards for the use of CBDC (such as
interoperability requirements).�could potentially be the regulator of the payment service
providers, which could be commercial banks and authorized fintech firms, as is the case with
China’s e-CNY.�In the second tier, the Federal Reserve delegates authority to banks and other
payment service providers, allowing them to offer access and services to their customers, and
to perform KYC, AML, and other regulatory requirements. These institutions act on behalf of
their customers on the Federal Reserve’s ledger for specific actions, as agreed with their
customers. The ability to achieve this requires a technology with expressive and fine-grained
permission delegations and privacy rules. �With this enhanced two-tier financial system, the
Federal Reserve gains substantially more granular and real-time data for managing and
monitoring financial policy, while encouraging U.S. banks to create an enhanced, more
competitive payments system. In an increasingly digital economy, CBDC offers significant
flexibility while retaining all the positive attributes of the existing two-tiered banking structure.
Banks would continue their essential role of knowing and delivering services to the end user
(KYC, OFAC, etc.) as CBDC enhances the Federal Reserve’s ability to manage reserves and
oversee monetary policy.�
As noted in our response to Question 6, the technology implementation of a CBDC should

provide the Federal Reserve Board with flexibility in how to handle, delegate, or assign
responsibilities to intermediaries. This preserves the financial payments two-tier system and
ensures that U.S. banks continue to protect the privacy of their customers while monitoring
payments for their legality. In the first tier, the Federal Reserve Board provides the system of
record for all consumer accounts and positions. The Federal Reserve:�remains the sole issuer
and governs the system of record of CBDC positions.�sets standards for the use of CBDC
(such as interoperability requirements).�could potentially be the regulator of the payment
service providers, which could be commercial banks and authorized fintech firms, as is the
case with China’s e-CNY.�In the second tier, the Federal Reserve Board delegates authority to
banks and other payment service providers, allowing them to offer access and services to
their customers, and to perform KYC, AML, and other regulatory requirements. These
institutions act on behalf of their customers on the Federal Reserve’s ledger for specific
actions, as agreed with their customers. The ability to achieve this requires a technology with
expressive and fine-grained permission delegations and privacy rules. �With this enhanced
two-tier financial system, the Federal Reserve gains substantially more granular and real-time
data for managing and monitoring financial policy, while encouraging U.S. banks to create an
enhanced, more competitive payments system. In an increasingly digital economy, CBDC
offers significant flexibility while retaining all the positive attributes of the existing two-tiered
banking structure. Banks would continue their essential role of knowing and delivering
services to the end user (KYC, OFAC, etc.) as CBDC enhances the Federal Reserve’s ability
to manage reserves and oversee monetary policy.�
Cash usage is already on the decline and likely to continue, as it has over decades as debit
and credit cards and now payment apps increase in prominence. Despite the ability to more
rapidly transfer money between institutions and individuals, cash is unlikely to disappear.
Cash continues to have an important role, particularly when natural disasters cause a lack of
power or connectivity, or when geopolitical conflicts require immediate access to money and
liquidity.�Nonetheless, the same concerns about fragmentation raised earlier apply here.
When innovation in the payments space relies upon the U.S. dollar, new alternatives simply
provide faster, easier and hopefully less costly ways to move money. If the underlying
currencies start to shift to various stablecoins or tokens, however, you would likely see the
rise of different payment structures from issuing institutions, each of whom would be seeking
to maximize commercial benefit: whether that is providing exclusive services, limiting access
to non-subscribers or looking to maintain dominance. This could result in creating new silos
rather than breaking them down, increasing the likelihood that existing inclusion challenges
are perpetuated. For example, it could become even more difficult for the un/underbanked to
continue using the cash economy (e.g., if cash becomes less widely accepted). Furthermore,
this fragmentation could compromise the Federal Reserve’s ability to manage monetary
policy by limiting oversight and ability to control the money supply since stablecoins would be
created/issued and managed by the private sector.. �From a technical perspective, regardless
of how the relationship between CBDC and cash evolves, neither the technical design nor the
functionality of CBDC built on smart contracts would be affected. Additional use cases could
just be built onto the same multi-party application framework. �
CBDC?
The absence of a U.S. CBDC creates a vacuum that would be exploited by other
governments/central banks, notably the People’s Republic of China/People’s Bank of China
which has already launched a pilot digital Yuan. The imperative towards faster, cheaper
digital payments and expedited settlement would favor digital currencies, ultimately creating
the scenario whereby currency substitution will occur and another nation’s CBDC would rise
to prominence, replacing the U.S. dollar in international trade. Without a national digital
currency, the U.S. economy would be unable to access international digital payment rails.
Furthermore, depending on which CBDC rises to prominence, at a minimum international
payments could be subject to uncertainty given geopolitical or financial stability risks or, in
worst case scenarios, allow for the currency to be used by bad actors or to be weaponized as
another tool to achieve political goals. �Domestically, a well-designed digital currency issued
by the Federal Reserve can be authenticated and tracked, rely on smart contracts to verify
transactions, and utilize complex business logic to address different financial activities. This
could reduce reliance on third parties to create additional efficiencies throughout the
transaction chain. Without a Federal Reserve issued CBDC, however, the inevitable
fragmentation that would result from multiple different stablecoins or tokens issued by
non-government institutions could increase inefficiency with additional steps needed to
monitor/reconcile different systems that don’t natively interact. Competition and competitive
pressures would be unlikely to reduce either friction in payment processes or the high fees
currently imposed on consumers or merchants. �
The use of the U.S. dollar in international trade and as the world’s reserve currency brings
substantial benefits to financing our country while benefiting U.S. companies and citizens.
Whether cash or CBDC, currency is vital to national security. Therefore, we believe that the
U.S. should take a leading role in establishing a CBDC aligned to the world’s reserve
currency. As noted in our response to question 9, the absence of a U.S. CBDC creates a
vacuum that would be exploited by other governments/central banks, notably the People’s
Republic of China/People’s Bank of China which has already launched a pilot digital Yuan.
�The imperative towards faster, cheaper digital payments and expedited settlement would
favor digital currencies, ultimately creating the scenario whereby currency substitution will
occur and another nation’s CBDC would rise to prominence, replacing the U.S. dollar in
international trade. Depending on which CBDC rises to prominence, at a minimum
international payments could be subject to uncertainty given geopolitical or financial stability
risks or, in worst case scenarios, allow for the currency to be used by bad actors or to be
weaponized as another tool to achieve political goals. �As noted by Darrell Duffie in his June 9,
2021 testimony before the U.S. Senate Committee on Banking, Housing and Urban Affairs
Subcommittee on Economic Policy, the rise in cryptocurrencies should also be of concern. A
Federal Reserve issued CBDC could provide an attractive and safe alternative to protect
against infiltration by undesirable types of cryptocurrencies. �Finally, the U.S. should take a
prominent role in international discussions regarding technical standards for the design and
appropriate uses of CBDC, including intergovernmental agreements for the cross-border use
of CBDC, which are already starting at the G7 level. To effectively influence these
developments, the U.S. will need to have the knowledge and credibility that comes from
having developed CBDC.�
Yes. We believe the most important component of a successful CBDC is a central bank
ledger that provides a single golden source of data and the ability for permissioned
participants in the CBDC ecosystem to view, access and act on those data. This requires a
decentralized distributed ledger capable of:�Clearly establishing rights and permissions of
various actors, with a high degree of built-in privacy protections at a sub-transaction level.
Permissioned banks and payment service providers can view only the essential data
regarding their own customers or transactions to which they are a party. �Accurate,
synchronized, real-time data. This eliminates the current challenges of duplicated data and
the need for constant reconciliations across separate records and systems of participants,
which is a more energy efficient method of data storage that increases security. �The ability to
integrate with, and operate in, multiple different infrastructures whether that be existing
payment rails or emerging ledger or blockchain platforms. An interoperable architecture would
allow the different systems of the Federal Reserve, banks and other payment service
providers to have a common, fully synchronized view of the current state of the Federal
Reserve ledger while affording the ability to operate on different database and ledger choices.
The ability to connect to existing solutions minimizes investment and encourages adoption.
�The flexibility to adapt to as-yet-unknown scenarios or use cases as technology continues to
evolve.�
The balance between privacy and the ability to retain necessary oversight to prevent illicit
financial activity is one of the key challenges for CBDC. This is where the chosen technology
makes the difference. With a decentralized distributed ledger running a smart contract
application framework, such as Digital Asset’s Daml, you can clearly define how much privacy
is required and requested and then create the smart contracts to embed and preserve those
permissions. For example:�The Federal Reserve would not centrally hold or monitor the
personal identity of CBDC holders or detailed transaction data, which would remain
decentralized at the level of payment service providers such as banks and fintech firms (as is
currently the case in the two-tiered banking system).�Individual users should not know the
source and use of each CBDC. Parties to a transaction know only that step of the transaction,
and transactions would not be visible to those involved in preceding or following transfers,
except as desired and arranged. For example:�When a consumer pays for something at a
store, the merchant doesn’t know where the money has been and the consumer doesn’t know
where it goes next.�In a Delivery vs. Payment (an atomic, transactional exchange of money
and securities), the central bank would not know for what reason the payment is executed,
and the CSD/Registry would not know for how much money the security was sold, although
both legs of the deal are processed in one single transaction.�Ownership is known and can be
closely controlled or restricted, enabling conformance with Know Your Customer (KYC),
Anti-Money Laundering (AML), Countering the Financing of Terrorism (CFT) and other
compliance requirements. The authority can control who can hold money at a programmatic
level, for example to comply with restricted lists or to apply sanctions. �The ability to audit and
track transactions, since data and contracts (to the lowest level of identification) are stored
along with the history of each transaction. The set of observers of a Daml contract can be
customized to allow for more transparency and visibility.�Data minimization that enables the
right to forget, enabling compliance with laws, regulations, and stringent standards such as
General Data Protection Regulation (GDPR). �Strong and resilient governance and security,
with a ledger that is updated in real time, auditable, and supports supervisory oversight. A
CBDC designed on a smart contract application framework creates a component approach to
data governance, workflow, data modeling protocols and business interactions that prevents
accidental data leakage, hacks and break-ins. Daml uses a declarative security model
developed by cryptography experts. Transactions, data and contracts are stored along with
transaction history in an authoritative ledger, ensuring a full, immutable record of CBDC
throughout its lifecycle and providing permissioned observers with auditability and traceability.
�A smart contract framework provides significant privacy benefits, embedded at foundational
coding level, that are demonstrably better than the add-on privacy features commonly in
place for crypto markets and tokens where the asset’s entire history is attached in a way that
is visible to every user. With Daml, privacy protocols can be built into the sub-transactional
level of a contract, allowing for separate ‘observer’ roles that permit oversight without access
to the user’s personal data or private aspects of the transaction. Confidential information
resides with its owner (regardless of whether blockchain or traditional databases are used),
and rights and permissions are set at a granular level to protect the ‘need to know’ principle.
This helps to limit the scope of data used, which minimizes the potential for data breaches or
other exposures of personal information, while still allowing authorities to monitor the legality
of transactions.�In contrast, all non-Daml blockchains lack the basic properties of privacy,
leaking transaction information to the world. Some chains have addressed some, but not all,
of the privacy concerns; however, they lack the ability to guarantee their privacy mechanisms
when transacting across chains. A CBDC solution should feature privacy within as well as
across ledgers.�
The potential for operational and cyber risks is unavoidable but can be mitigated through
infrastructure choices and the use of smart contracts and a decentralized distributed ledger.�In
terms of operational resiliency, as CBDC use becomes widespread in financial markets,
atomic swaps and instant settlement can minimize the interconnectedness between firms
which would mitigate counterparty risk and the domino effects seen in the 2008- 2009
financial crisis. �CBDC can make the transfer of money more straightforward, faster and
cheaper (whether peer to peer, customer to business, business to business, across banks, or
internationally). Smart contracts are the necessary ingredient: they not only ensure that
privacy controls are well implemented but also clearly define roles, rules and permissions for
each workflow. Daml, in combination with Canton, perpetuates those controls and
permissions even as access to CBDC extends across platforms, ledgers and legacy
databases. �This is crucial to providing finality of transactions via atomic swaps. With
cross-ledger atomicity, if one leg of a transaction fails, all legs fail. By ensuring atomicity,
systems can achieve payment-versus-payment and delivery-versus-payment without the risk
of handing over goods when the payment leg fails,and removes the need for a central bank to
act as an escrow. �One way operational resilience can be achieved is to start with the
infrastructure. For example, the design of Digital Asset’s Canton ledger interoperability
protocol (https://docs.daml.com/canton/about.html) ensures that as long as there is a single
honest party to the transaction, any malicious actor or malfeasance is guaranteed to be
unveiled. �With regards to cyber resiliency, since CBDC creates a Federal Reserve ledger, the
highest levels of security, data governance, and controls are essential. The ledger must be
updated in real time, auditable, and support supervisory oversight. A CBDC designed on a
smart contract application framework creates a component approach to data governance,
workflow, data modeling protocols and business interactions that prevents accidental data
leakage, hacks and break-ins. For example, Digital Asset uses a declarative security model
developed by cryptography experts. Transactions, data and contracts are stored along with
transaction history in an authoritative ledger, ensuring a full, immutable record of CBDC
throughout its lifecycle and providing permissioned observers with auditability and traceability.
�While it is possible for the cryptographic key of a participant to be compromised, allowing the
entity that has stolen the cryptographic key to act in the name of the aggrieved party, this
would not be a challenge unique to CBDC. Industry standards exist to protect against this
worst case scenario using Hardware Security Modules. �
The specific parameters of CBDC will be set by the Federal Reserve. As a digitized form of
money issued by the Federal Reserve, we expect that CBDC would be legal tender in order
for it to be effectively used in trade and as a monetary policy lever. �
We would expect that CBDC could pay interest; however, that decision is up to the Federal
Reserve Board and how the CBDC is designed to interact with the existing two-tiered banking
system. As needs evolve, we believe it is critical that the technology underpinning the CBDC
is agile and flexible enough to adjust to changing parameters. So, for example, if CBDC is not
designed as interest bearing but then becomes so, the Federal Reserve would have another
lever for monetary policy and could nimbly implement interest rate changes (positive or
negative). Smart contracts enable this, as any change made to the core definitions is
automatically federated throughout the application. �
Any decision on limits should be made by the Federal Reserve as a matter of policy.
However, similar to whether a CBDC is interest-bearing, the CBDC should be built on a
technology that allows its rules and provisions to be changed as needs evolve and for those
changes to be implemented rapidly throughout the entire system. Again, smart contracts
simplify this process: limits could be set within the core permissions, and they would
automatically federate throughout the application. �In terms of how this could work: initial limits
could be defined and changed over time as use of the CBDC increases across markets, is
used in lending and liquidity, and interacts with existing services provided by banks and
financial institutions. Should balance limits be imposed, a smart contract could instruct the
conversion from digital to physical currency in a bank account or could govern how an
account could be used. For example, a transaction could fail because the payee is exceeding
its limits or because the payor does not have sufficient funds. In either instance, the smart
contract could be set up such that: �The excess or underage on a payment falls back on more
traditional, non-digital payment mechanisms.�The transaction is locked, giving the recipient
time to create capacity within balance limits or the sender to move funds to cover a
shortfall.�Smart contracts simplify this by encoding the specific rights of ownership along with
the rules and processes around those rights. The Federal Reserve will want to ensure that a
rich data definition language exists that can describe both the records and the rights parties
have according to these records. Clear data controls are also important, so that both parties
must jointly agree on changes to ownership records or allow signatories to an erroneous
contract to amend it.�
The technology implementation of a CBDC should provide the Federal Reserve with flexibility
in how to handle, delegate, or assign responsibilities to intermediaries, while preserving the
financial payments two-tier system that ensures that U.S. banks protect the privacy of their
customers while monitoring payments for their legality. In the first tier, the Federal Reserve
provides the system of record for all consumer accounts and positions. The Federal
Reserve:�remains the sole issuer and governs the system of record of CBDC positions.�sets
standards for the use of CBDC (such as interoperability requirements).�could potentially be the
regulator of the payment service providers, which could be commercial banks and authorized
fintech firms, as is the case with China’s e-CNY.�In the second tier, the Federal Reserve
delegates authority to banks and other payment service providers, allowing them to offer
access and services to their customers, and to perform KYC, AML, and other regulatory
requirements. These institutions act on behalf of their customers on the Federal Reserve’s
ledger for specific actions, as agreed with their customers. The ability to achieve this requires
a technology with expressive and fine-grained permission delegations and privacy rules. �With
this enhanced two-tier financial system, the Federal Reserve gains substantially more
granular and real-time data for managing and monitoring financial policy, while encouraging
U.S. banks to create an enhanced, more competitive payments system. �Again, we would
stress the importance of creating a CBDC on an infrastructure that can adapt to evolving
conditions. Given the rapid pace of change and innovation in financial markets, particularly
with regards to consumer financial services, any CBDC must be underpinned by a technology
that can interoperate with new solutions, extend to emerging applications and new providers,
and preserve its core features (privacy, permissions) – lest it become obsolete.�Parallel
industry developments�One use case that complements the creation of CBDC is the
Regulated Liability Network (RLN) that has been proposed by a number of commercial banks
and payment service providers in order to capture and catalyze some of the promises of
digital currency today, using current rules, regulations and arrangements. This plan leverages
existing public-private sector arrangements for regulated payment networks in place between
central and commercial banks, but it improves on these arrangements to capture some of the
key attributes of CBDC.�As proposed by the team behind the initiative, the RLN could play a
major role in de-risking and accelerating commercial bank payments. A concept paper
published by Citi* demonstrates how RLN would connect the liabilities of all mainstream
finance players involved in transactions. One of the most important elements of this plan is
that it does not require new rules or functionality for any of the actors in the payment process.
The legal certainty around the payment system and liabilities is maintained but the technology
changes. With central banks, commercial banks, and payment processors all sharing a
technology framework to conduct business, the time to finalize transactions and the risk
factors involved in payments could be significantly minimized. �The RLN effectively replicates
the existing two-tiered banking system with the creation of a network that supports a common
way to represent the liabilities of different regulated institutions:�Commercial banks leverage
their balance sheet to issue commercial bank money on the RLN.�The digital representations
of these funds are managed by the issuing entity, meaning the central bank manages its
liabilities in central bank money and each commercial bank manages the commercial bank
money they have issued.�The different issuances of commercial bank money are fungible,
making transfers between the banks straightforward. To achieve this, every business ledger
would need to be updated: those of the originating bank, the central bank, the recipient bank,
other central banks or potential intermediaries. �If the different ledgers are interoperable, the
updates can be linked and synchronized into one transaction.�RLN has been significant in
bringing the industry together to conceive of ths digital form of money as a regulated liability
and to the industry together to problem-solve and accelerate implementation. Digital Asset
has joined forces with SETL to create a regulated network for tokens, which will be minted,
burned and transferred in a coordinated single operation that achieves real-time settlement
between the customers of any regulated institution. However, we believe that RLN is a use
case for CBDC, not a substitute for a Federal Reserve issued CBDC, which would offer
substantial additional benefits including the elimination of depository risk.
�* https://www.citibank.com/tts/insights/articles/article191.html�
Offline capabilities will be important to retail CBDC in order to ensure financial

inclusion.�CBDC payments will require connectivity although it may become possible to
transfer money using a direct connection between devices. Since offline payments would
require someone to provide credit (unlikely to be provided by the Federal Reserve), we
believe that offline payments will be a service provided on top of CBDC. Private companies
could create apps to manage offline transactions, with records synced up when the user is
online again. �Alternatively, secure hardware could be used to complete transactions and store
the relevant data until connectivity is available to sync up with the ledger. �
sale? If so, how?
The design of CBDC should emulate the capabilities of currency with regards to
transferability, fungibility, and other uses. The ability to set permissions and embed rules in
CBDC, including compliance and regulatory tests, could ease the operational burden for the
provider by providing surety at point of sale. �In general, however, the user
experience–including use and acceptance at point of sale–would be services provided on top
of CBDC. Similar to how payment services and technology are developed today (e.g., debit
cards, digital payment apps, and payment terminals) these are likely to be developed by
private companies. �
Interoperability is critical to any CBDC in order to achieve transferability across multiple

payment platforms. It allows the Federal Reserve, banks and other payment service providers
to have a common, fully synchronized view of the current state of the Federal Reserve ledger.
It also enables complex, multi-party workflows to take place across ledgers. This is not only a
necessary condition for sustaining the global economy–from trade, to payments, to financial
market activity– but is also the key to efficiency since it eliminates current challenges of
duplicated data and constant reconciliations across separate records of participants.�For
domestic payments, the applications that are integrating into the CBDC ecosystem need not
run on the Federal Reserve’s own infrastructure, and should interoperate across commercial
banks and payment providers. Therefore, infrastructure interoperability is needed to ensure
that the CBDC solution is more than a like-for-like replacement of the existing payment
system. Looking outside national borders, it is unlikely that different countries issuing CBDC
will decide on the same infrastructure. Therefore, a U.S. CBDC should interoperate across
different technical infrastructures in order to reap the benefits of frictionless FX
transactions.�We believe that seamless and built-in interoperability is the only way for CBDCs
to reach their full potential. Digital Asset’s Daml provides the four key elements required for
true interoperability: �Data privacy: A CBDC solution should feature privacy within as well as
across ledgers. This functionality, while native to Daml, is missing in almost all non-Daml
blockchains. They lack the basic properties of privacy, leaking transaction information to the
world. Some chains have addressed some of the privacy concerns but lack the ability to
guarantee their privacy mechanisms when transacting across chains. �Multi-ledger technology:
The ability to deploy and connect digital currency systems across disparate networks
regardless of the underlying IT infrastructure. Top among the challenges is deciding which
technology to use - distributed ledger technology (DLT), centralized database, or existing
payment rails. Riding on the back of this issue is the requirement for compatibility with other
CBDCs, since there will be no single master ledger and because some CBDCs may not use
DLT. Ensuring that a CBDC is compatible with other CBDCs is a critical first step to
preventing the CBDC from hitting a dead end in cross-border applications. �Cross-ledger
atomicity: If one leg of a transaction fails, all legs fail. By ensuring atomicity, systems can
achieve payment versus payment and delivery versus payment without the risk of handing
over goods when the payment leg fails and without the need for a depository institution or a
central bank to act as an escrow.�Composable extensibility: This property is the ability to
dynamically add new applications and to connect to other networks easily, from existing
infrastructures to the most sophisticated emerging ledger solutions. Without composable
extensibility, institutions will likely reinvent the wheel when future technologies arise or when
there is a need to deploy future use cases to the same infrastructure. Since it would be
impossible to predetermine all potential uses for CBDC, it must be easy to build new
applications or add connections to other networks in order to support the adoption and
expansion of the CBDC. �Importantly, new use cases must not require changes to the initial
implementation, and future use cases must be tightly integrated to ensure frictionless
transactions between parties. Daml is agnostic to ledgers and platforms, and extensibility is a
fundamental characteristic. Each new application relies on the same core code, reducing
rework and time-to-market while ensuring integrity, and all applications can be easily
integrated with additional providers and data sources. �We believe that Daml provides the
necessary technology infrastructure to create and successfully manage CBDC, with the
added benefit of minimal investment and upfront cost, the ability to extend and evolve the
program over time, and the flexibility to set or revise standards as requirements change. �
CBDC?
Any consideration of CBDC should place significant value on future-proofing to allow for the
broadest possible set of uses and greatest flexibility to expand as opportunities arise. This
includes looking downstream to equitable adoption, allowing users to choose how they
interact with the CBDC and to avoid commitment to a particular technology. �Since it is
impossible to predetermine all potential uses for CBDC, the design of the currency should
allow new uses to be created without requiring changes to the initial implementation. This
makes composable extensibility critical to ensuring the ongoing effectiveness of the digital
currency. Composable extensibility is the ability to dynamically add new applications and to
connect to other networks easily. Without composable extensibility, companies will likely
reinvent the wheel when future technologies arise or when there is a need to deploy future
use cases to the same infrastructure. �
benefits of a CBDC?
The design and implementation of CBDC will be essential to ensuring a safe, efficient digital
currency that supports the Federal Reserve’s ability to effectively manage monetary policy,
assure the U.S. remains the world’s reserve currency, and expand financial inclusion. The
most important component of a successful CBDC is a central bank ledger that provides a
single golden source of data and the ability for permissioned participants in the CBDC
ecosystem to view, access and act on those data. This requires a decentralized distributed
ledger with the following characteristics:�Smart contracts that support multi-party workflows. A
CBDC built on smart contracts embeds rights and permissions, limits data to stakeholders,
and enables an ‘observer’ role to facilitate oversight. In addition to clearly defining roles,
responsibilities and rules for each workflow, monetary policy objectives (such as directed
lending or prioritized investments) can be encoded directly within CBDC.�Embedded privacy
and safeguards. The balance between privacy and necessary oversight to prevent illicit
financial activity is one of the key challenges for CBDC. Using a decentralized distributed
ledger running a smart contract application framework, you can clearly define how much
privacy is required and requested and then create the smart contracts that embed and
preserve those permissions. This enables ownership to be known while safeguarding the
privacy of individual transaction data; comprehensive auditability and traceability; data
minimization (including the right to be forgotten); a full, immutable record of CBDC throughout
its lifecycle; and strong and resilient governance and security with a ledger that is updated in
real time and supports supervisory oversight. �A CBDC designed on a smart contract
application framework creates a component approach to data governance, workflow, data
modeling protocols and business interactions that prevents accidental data leakage, hacks
and break-ins. �Accurate, synchronized, real-time data. This eliminates the current challenges
of duplicated data and the need for constant reconciliations across separate records and
systems of participants. This reduces operational cost and risk throughout the payment chain,
enables a more energy efficient method of data storage, and increases security.
�Interoperability, to allow integration with and operability across multiple different
infrastructures. This enables CBDC to work with existing payment rails and established or
emerging ledger or blockchain platforms. An interoperable architecture allows the different
systems of the Federal Reserve, banks and other payment service providers to have a
common, fully synchronized view of the current state of the Federal Reserve ledger while
affording the ability to operate on different database and ledger choices. The ability to
connect to existing solutions minimizes investment and encourages widespread adoption.
�The ability to dynamically add new applications or connect to other networks with composable
extensibility. Connectivity to existing infrastructures or to the most sophisticated emerging
ledger solutions is critical to the success of a CBDC. Without composable extensibility,
institutions will likely reinvent the wheel when future technologies arise or when there is a
need to deploy future use cases to the same infrastructure. Since it would be impossible to
predetermine all potential uses for CBDC, it must be easy to build new applications or add
connections to other networks in order to support the adoption and expansion of the CBDC.
�We would be pleased to work with the Federal Reserve to model various options in
preparation for, or as part of, a pilot CBDC program. This complements our existing work with
the Regulated Liability Network, which will bring some of the benefits of digitization to
payments but cannot provide the security, flexibility and scope necessary for a CBDC. �In
parallel, we are developing a dedicated CBDC sandbox to provide a safe space for modeling
the interactions that sit at the heart of CBDC. The ability to see CBDC in action and
understand how the rights, permissions and workflows of a smart contract-driven CBDC
would function is an important next step and will facilitate discovery for policymakers,
business users and developers.�While there are undoubtedly risks in introducing a digital
currency, careful design and the right infrastructure can mitigate many of those challenges.
There is also risk in inaction. We believe the United States should act expeditiously to design
and pilot a CBDC so that decisions about implementation can be thoughtfully considered.
This allows the U.S. to retain preeminence in international trade as the world’s reserve
currency and enables the U.S. to take a prominent role in international discussions regarding
technical standards for the design and appropriate uses of CBDC, including
intergovernmental agreements for cross-border use.
_________________________________________________________________________
Filipe Alves Ferreira
Industry
Individual
Country
Portugal
State
Email
Filipe's answer :Thank you for your paper "Money and Payments : The U.S. Dollar in the Age of
Digital Transformation".The launch of the US CBDC is a necessity in order to fulfill a gap that still
exists in the adolescence of the Internet.I want to say that your general framework seems to me to be
judicious but too limited in terms of the intended benefits in favor of people as human individuals, the
first interveners and the only drivers of the Economy and the peaceful conjuncture.That's why I want
to look forward to more content on the USA CBDC under development at the Board of Governors of
the Federal Reserve System.I am essentially referring to the gaps that the draft of the CBDC of the
United States of America allows to persist in a similar way to the CBDC of the digital €uro, of the
digital Yuan and to a greater or lesser extent in other CBDCs:1. The US CBDC has to be the digital
US$ and the US$ is the currency of the world. - How does the FED want to develop the vitality of
the dollar? - How to use. and does your central bank design the currency whose legal tender serves
the development of the World Economy?The digital US$ should be designed to be the UUS$$, the
digital universocial dollar .2. The US CBDC has to address the issue of interest rate variability and
introduce the example of a limited fixed rate as an economic stabilizer for the formation of investment
decisions. - USA and the FED can decide that the interest rate is 2%/year/365 payable on a daily
basis and progresive compress inflation; - USA and the FED may decide that this is sufficient for
the formation and remuneration of savings based on the money data-valuation practice, which leads to
remuneration based on capital gains and random multiplicative capacity . - USA and the FED with
the CBDC now proposed UUS$$ may require for its creation genesis the addition of the date-time to
this FED money and the recordable name of the owner of this UUS$$ digital object.3. USA and FED
may (and have to do) agree protocols with W3C, Google-Alphabet and Author to license WUW The
Webcash Universocial Web and T.O.M. The Time Owned Market.
Filipe's answer :��The benefits that should be achieved with the launch of the US CBDC may
be more important than those considered in your January 2022 paper and be specific to the
Universocial US$$ of the FED, by introducing the notion of an automatic work on the data of
the money to be created as 1 by 1 digital objects with unique characteristics and just shifting
the asset from credit-debit balances to digital property asset registered at a sequencial
historic general ledger.�The notion to be introduced and already tested is the processing of
money in different parts of the body of the digital object.
inclusion?
Filipe's answer :��Considering in the first place the possible launch of the US CBDC as a
liability of the central bank and fearing multiple launches of similar CBDCs, I have the intuition
of certain storms in the field of financial inclusion where the US dollar digital presupposed in
your paper of January 2022, even if with unmistakable value support, it may lack the simple
features that I see in the launch of USA FED's CBDC or Universocial US$$ giving it in a way
linked to the value support:�- as cash production cell (1st monetary part processable as
personal savings growing advantage ) +�- a counter @stamping of the time in production of
the cell and its antiquity in the production of distributable wealth (2nd financial part
processable as capital gain as the time go) Time Market Bid & Ask +�- a webtaxmatic cloud
function as a release value of the webcashmatic income of the new taxable amount that the
US Treasury thanks (3rd part processable as "freedom" gain) +�-a tagvaporator of the
personal orientation option for the free exercise of the owner of the digital object UUS$$
regarding the eventual limit destination (democratic folks control of investments) of the
monetary load allocated in the "Universocial Sovereign Anchor" which production is
distributed every 24 hours (4th part processable as "multiplicative capacity" gain).�
Filipe's answer :The launch of US CBDC designed as "...a digital liability of the Federal Reserve
that is widely available to the general public" could affect the Federal Reserve's ability in the pursuit of
its maximum-employement and price-stabilitty goals. Because such CBDC would not be USA
genetic but one more CBDC and would lack not only of an underlying asset pool as the others even not
so important for United States of America and it futur digital dollar but moreover it lacks of an
underlying construction to enable folks on ability for wealth creation and extraction from the virgin
space self dimensionable with UUS$$ and a fixed interest rate for the cash production to be shared to
get rights to share cash results every 24 hours.Estas lacunas evendenciam dúvidas sobre todas as
cryptos and less but also sobre all CBDCs as it's coming before me.In my proposed design of
FED's UUS$$ for United States of America the "digital liability" would be "FED's disponibility of
economic spaces for anidation of central bank money in web dynamics production" creating conditions
to generate a stream of money now again towards the FED !!! and to rearrange the Universocial
Economy.
stability?
Filipe's answer :��It would be positive or negative for stability in dependence on the CBDC
design.��I would trust a UUS$$ as FED's codificated spaces to be created at the General
Ledger of The Webcash Universocial Web" as FED's authorized spaces for anidation
(reversible allocation) of folks monetary burdens who use the PSH Personal Savings Helper
for the practice of the money data-valuation.��US CBDC as FED's a liabity would not be great
to resolve inflation and USA Debt ( no so important I agree but would prefer an organized in
inflation compressor and investment resources cash stream for people wellbeing and to
maintain USA leadership.
Again in dependence of the CBDC design.�A design where the US FED authorize the use of
an infinite number of it coded spaces for anidation alphanumeric and @stamped of monetary
burdens to be provided of WUW's algorithm for the money data-valuation reproduction seems
the opportunity to serve USA with a pioneer central bank currency driver included the
processed money pumping by Google Cloud Platform in stream for the Universocial
Sovereign Anchor of shared cash production at The USA FED and with cash results every
12:00 at New York local hour at The T.O.M. The Time Owned Market.��Could a CBDC
adversely affect the financial sector?��Adaptations with upcoming reaction events would be
daily webmatic treated by the total transparence of the WUW The Webcash and The T.O.M.
The Time Owned Market and all insuered by Google's Technical Structure.
Filipe's answer :The tools are considerated in standards of the USA FED and could insure full
succès for implementation and to run the W3C Internet, drived in handleling by Google's Tech
Services :- Draft protocoles and execution agreements ;- Regulations of US Congres ;- Creation
of FED's codes for authorizing anidations at the WUW's General Ledger ;- Implementation of
WUW The Webcash Universocial Web ;- Creation of the T.O.M. The Time Owned Market ;-
Creation of the app P.S.H. - Personal Savings Helper ;- Creation of Do-G-Phones specifiques for to
run PSH app ;- Testification phase at MIT.- WUW's notary documents for operations over digital
properties "Owndated Webquantums".
Yes it's important to preserve the general public access to a form of central bank money.
CBDC?
Filipe's answer :��With great difficulties.

Filipe's answer :��Agreements are allways the better solution even with the smallest nations.
Filipe's answer :��All the related with a folks savings helper and actions of monetary policy
sanitation.
Filipe's answer :��Giving people the opportunity to create their own processable digital CBDC
by anidation of monetary burdens in the spaces authorized by The US FED.
Filipe's answer :��Let Google answer by protocol with you.�No proble at all about that, and no
costs for anybody. Because the CBDC UUS$$ could be designed for virgin wealth extraction
with payements retained at the source making the thing free for everybody I said.
Filipe's answer :��Of course by specific Congress Law.
Filipe's answer :��A CBDC has not to pay interest.��Because the interest rate (2%/day/365 daily
payed) is use only to be transformed in a shared generator of cash results, with individualized
times at production and a WUW's algorithm for the aplication of daily results upon UUS$$
digital objects with capital gains for everybody owners.��These capital gains are prefered to the
attraction of an interest rate which mechanics is inflationary as knone.
Filipe's answer :��No limits in my construction of US CBDC the processable UUS$$

digital.��Everybody may shift the asset from currency or banks balances at Central Bank of
United States of America into Universocial US Dollar Digital Object , becoming owner and go
back at any time without any cost or risk of loss.
Filipe's answer :No intermediaries at all. Just only providers for WUW The Webcash Universocial
Web and for The T.O.M. The Time Owned Market two firms with self feeded and under control of
:Congrès Law ;Standards US Treasury ;Standards US FED ;Standards W3C ;Standards
Google-Alphabet ;Standards Time Unix for @ stamping over money data-valuations ;Inspections
TIGTA over daily cash production and daily cash results.
Filipe's answer :��Capabilities offline as Google's standards for works on human heath.
sale? If so, how?
Filipe's answer :��The app PSH to run the practice of the money data-valuation with finalization
of the Personal Business as a Service for the creation of personalized digital savings in web
dynamics using authorize spaces of USA FED for issuance of UUS$$ digital objects dollars is
offered for free by WUW in agreement with Google and USA FED.��Requirements : Inscription
of Identity at the WUW's General Ledger and wil to shift from the two kinds of the US Central
Bank money in the third form which is a set of digital objects with legal tender.
Filipe's answer :��Tecnologia Google Cloud Platform at least for any changes of rights and
ownerships in basis of the service of handling of the WUW's General Ledger with
certifications included and service cash back when the user of the PSH data-valuation app
decides to push the button "cashCall".��No proble with bank system.��Well, even if we dont need
the last computacional Google's abilities we would preserve the standards for complete
efficacity.
CBDC?
Filipe's answer :��United States is the first technological word's nation.�W3C serves the world
peacefull.�Google's is able to make another search engine to identify any digital object as
UUS$$ with legal tender.
benefits of a CBDC?
Filipe's answer :��A big quantity of benefits such us for exemple the free service of inheritage
inventory, or simply a "flashed of individual position" provided with a set of dynamic counters
for evaluation and deals.
_________________________________________________________________________
ROXE (Andreas Jobst, Chief Economist)
Industry
Country
State
New York
Email
andy@roxe.io
AML/CFT and illicit flows: greater (centralized) transparency about aggregate money flows
enhances system-wide compliance with AML/CFT and sanctions financing regulations (which
has proven difficult to implement consistently across crypto-assets); also helps reduce tax
evasion and financial crime (incl. fiat counterfeiting).��LOLR: CBDC helps restore the CB’s role
as “lender of last resort” (LOLR) for digital transactions that would otherwise be conducted via
crypto-assets that remove the CB’s control over monetary aggregates and the capital
account; deposit insurance for CBDC would not been needed by construction.��Money velocity:
increases capital allocation by raising the opportunity cost of holding cash, thus, increasing
money velocity while discouraging precautionary cash savings/hoarding.��Cost-efficiency of
financial intermediation: lower transaction costs by increasing competition, widening access
to services, promoting financial inclusion, and opening the possibility of complementary
services offered on social networking and e-commerce platforms of global scale; lower cost
for retail banking operations and financial infrastructure in areas where the use of CBDC can
be more predominant.��Credit analysis: availability of data mining & analytics tools could
enhance risk management, and, thus, lower the cost of risk for new lending.��Capital markets:
a wholesale CBDC could facilitate more efficient issuance, trading and settlement as well as
processing of subsequent corporate actions, such as dividend or interest payments.
While CBDCs contribute to efficiency and innovation in retail payment systems, including
cross-border payments, similar results could also be achieved without the need of a CBDC
(e.g., instant payments). Moreover, the issuance of isolated domestic CBDCs does not seem
to be the optimal way for improving cross-border payments efficiency.
inclusion?
CBDC could improve financial inclusion by providing access to efficient, cheap, and real-time
payments at lower cost outside the formal banking system.
The introduction of CBDC increases the opportunity cost of holding cash and/or hoarding,
which is likely to increase the velocity of money due to a lower elasticity of money demand to
a change in real rates. This will increase the efficiency of capital allocation and enhance the
effectiveness of price-based monetary policy, with a higher probability of reaching the optimal
policy trade-off between stable inflation and reaching potential output.�
stability?
CBDCs could be easily understood as a safer store of value than deposits and commercial
banks money. Thus, a CBDC may be used as a store of value (not only as a means of
payment), which could cause a shift of commercial banks’ deposits to the CBDC. Banks’
deposit base could come under pressure, but credit provision must be sustained even during
the transition. Today commercial banks create money as a counterpart of loans financing the
real economy. With CBDCs, central banks could become a main financier of the economy,
although central banks are not ready to fulfill that function for which they have no capability
nor mandate.�
It is important for the US to develop its own CBDC. Foreign CBDCs (as well as stablecoins
and other private crypto-assets) could reduce monetary policy autonomy through currency
substitution and worsen vulnerabilities from currency mismatches. Without appropriate
safeguards, they could facilitate illicit flows and make it harder for regulatory authorities to
enforce FX restrictions and capital flow management measures.
There are several tools to encourage the use of CBDC for payments rather than store of
value, i.e., to reduce the competitiveness of CBDC versus bank deposits (e.g. limits on
individuals’ holdings or transactions and remuneration); these must be effective under all
different circumstances. To limit the use of CBDC as a store of value, one of the most
commented options would be to install a limit of CBDC holding per individual. Another
mitigating option would be a two-tiered remuneration structure, in which an initial amount
below a certain threshold may enjoy a remuneration close to market rates, while quantities
exceeding that threshold would be discouraged by a remuneration consistently below the
policy rate. Still, this tool may not be effective in crisis periods or low interest environments.
Depending on the remuneration of the CBDC, rates paid to depositors and savers, and
therefore on the cost of funding and the cost of credit will adjust. Central banks should also
consider providing alternative sources of funding to banks should clients decide to transform
their commercial bank deposits into central bank liabilities. Finally, the programmability of
CBDC, including stability mechanisms, can help mitigate operational risk.
The declining cash use should impede the public’s access to central bank money, especially
for transactions that do not involve banks (or other trusted third parties). While the evolution
to a cashless society is likely, the diminishing importance of fiat increases system-wide risks
from bank failure(s) affecting commercial bank money. In addition, in case of a natural
disaster or any other wide-spread emergency, CBDCs can be used to distribute relief funds
more effectively.
CBDC?
There has been a significant increase in the efficiency of domestic and cross-border digital
payments with real-time settlement capabilities. While this evolution will continue with or
without CBDC, a CBDC allows for better management, end-to-end accountability, end-to
end-monitoring and a wide spectrum of possibilities for payments, collections, disbursements
for individuals and businesses alike.
Foreign CBDCs (as well as stablecoins and other private crypto-assets) could reduce
monetary policy autonomy through currency substitution and worsen vulnerabilities from
currency mismatches. Without appropriate safeguards, they could facilitate illicit flows and
make it harder for regulatory authorities to enforce FX restrictions and capital flow
management measures. Thus, the near-term availability of a CBDC would be desirable;
however, given the dominant reserve currency status of the USD, the Federal Reserve is
likely to have more time to develop its own CBDC compared to many (much smaller) open
economies.
Traditional monitoring of monies has been done by means of tools that are capable of looking
into currency, wires, ACH, bank accounts, and other sources of paper trails. CBDC allows for
multiple data points to be identified, measuring, monitoring and mitigating; cutting several
necessary steps from todays’ way of identifying, measuring, monitoring and mitigating risks.
The CB can set transaction limits to keep certain transactions anonymous if they fall below
the set threshold. For instance, the Roxe payment system and CBDC solution can track the
sum of all the transactions per customer and report to the CB when a user exceeds the
defined threshold. The CB could also set up (1) a separate smart contract for a “cash shuffle
protocol” to execute the transactions internally so it cannot be traced to the original user;
and/or (2) a centralized node in RSS to transmit transactions so that the original user or wallet
cannot be traced.
On a permissioned blockchain (used by Roxe), it is very unlikely to have a cyber-related

event. Adding more supernodes to the network enhances its resilience. The higher the
number of supernodes, the less the impact to the blockchain. For services and operations
that have access to the blockchain, they should be backed up on multiple servers and follow
standard IT disaster recovery processes. Much higher than normal load could cause
transaction timeouts, transactions to get canceled, or transactions to get backed up and
process slowly. Roxe designs services in such a way that monitors and reacts to sudden load
hikes and auto scale in critical services to minimize this risk. Roxe does not use any
gateways or bridges with other blockchains that add operational/cyber risk. Operational risk
from internet disruptions can be mitigated with nodes being located globally in different
regions. Operational resilience are provided by multiple data centers, multiple physical
location based horizontally scalable infrastructure, and redundancy in all key system
components to ensure when one server or even one data center is down, the system will still
mostly recover automatically to keep operating.
CBDC is a digital form of currency that is backed by a Central Bank and through that has
legal tender status.
A CBDC can but does not need to pay interest. It is preferable to develop programmability
that allows the interest on CBDC to drop below the effective policy rate.
Yes. Avoiding the use of CBDC as a store of value (which risks disintermediating the banking
sector), one of the most commented options would be to install a limit of CBDC holding per
individual.�
The common intermediaries should be commercial banks as well as payment service

providers (PSPs). Ideally, they would provide retail clients account-based access via a
custodial web wallet.
CBDC should have “offline” capabilities and allow secure offline payments just like paper
currency. There are multiple ways in which this can be achieved:��QR Code: Unique QR code
associated with a wallet could be stored offline and used to pay. The QR code works like
google authenticator, where the QR code changes every few seconds so it cannot be stolen.
However, the mobile device data could be stolen, so it will be important to verify that: (1) the
device ID of the QR code or tokenized wallet holder belongs to the original holder; (2) users
can set up an upper limit for offline transactions; and (3) long as one party is online, these
details can be verified.��Tokenizing wallet address: The user’s wallet address can be tokenized
via encryption and stored on the customer’s device. With the token, the customer could pay a
merchant even when offline. Merchants are online but can verify offline customers payments.
Today, most smart phones are equipped with secure hardware to store keys that can be
accessed only by users' biometrics like face authentication or fingerprint or
password.��Non-custodial hardware wallet: In a hardware wallet, the user’s cryptographic keys
that authorize funds transfer may be stored and managed on the user’s personal device itself.
This property makes cryptocurrency wallets more cash-like. This solution however, also
exposes the user to the risk of unrecoverable financial loss if the wallet or device hosting it is
compromised or lost. This solution protects the user against data theft and double
spending.�Counterfeit CBDC: It's very difficult to counterfeit CBDC’s on the blockchain. Roxe
verifies that the address of the token comes from the recognized blockchain and not
counterfeit to mitigate this risk.
sale? If so, how?
Yes. Making a payment with CBDC to merchants in-store should be as simple as scanning a
QR code. Roxe App supports this functionality.
To recognize CBDC, payment platforms would need to add and support CBDC as a new
digital asset type. In the case of Roxe, CBDC can be swapped into fiat before sending the
transaction to another payment platform. Hence, Roxe can support transferability across
multiple payment platforms w/o making any adjustments to payment platforms.
CBDC?
The operating model and governance of CBDC is crucially dependent on technology

innovations. For instance, the speed of transactions per second could be improved to support
scaling operations. Roxe’s blockchain provides the maximum speed of 3,200 tps and blocks
get mined every 0.5 seconds.
benefits of a CBDC?
Interoperability with other payment solutions would facilitate the deployment of the CBDC
while contributing at the same time to the overall adoption of new forms of digital money and
payments. CBDCs should be integrated into broader services enabling intermediaries to offer
new value-added services. Access to CBDCs should be provided through supervised
intermediaries that are best suited for providing end user services and adapting to evolving
user needs. It is important to ensure that the central banks develop a robust and flexible core
infrastructure that leaves enough room for the private sector to deploy profitable business
models that encourage further innovation and investment in the development of value-added
services. �Interoperability with other jurisdictions with a set of aligned standards, e.g. as
defined in the G7 Public Policy Principles for retail CBDC, would avoid fragmentation and
friction in cross-border and cross-currency processes as experienced today for cross-border
payments. Achieving technical interoperability and a level of legal and regulatory
harmonization for CBDC would greatly contribute to the G20 roadmap of enhancing global
cross-border payments.��The anonymity/privacy trade-off should be carefully considered, not
only in comparison to cash (with a view on reducing illicit use of money) but also in
comparison to other digital payment solutions facilitated by the private sector. A regulatory
level-playing field for all types of digital payment solutions (i.e. CBDC and private sector
solutions) in terms of AML controls and traceability is equally important.��The Fed should also
explore the opportunities offered by different design options, such as the potential addition of
programmability features to CBDCs; this could provide the private sector new ways to
innovate, as well as the implementation of embedded supervision which could improve the
efficiency and effectiveness of existing supervisory processes.�
_________________________________________________________________________
Jakub
Industry
Country
Czechia
State
Email
Yes
Yes
inclusion?
Yes
Yes
stability?
Yes
Bank is ČSOB Swift/BIC code : CEKOCZPP and number conto:CZ0903000000000298329537
Yes
CBDC?
No
No
Yes
No
No
No
No
No
No
No
sale? If so, how?
No
No
CBDC?
No
benefits of a CBDC?
No
_________________________________________________________________________
Industry
Country
State
California
Email
Local law enforcement and some people assisting shouldn’t have authority to team up against
1 without cause at all
Don’t steal from people who own property like the oldest bitcoin that exists I have the Satoshi
Nakamoto wallet in my possession and it shows the transaction date when I bought it on July
2021 150 million
inclusion?
Negative
Pay me
stability?
My money back
n/a
N/a
N/a
CBDC?
N/a
N/a
N/a
N/a
N/a
N/a
N/a
N/a
N/a
N/a
sale? If so, how?
N/a
N/a
CBDC?
N/a
benefits of a CBDC?
N/a
_________________________________________________________________________
Industry
Country
State
California
Email
Local law enforcement and some people assisting shouldn’t have authority to team up against
1 without cause at all
Don’t steal from people who own property like the oldest bitcoin that exists I have the Satoshi
Nakamoto wallet in my possession and it shows the transaction date when I bought it on July
2021 150 million
inclusion?
Negative
Pay me
stability?
My money back
n/a
N/a
N/a
CBDC?
N/a
N/a
N/a
N/a
N/a
N/a
N/a
N/a
N/a
N/a
sale? If so, how?
N/a
N/a
CBDC?
N/a
benefits of a CBDC?
N/a
_________________________________________________________________________
Nicholas Luczak
Industry
Individual
Country
State
Michigan
Email
A non-interest bearing asset, the US CBDC, could be substituted slowly into the US Financial
market for monetary assets, providing widely available liquidity through private and
accountable transactions. Like every individually issued dollar bill has its unique code, "digital
dollars" could serve a similar role. Digital dollars and physical cash, could become a new
reserve asset. �The ratio of digital dollars to physical cash, determined by monetary and fiscal
policy makers, would be regularly published, along with the total quantity of both available to
an anonymous hypothetical individual.
inclusion?
The "digital dollar" and its partnership with physical cash, could serve as the underlying
denominator globally. Moreover, direct control of both can be accomplished by both the
Treasury and the Fed.
stability?
CBDC?
sale? If so, how?
CBDC?
benefits of a CBDC?
_________________________________________________________________________
Mastercard
Industry
Country
State
New York
Email
jesse.mcwaters@mastercard.com
The Federal Reserve’s discussion paper provides a welcome and thoughtful analysis of the potential
implications of implementing a CBDC in the United States. One topic that could warrant further
discussion is the architecture and operating model that would – if the Federal Reserve decides to
proceed with the creation of a retail CBDC - best align with (i) the underlying policy goals motivating
the creation of a CBDC and (ii) the existing landscape of the U.S. financial system. We strongly
endorse the position of the Federal Reserve that – if a CBDC were to be created – the United States
financial ecosystem and its consumers would be best served by an “intermediated” system where “the
private sector would offer accounts or digital wallets”. This public private cooperation on what is
sometimes called a “two-tier” CBDC is critical to ensuring an open and competitive payment
ecosystem characterized by strong innovation. However, there are many different ways to structure
public-private cooperation within such a system, some of which may be more or less suited to the
policy goals of a given CBDC. In any case, a clear governance framework which sets out the
responsibilities of the public and private sector, is needed.For example, in the 2021 Bank for
International Settlements (BIS) Working Paper (#928) Auer and Böhme outline two distinct
approaches to deploying a two-tiered CBDC. The first is a ‘Hybrid Architecture’ where the central
bank retains a copy of all retail CBDC holdings, and transactions are processed directly through
updates to the central bank ledger. The second approach is an ‘Intermediated Architecture’, which we
refer to as a ‘Federated Architecture’ (to avoid confusion with the Federal Reserve’s use of the term
intermediated). Under this approach, the central bank records wholesale balances, and private sector
intermediaries clear and settle CBDC balances bilaterally. Although we believe that further study is
required to determine if a U.S. CBDC is warranted, a Federated Architecture is more likely to align to
the goals of the Federal Reserve’s policy objectives. This approach is aligned with the existing
allocation of public and private responsibilities within the financial system, and by extending a broader
set of capabilities to the private sector (compared with the Hybrid Architecture approach), it would also
provide a more robust platform for the development of value-added innovations. Critically, a
Federated Architecture would also support the Federal Reserve’s goal of creating a privacy-protected
CBDC. As we discuss further in our response to Question 12, a Federated CBDC avoids the creation of
a ‘master ledger’ at the central bank by fragmenting transaction data across supervised intermediaries
and also eliminates the data-protection risks of centralizing all transaction data.Beyond questions of
CBDC architecture, two additional factors that will be important to consider are (i) the mechanisms by
which CBDC payments are accepted and (ii) the incentive structure to ensure sufficient private sector
investment in a secure, competitive, and innovative ecosystem. As we explore further in our response
to Question 22, enabling acceptance points is one of the greatest challenges to driving mass adoption of
a new payment solution. Adopting an ‘open acceptance’ framework, using existing acceptance
technologies and networks to facilitate payments by CBDC, can maximize the day-one ubiquity of the
system and minimize complexity of adoption for users and merchants alike. Finally, while the
selection of a Federated CBDC Architecture and the adoption of an open acceptance framework can
minimize the complexity of integrating with a CBDC, there is no getting around the fact that building
new wallet solutions, integrating with new payment infrastructure, and enabling the various links in the
payment value chain are all costly activities. Sustainable payment ecosystems are dependent on a
delicate balancing of incentives between those stakeholders who bear the costs of enabling payments
and those who benefit from payment services. In order for a central bank’s CBDC infrastructure to
sustain a vibrant and competitive ecosystem of payments innovators, incentives will need to exist that
allow payment service providers to generate an appropriate return on their investments.If the U.S.
chooses to develop a CBDC, we are ready to work with the Federal Reserve to ensure a CBDC will
flow seamlessly across existing payment networks. As evidenced by our history, we are devoted to
providing both system-wide resilience as well as open and user-friendly consumer choice. Mastercard
has deep expertise in building and operating secure, high-performance payment networks. We govern
& operate the world’s fastest payments processing network (capacity of > 20,000 transactions per
second), connecting consumers, financial institutions, merchants, governments, and businesses in more
than 210 countries and territories.
Below, we focus in our response on CBDC as a means of payment. �While a CBDC could
play a role in payments innovation, increased financial inclusion, visibility into economic
activity, and improved efficiency of national and international payment flows, all of these
potential benefits can also be achieved through facilitation of a vibrant private sector and
competition in payments. For example: real-time payment systems, certain stablecoins, and
the development of blockchain based “tokenized deposit” capabilities by commercial banks
and fintech companies have great potential to lower costs and improve the speed and
efficiency of payment flows. Concurrently, the growth of open banking, open finance, and the
ascendency of neo-banks will increase competition and support a more inclusive financial
system. Therefore, while a CBDC is one approach to reducing frictions in payments and
supporting a more inclusive financial system, it is not the only means of doing so. �Ultimately,
while CBDCs are an exciting new tool in a central bank’s toolbox, that does not mean they
are the right tool to fix every problem nor that every country needs a CBDC. In some cases, a
CBDC might be an appropriate tool for the job, but not the only appropriate tool. In other
cases, established systems and services or innovations other than CBDCs may be a better fit
to achieve a central bank’s goals. �Further, the Federal Reserve should consider the
precedent it would be setting in regard to inserting itself into a part of the financial system
which has historically been driven and maintained by the private sector. Such a shift
dramatically alters the stance of the public sector’s role in facilitating payments innovation.
Therefore, we believe that the Federal Reserve should carefully analyze the case for a
CBDC, considering the unique features of the U.S. economy to find the approach that best fits
our nation’s unique payment needs.
inclusion?
A CBDC might have the potential to increase financial inclusion. However, the central
features of a CBDC (i.e., digitized central bank money and a new method of payment) do not
solve many of the problems that result in people being unbanked. �Lack of access and lack of
trust are fundamental issues that keep people out of the formal banking system. Those issues
can be addressed without a CBDC. For example, according to a report by Maiden Labs,
“Centering Users in the Design of Digital Currency,” many unbanked Americans are
unbanked because they distrust banks, and this distrust is typically rooted in fee practices. In
particular, unbanked Americans have concerns about not understanding when they will incur
checking account fees. A CBDC will not have inherent qualities that would address this
distrust, but improved transparency and competition of financial services in general may help.
In the context of a CBDC, this responsibility would fall to the private sector intermediaries.
The same is true of access. That is, the manner in which a CBDC is intermediated could
improve access, but so could other innovations in our financial system that are constructed on
the existing commercial bank money infrastructure.��Moreover, in line with our response to
question 2, we believe it will be important for the Federal Reserve to carefully analyze the
capacity of a CBDC to improve financial inclusion, comparing and contrasting the strengths
and weaknesses of a CBDC with other approaches. For example, in their recent paper “The
Treasury Option: How the US can achieve the financial inclusion benefits of a CBDC now”,
Jackson and Massad explore how an expansion of the U.S. Treasury Department’s popular
and well established Express Direct offering “would facilitate distribution of federal benefits
and provide low-cost, no-frills payment services” providing “a faster, easier way to achieve
some of the primary objectives of those who favor a CBDC”. Such a program would be “much
easier to establish and could be implemented now.” A focus on enhancing existing programs,
such as Express Direct, would not require the costly and technically complex deployment of
new infrastructure or the navigation of macro-economic challenges unique to a CBDC
(discussed further in our response to questions 4 - 7). Before proceeding with the
development of a CBDC on the ground of financial inclusion, the Federal Reserve should
closely analyze this premise, and compare it with other proposed approaches to fostering
inclusion, to determine which are best positioned to meet the genuine needs of financial
underserved Americans.
A U.S. CBDC would require the Federal Reserve to balance the potential adverse effects of
deposit substitution with the potential to add new tools to effectuate monetary policy. The
Discussion Paper addresses the uncertainty surrounding the share of assets that individuals
might choose to hold in a CBDC at any given time—particularly in relation to their holdings of
commercial bank deposits. Here, the Federal Reserve faces a serious challenge. To be
considered a success, a CBDC must have sufficient user adoption to justify the time and
investment made by the Federal Reserve. A CBDC must also be used with enough frequency
to provide a sustainable business model for multiple competing payment interface providers.
However, it would clearly not be desirable if a CBDC becomes so popular as to drive
large-scale substitution away from commercial deposits, undermining the stability of the U.S.
financial system or disrupting established channels of credit creation.��Several factors may
frustrate efforts to quantify and mitigate the risk of substitution. First, it will be difficult to
determine the likely degree of substitution of CBDC for commercial deposits prior to the
launch of a CBDC, particularly absent the launch of a CBDC in another major economy. To
cite research by the Bank of England, “gauging the likely shift from deposits into CBDC is
challenging because to date no major economy central bank has introduced a CBDC.”
Second, until a CBDC system has run for a significant period, it will be difficult to ascertain
how consumer’s CBDC usage patterns will vary in response to exogenous factors. While the
Discussion Paper remarks that “[t]hese concerns could potentially be mitigated by CBDC
design choices,” the implementation of design choices would be in the hands of independent
intermediaries and outside of the direct control of the Federal Reserve. Finally, it is important
to note the nature of digital services often enjoy extremely steep adoption curves, potentially
limiting the period that the Federal Reserve would have to adjust a production system in
response to early data.��None of these challenges should be taken to suggest that a CBDC
could not be deployed; however, they suggest that modelling or observation of CBDC
adoption trends in other jurisdictions may not be enough to accurately estimate substitution of
CBDC for commercial deposits. Instead, effectively identifying substitution risks and
formulating mitigation and management strategies may demand larger scale, and longer
duration, controlled-access pilots than have been required for previous developments in U.S.
payments.��The benefits of new monetary policy tools potentially made available through a
CBDC also remain uncertain. For example, while a CBDC might offer a way to stimulate
aggregate demand through direct transfers of money to the public (so-called helicopter
drops), a key challenge to these transfers is the identification of recipients and accounts, and
that challenge is not solved by a CBDC. The Bank for International Settlements (BIS) reaches
this conclusion in a report titled “Central Bank Digital Currencies: Foundational Principles and
Core Features.” In fact, the BIS report concludes that “monetary policy will not be the primary
motivation for issuing CBDC.”
stability?
Large-scale or volatile deposit substitution caused by a CBDC could have several

implications for financial stability, many of which have been covered in detail by academic
and central bank publications in recent years. Some of the frequently cited potential
implications are discussed below. �1.�Implications on the cost and availability of loanable funds:
The introduction of a CBDC could lead to a reduction in commercial bank deposits, as bank
customers would be able to choose to move some of their deposits to the CBDC. Since
deposits constitute an important source of low-cost funding for banks’ lending operations, the
outflow of deposits at a significant scale could have adverse consequences for the cost and
availability of credit in the broader economy. �2.�Implications on monetary policy
implementation: The introduction of a CBDC could potentially allow changes in policy to be
passed on to households more quickly than via commercial banks; particularly if
unconventional forms of monetary policy, such as direct central bank disbursements to
consumers, were to be explored. Concurrently, an overall reduction in the stock of
commercial bank money could theoretically reduce the effectiveness of more traditional
monetary policy operations executed via changes to interest rates. �3.�Financial stability
generally: If consumers see a CBDC as less risky than traditional deposits during a period of
financial stress, it could trigger a “rush to safety” that would undermine the stability of
otherwise solvent banks. While consumers already have access to central bank liabilities
through cash, a CBDC may have significantly fewer barriers to large scale transfers, as it
would not require the consumer to physically obtain or transport cash and may be perceived
as less subject to theft. The introduction of a CBDC may significantly increase the volatility of
deposit substitution during times of crisis—placing pressure on commercial banks’ liquidity
and solvency positions. �Possible methods of mitigating these risks are discussed in response
to question 7 below.�
The introduction of a CBDC has the potential to shift consumer demand for central bank
money relative to commercial bank money. If deposit substitution were widespread or with
significant volatility, it could potentially have unintended adverse consequences for the cost
and availability of loanable funds and the overall stability of banks. Please see our response
to question 5 for a discussion of these issues. �Moreover, as we discuss in our response to
question 4, it would be difficult to determine the likely degree of substitution of CBDC for
commercial deposits prior to the launch of a CBDC, particularly absent the ability to observe
the launch of a CBDC in another major economy. And, until a CBDC system has run for a
significant period, it would be difficult to ascertain how consumers’ CBDC usage patterns
would vary in response to exogenous factors and therefore how deposit substitution will
unfold.�
Since the rate of deposit substitution cannot be known now, and since the potential adverse
implications of uncontrolled large-scale or volatile movements between commercial deposits
and the CBDC are significant, many central banks have concluded that they will require policy
tools for mediating the flow of deposits. Here, we outline three potential mechanisms for
consideration and exploration by the Federal Reserve. �Limits: The most effective means of
mediating the flow of funds between the CBDC and commercial deposits would be to limit an
individual’s holdings of CBDC at any given time. In order to implement this policy, while also
ensuring that users could always receive a payment, the European Central Bank has
suggested that a “waterfall” approach could be employed, whereby incoming CBDC in excess
of the holding limit would be converted automatically to commercial bank money and be
deposited in the payee’s account. �Remuneration: Another approach would be to discourage
the holding of a CBDC by introducing an opportunity cost to holding the CBDC relative to
commercial deposits. This could mean providing a zero rate of return on CBDC holdings. This
could be delivered on a tiered basis with holdings below a certain level providing zero-yield -
similar to cash - and holdings above that level subject to a negative rate of interest. However,
some commentators—including Burkhard Balz, Member of the Executive Board of the
Deutsche Bundesbank—have expressed concerns that this approach may not be enough to
halt a “digital bank run” during a financial crisis. Moreover, the use of highly negative rates to
constrain deposit substitution during a crisis could face significant popular opposition.
�Redistribution of funds: A third means by which the Federal Reserve might mitigate the
implications of large-scale deposit substitution would be by offsetting the accumulation of
liabilities on its balance sheet resulting from adoption of a CBDC with the provision of
wholesale funding to financial institutions. Such a policy could be effective in mitigating the
impact of CBDC issuance on the cost and availability of credit in the U.S. economy. However,
it is less likely that such a policy would—on its own—be an effective means of mitigating more
volatile swings in public demand for the CBDC, such as during periods of intense financial
stress.�
No, we believe it is not strictly necessary. This is because electronic methods of payment
using commercial bank money have significantly expanded the array of payment options
available to consumers and will continue to be a viable substitute for cash as the use of cash
declines. For banked consumers in the United States, there likely would be no meaningful
distinction between CBDC (central bank money) and deposits (commercial bank money)
when making a payment electronically; as the two would presumably be easily
interchangeable and readily available. Consumer choice in a payment method is determined
by ease of use, acceptance by the merchant, and other benefits or incentives. Current
electronic payment methods address consumer need and, thus, should obviate the need for
CBDC as a way to compensate for a decline in cash use. �However, we recognize that some
economists have suggested that if consumers were to be abandon their use of cash entirely it
could have unintended consequences for a central bank’s control of monetary policy. These
concerns are best articulated by the Sveriges Riksbank in their 2018 “e-Krona Project Report
2” where they note that:��“The fundamental trust in the Swedish monetary policy system risks
declining. In times of financial unease, the knowledge that money in bank accounts can
always be converted to risk-free state money in the form of cash comprises a linchpin. If cash
is marginalized, this feature will be eroded.”��In other words, if the accessibility or acceptance
of cash were to significantly decline, consumers access to central bank assets would be
reduced, which could potentially cause or accelerate a loss of confidence during a financial
crisis. This concept was explored by the Bank of Canada in its May 2020 Staff Discussion
Paper, where the authors concluded that in the absence of cash, a CBDC is not required to
ensure monetary stability, provided that frameworks exist to ensure trust in commercial bank
money (a framework already maintained in the United States). However, they note that in
circumstances where cash has fallen into disuse, a CBDC may be helpful in other ways.
Given this, they conclude that the question of whether a CBDC is required will be “a
judgement call” that is subject to the unique context of a given country. This analysis
suggests that a CBDC (or another method of public access to a form of central bank money)
is likely not required to safeguard the monetary system of the United States, but that it might
be reasonable for the Federal Reserve to explore deploying to provide additional support for
public confidence in money.
CBDC?
In a scenario where the U.S. chooses not to issue a retail CBDC, there is no reason to
believe that the U.S. payment landscape would not continue to be characterized by vibrant
competition and world-leading innovation. Absent the issuance of a retail CBDC we would
expect to see the continued development of safer, faster, lower-cost methods for domestic
and cross-border digital payments. The existing U.S. payment system creates strong
incentive for companies to improve payments. Recent developments, such as a private sector
real-time payment system in the United States, demonstrate that industry is capable and
willing to achieve meaningful evolution in payment methods. Also, the benefits of a CBDC for
digital payments that the Federal Reserve identifies in the Discussion Paper—such as
streamlining cross-border payments “by using new technologies, introducing simplified
distribution channels, and creating additional opportunities for cross-jurisdictional
collaboration and interoperability”—can be realized without a CBDC. U.S. companies realize
this and are investing heavily in new technologies, such as blockchain and AI, to driver further
improvements in domestic and cross-border payments. �However, we recognize that the
evolution of the digital payments marketplace might benefit in the long run from a tokenized
form of the U.S. dollar, particularly for wholesale payments, if other countries move to a digital
currency model. Thus, it will be important to consider whether sustaining the U.S. financial
system as the world’s leader and the U.S. dollar as the world’s reserve currency would be
supported by the issuance of a CBDC in the United States. If so, the need for a CBDC might
be limited to wholesale transactions between licensed financial institutions, which would
present fewer challenges from a deployment, management, security, and macro-economic
perspective than a CBDC that is available for retail use.
The Federal Reserve should monitor the decisions by other OECD nations and evaluate
whether the development of a U.S. CBDC would be important to maintaining the preeminence
of the U.S. financial system and sustaining the role of the U.S. dollar as the world’s reserve
currency. Further, the Federal Reserve should not take a binary approach to any decision
regarding the development of a CBDC, but rather should focus on use cases (wholesale,
retail, etc.) and risk mitigation. By evaluating the decisions of other nations in this context, the
Federal Reserve can best determine whether a CBDC is appropriate for the United States
and, if so, the characteristics that CBDC should have.
For ways to manage the different risks associated with CBDC, please refer to our answers to
questions 7, 13, and 22.
Comparisons are frequently made between a CBDC and the only other form of central bank
money currently available to retail customers – physical cash. However, unlike cash which
enables anonymous and untraceable transactions between counterparties, a CBDC must be
structured in a way that enables it to achieve compliance with AML and CFT regulations,
detect fraud, and adequately secure itself, its users, and its data, against cyberattacks and
other malicious/illegal activity. �Identity verification will therefore be key to any successful
CBDC deployment, particularly when we consider that any fast and easily accessible means
of making payments attracts bad actors who seek to exploit the speed of payments to commit
fraud (e.g., Account Takeover) and scams (e.g., romance scams, investment scams). Once
consumers and businesses funds are stolen, criminals often use these illicit funds to support
other criminal activities by moving the funds across the payments system through a complex
chain of transactions across multiple financial institutions and jurisdictions. �At the same time,
while any payment requires high levels of privacy and data protection to be attractive to
consumers, a CBDC may face an up-hill battle – particularly given persistent concerns among
certain groups that a CBDC could be used as a tool of government surveillance. In this
respect, it is noteworthy that existing payment solutions already provide for high levels of
privacy through sophisticated techniques such as encryption of payment information or
tokenization of card numbers. �Fortunately, like any form of digital payment, a CBDC could be
designed to provide personalized levels of privacy and optimize individual choice over how
their personal information is used and shared. One of the simplest ways of doing this would
be to adopt a two-tier federated approach to a CBDC (referred to by the BIS as a ‘two-tier
intermediated CBDC’) where supervised intermediaries onboard CBDC users and execute
retail CBDC payments from aggregated accounts held at the central bank. Under this
approach the central bank retains full control over the issuance and distribution of the CBDC
but does not have visibility into individual users’ accounts and payments. Moreover, the
fragmentation of data across the CBDC ecosystem avoids the creation of a data ‘honey-pot’,
limiting the impact of any individual data breach. �Additionally, the Federal Reserve may want
to consider how this approach would be combined with one or more forms of emerging
technology designed to support user-privacy without sacrificing security or compliance, such
as zero knowledge proofs (ZKPs), Shamir Secret Sharing (SSS), and Multi Party
Computation (MPC). However, it will be important to remember that many of these techniques
are in their technological infancy and would require significant testing and development in
order to validate their security and scalability.�
One area of risk that was given limited consideration in the discussion paper is the enormous
complexity of mitigating fraud and cyber-risk across a retail CBDC ecosystem. The cost to the
global economy of cybercrime is expected to grow by 15 percent per year over the next five
years, reaching $10.5 trillion USD annually by 2025. A retail CBDC will inevitably face
sophisticated fraud and cyberattacks from both private and state-sponsored actors. CBDC
users must trust that the system will be accessible and operational where and when it is
needed; that their funds, accounts, identity, and other data are secure; and that they will be
protected in the event of fraud. �Effectively deploying the strategies and techniques needed to
secure a retail payment system will require the Federal Reserve to consider a number of new
dimensions. Firstly, retail payment systems have significantly more endpoints than the
wholesale payments system, with each opening offering a potential point of vulnerability.
Effectively securing these endpoints requires the development of tools that work across the
payment ecosystem proactively monitoring, detecting, and acting on security and cyber risks
across their digital supply chain.��Secondly, while supervised intermediaries in a two-tier retail
CBDC ecosystem will likely be responsible for conducting their own Know Your Customer
(KYC) and Anti-Money Laundering (AML) activities, their inability to track transactions beyond
their perimeter leaves them vulnerable to financial criminals—who have developed tools that
exploit such limitations. To avoid inadvertently facilitating financial crime, central banks that
issue CBDCs may need to do more than set stringent KYC and AML standards for supervised
intermediaries; they may also need to curate a network-level view that empowers all
intermediaries to more effectively identify and trace financial crime as it moves across the
ecosystem.��Finally, it will be important to consider that modern cybercriminals exploit both
organizational silos and national borders to undermine the safety and security of critical
systems. The result is a world where no organization pursuing a strategy of cybersecurity
‘self-reliance,’ regardless of their sophistication, can be confident that their systems are
secure. The safest organizations will be those that ‘travel together’—sharing critical insights in
real-time from a network that is global in scope. To effectively secure a retail CBDC from both
foreign and domestic threats, central banks will need to deploy ecosystem-level monitoring
tools that are global in scope; relying on partners to provide critical intelligence from beyond
their own borders.�
If the Federal Reserve develops a CBDC, legal tender status would be desirable.
Interestingly, the Federal Reserve explained in a research note titled “Preconditions for a
general-purpose central bank digital currency” indicates that giving a CBDC legal tender
status will not ensure the willingness of participants in the economy to accept CBDC as
payment. Instead, that would largely depend on the credibility of the CBDC, including the
soundness of the legal framework underpinning it. However, we agree with a comment from
the European Central Bank executive board member Fabio Panetta that “it would be quite
awkward not to have legal-tender status for an additional instrument issued by a central
bank.” The lack of legal tender status would likely be a material hurdle in getting the public to
accept and use CBDC. In other words, legal tender status might be necessary (but possibly
not sufficient) to establish the credibility of a CBDC with the public.
Paying interest on a CBDC may significantly exacerbate deposit substitution risk. The
Discussion Paper acknowledges this, and we agree that “an interest-bearing CBDC could
result in a shift away from other low-risk assets, such as shares in money market mutual
funds, Treasury bills” reducing “credit availability or raise credit costs for businesses and
governments.” �However, preserving a technical option to add a coupon (negative or positive)
to a CBDC may be of interest to the Federal Reserve if it were to develop a CBDC. �
The establishment of quantity limits on individual holdings may be necessary to avoid

destabilizing levels of deposit substitution, particularly during periods of financial crisis. Limits
have the advantage of being easily understood by users and, if set at a reasonable level,
should have little or no impact on consumer usability. Concurrently, they would provide
commercial banks with a way to understand their potential exposure to deposit outflows.
While a range of technical issues might need to be addressed—for example, how inbound
payments that would exceed a user’s limit should be handled, or how a limit would be applied
to an individual who has opened accounts with multiple private intermediaries facilitating
CBDC access—these challenges appear solvable, particularly if addressed at the design
stage. �However, research by the Swedish Riksbank suggests that the use of limits could have
the unintended consequence of disrupting parity between the market valuation of retail CBDC
deposits relative to commercial bank deposits, particularly during a crisis. In their 2018
“e-Krona Project Report 2”, the Riksbank notes that: �“It is the Project’s assessment that
limitations on access to e-krona may be associated with problems. For example, it may be
difficult to maintain parity between Swedish krona in the form of cash, deposits in bank
accounts and reserves. Assume, for example, that the e-krona becomes very popular but that
there is a maximum limit imposed on each person’s holdings. This could lead to the
emergence of a market on which those who have not fulfilled their e-krona quota would be
offering those who have the opportunity to buy e-krona in cash or by depositing money in a
bank account at a higher than one-to-one price” �While this should not eliminate the use of
limits from consideration, it does suggest that their design will require close consideration to
ensure that any use of limits does not have unintended consequences. �If the Federal Reserve
developed a CBDC with quantity limits, we would suggest that the Federal Reserve establish
a system whereby the amount of a CBDC transfer to an individual that exceeds the
individual’s limit is allocated to a commercial bank account of the individual’s choosing. Such
a system is technically feasible and would avoid the complications and uncertainty that often
surrounds failed payments. �Moreover, it may be possible to simplify the implementation of this
capability by leveraging pre-existing payments infrastructure. Such a solution would need to
be underpinned by instructions from customers during an onboarding process to permit the
intermediary to perform this conversion and apply funds to a designated account. Due
consideration would also need to be given to individuals who are unable to access a
commercial bank account or choose not to have one. The Federal Reserve should study the
most efficient means of shifting payments exceeding any CBDC holdings limit to ensure that
the approach does not have unintended consequences on efficiency and stability of the U.S.
payments system, nor on the financial inclusion of its most vulnerable users.�
If the Federal Reserve issues a CBDC and develops a two-tier federated approach,
intermediaries would play a critical role in creating trust, meeting the needs of users, and
enabling the successful adoption of a CBDC. As in the current ecosystem, it is likely that
some firms may provide end-to-end intermediary services while other firms would specialize
in particular intermediary functions.��The goal of intermediary regulation should be to protect
consumers, address AML/CFT risk, and mitigate systemic risk. Regulation should be
functional and risk-based, so that intermediaries performing the same functions are subject to
the same regulation, tailored to the risk related to the services provided. This approach is
important to prevent gaps and arbitrage in the regulatory landscape and to enable fair
competition. �CBDC intermediaries should be able to provide a CBDC experience that
addresses the following issues:��Strong and varied user experience design: Consumers expect
payment journeys to be recognizable, intuitive, and in some cases tailored to their unique
needs. �Ease of adoption: The success of a CBDC will depend on the adoption rate which, in
turn, will depend on many factors such as security and convenience. Consumer education
and awareness on the characteristics and capabilities of the CBDC will be key.��Customer
Identification: Intermediaries will need to develop an efficient onboarding process (e.g.,
sign-up, KYC, funding of accounts), conduct ongoing AML/CFT monitoring, and provide user
education. �Payment networks with strong payment technology expertise, such as Mastercard,
will have an important role to play if a CBDC is to be usable for payments and otherwise
transferable in a manner akin to cash. Network intermediaries should focus on the following
value drivers:��Acceptance: A CBDC must be usable for a variety of in-person and digital
transactions to provide value as a payment mechanism. However, enabling acceptance
points is a prominent challenge to driving mass adoption of a new payment solution.
Consumers will be more likely to adopt a CBDC if it can be used on existing acceptance
infrastructure and is supported by known and identifiable payment form factors (physical and
digital) linked to the user’s existing devices and accounts. Therefore, linking the CBDC to
existing payment networks such as Mastercard would make adoption easier for both
consumers and merchants. Commercial incentives could then encourage the private sector
(e.g., wallet providers, merchants, etc.) to further expand the reach of those networks and
achieve the key motivation for issuing a CBDC. �Interoperability: Interoperability between
payment systems avoids closed loops that reduce the fungibility of money, fragment liquidity,
and limit competition. Here, interoperability with other stores of value (e.g., commercial bank
deposits, prepaid accounts) would be important. �Consumer Protection: Consumer trust is at
the heart of payments. Individuals must have confidence that they are getting what they pay
for and that they are protected in the event of fraud, disputes, refunds, or data misuse. This
requires a framework of standards and rules that safeguard the security of every transaction
while ensuring that all parties are treated fairly and equitably. The private sector could play a
variety of roles in this effort, including the co-development of such framework and offering
lines of cyber/fraud defense to the central bank or supervised private intermediaries.
Additional consumer protection features may also be a value-added service offering. �Value
Added Services: A CBDC has the potential to serve as a foundation for innovative and
value-added financial products and services developed by competitors within the private
sector. Such value-added services may be varied, but a notable consideration is programable
payments—the ability for users to build simple conditional obligations (colloquially, “smart
contracts”) into a payment. Programmability could theoretically support a wide variety of use
cases, including escrow services, automated insurance claims, and the provision of
installment loans at the point of sale.�
A defining feature of cash is that it does not require network connectivity to function. Offline
payments would likely be a useful feature for CBDC in several edge cases. Emerging
technologies may present opportunities to deliver this functionality while limiting the risk of
fraud borne by payment counterparties. The handling of offline transactions by card-based
ecosystems today may provide a model for facilitating offline CBDC payments – using a
combination of technology and business roles to define liability and limit exposure.
Mastercard uses ‘counters’ on the payment card chip to manage offline payments risk. These
can be set to allow offline transactions only when the number of offline transactions is below a
threshold. These configurable risk parameters allow the convenience of offline transactions
for consumers and merchants at a manageable level of risk that is tolerable for all entities.
sale? If so, how?
For a CBDC to provide consumers value as a payment mechanism, it must be usable for
a�variety of in-person and online transactions. However, enabling acceptance points is one of
the�greatest challenges to driving mass adoption of a new payment solution. Consumers will
be more likely to adopt a CBDC if it can be used on existing acceptance infrastructure and is
supported by identifiable payment form factors (physical and digital) that are linked to the
user’s existing devices and accounts. Therefore, linking the CBDC to existing private payment
networks would make adoption easier for both consumers and merchants. Commercial
incentives could then encourage the private sector (wallet providers, merchants, etc.) to
further expand the reach of those networks.
Interoperability between payment systems avoids closed loops that reduce the fungibility of
money, fragment liquidity, and limit competition. For a CBDC, interoperability with other stores
of value (e.g., commercial bank deposits, e-money etc.) would play an important role in
strengthening the domestic payment ecosystem and reinforcing the role of central bank
money. Sustained collaboration between public and private sector participants will be critical
to delivering this interoperability. �Mastercard is supportive of the Federal Reserve’s proposed
intermediated model (two-tiered) approach to a CBDC (provided development of a retail
CBDC is deemed necessary), which will ensure that the Federal Reserve System retains
strong institutional governance over the core CBDC infrastructure. This model will also
facilitate the engagement of the private sector in the competitive development of innovative
payment interfaces and use cases that allow transferability across multiple payment
platforms. An intermediated (two-tier) model would allow participants to use networks to store,
move, and transact CBDC. This would prevent lock-in risks and allows CBDCs to become
accessible to retail customers as they flow across multiple networks.
CBDC?
We do not believe that it is possible to determine the future technological innovations that
may affect the design and policy of CBDCs. The continued digitization and miniaturization of
payments, driven by increased e-commerce and the rapid evolution of parallel technologies
like 5G, means that the future of payment systems will likely evolve in unpredictable ways.
�Therefore, we recommend that the design of a CBDC should be structured to embrace the
necessary scalability, extensibility, and flexibility to accommodate a rapidly changing
payments landscape. The Federal Reserve’s preference for an intermediated (two-tier) CBDC
is an important first step in achieving that structure, as it provides the flexibility to add new
issuance and distribution mechanisms without requiring the Federal Reserve to design and
deploy those capabilities itself. The participation of private sector intermediaries allows the
central bank to deploy incentives for the continuous innovation in new payment capabilities
that will be required in order for a CBDC to remain relevant.
benefits of a CBDC?
We focus this response on potential approaches to navigating the challenge of facilitating

offline CBDC transactions, while at the same time supporting an ‘identity verifiable’ CBDC.
Certain ‘token-based’ CBDC implementations may have the potential to enable low-risk offline
CBDC transactions, however, the bearer nature of these assets’ risks providing bad-actors
with an improved set of tools for the facilitation of financial crime. �One approach to this
challenge might be the creation of two forms of a CBDC with differing technical
characteristics: a primary “account-based” system and a secondary “bearer token” narrowly
designed to facilitate offline payments. The relationship between these two forms could be
structured to “nest” the bearer token within the account-based system. Under such a
framework, users could be required to first onboard to the primary account-based
system—undergoing all necessary KYC checks—before having the right to either convert
their account-based holdings to bearer tokens or receive bearer tokens from a third party.
When combined with technical solutions to limit individual holdings of bearer tokens and the
size and frequency of an individual transfers of bearer tokens, this framework could ensure
most CBDC deposits would remain in the primary account-based system linked to the verified
user’s identity. �An alternative, and significantly simpler, approach to reconciling these policy
objectives would be to deliver offline payments as a value-added service, with risk
underwritten by supervised private intermediaries, rather than as a feature of the core system.
The handling of offline transactions by card-based ecosystems today provides a model for
how this could be accomplished by using a combination of technology and business roles to
define liability and limit exposure. For example, Mastercard uses counters on the payment
card chip to manage the risks of offline payments. These counters can be set to allow offline
transactions only when the number of offline transactions is below a threshold. These risk
parameters may be set at a regulatory level or based on individual issuer risk tolerance. This
allows the convenience of offline transactions for consumers and merchants at a manageable
level of risk, acceptable for all entities in the ecosystem.��Within the context of the CBDC, this
second approach would have the benefit of simplifying the Federal Reserve’s ability to deploy
policy tools—such as limits and tiered remuneration—and obviating the need to develop
costly parallel infrastructure to enable a bearer token that operates parallel to the primary
account-based system.
_________________________________________________________________________
Joey Sommer
Industry
Other: Retired central banker
Country
State
New Jersey
Email
There is no point in implementing CBDC while cash is still around. It's about as useless as
issuing a $1 coin while still keeping the $1 bill in circulation. The main benefits of CBDC are
inherent in its displacement of cash: AML, physical hygiene (think of the anthrax scare), and
the ability to create negative interest rates, if needed for monetary policy purposes.
inclusion?
stability?
If CBDC displaces cash, it could always offer interest rates lower than bank rates. This would
keep most deposits in the banking system. CBDC could also employ tiered interest rates,
with deposits under a certain threshold receiving more favorable terms.
No.
CBDC?
I think you misapprehend "legal tender." It is an extremely narrow commercial law doctrine,
akin to hindrance. It permits refusal, and merely means that a refused legal tender will
substitute the original debt with a clean new one: stripped of any consequences of default
appurtenant to the original debt. Herman Oliphant, The Theory of Money in the Law of
Commercial Instruments, 29 YALE L.J. 606, 609 (1920). Courts are indulgent toward
non-legal tenders. W.F.K., Note, The Requisite Medium in a Tender of Performance of an
Obligation to Pay Money, 76 U.PA.L.REV. 433 (1928); Simmons v. Swan, 275 U.S. 113, 116
(1927).�Legal tender only had monetary significance in the days of the gold standard. Even
this monetary significance was limited until the abrogation of the gold clause.
I have already answer this, above.
No. Tiered interest is a better solution. AAA companies will not want to hold liquidity with A+
banks, but already use the repo market to do so. This drains collateral from the system.
sale? If so, how?
CBDC?
benefits of a CBDC?
_________________________________________________________________________
Lucille Eckrich
Industry
Academia
Country
State
Illinois
Email
A) The potential benefit of CBDC that your white paper failed to address IS its PRIMARY
potential benefit in my view. This benefit is that, initiated as part of systemic monetary reform
legislation, CBDC can and will replace existing bankmoney (that is, dollar-denominated
means of payment created by commercial banks through account entries whenever they
make loans) and function alongside US coins and paper notes as our US money, a public
liquid asset. Congress should never have ceded to commercial banks its Constitutional power
and responsibility to create money, as it did in 1913. But Congress today can and should
reclaim its authority to create US money, not, like now, as a liability, but as Money, our public
liquid asset, in amounts determined by an independent monetary authority established within
the US Treasury (or as a 4th branch of government if we ever choose to update or amend the
US Constitution thusly), and transition us seamlessly to this sovereign, public, Just Money
system in a timely and orderly manner. There is much literature already on this by authors
such as Steven Zarlenga, Joseph Huber, Richard Werner, Saule Omarova, Thomas Mayer,
Kaoru Yamaguchi, and many other scholars.��B) Achieving the major policy change I identified
in A (to institute CBDC as part and parcel of monetary reform legislation like that introduced in
2011-12 in H.R. 2990, which has recently been updated for 2022-23) will correct a systemic
flaw that has fueled an exponential growth imperative and impeded equity, sustainability,
flourishing, and peace for all people ever since double-entry bookkeeping and power-relations
gave rise to modern money and banking 1200s-1900s. That flaw is the creation of money as
private-interest-bearing debt, as a liability. Even your own definition of CBDC as “a digital
liability” reflects, and threatens to perpetuate, this conceptual and practical flaw, which has
been critiqued since the 2007-08 crises by authors such as McMillan (2014, The End of
Banking: Money, Credit, and the Digital Revolution), Huber (2017, “The Case for a
Central-Bank Currency Register,” and Kumhof et al (2020, “Central Bank Money: Liability,
Asset, or Equity of the Nation." �I encourage you to rethink your definition of money. Doing so
is not merely a conceptual or semantic matter. It is a policy matter of how to create and
account for Money—whether digital, coin, paper, or on account—as a public good, a public
liquid asset. Achieving that conceptual, legislative, and accounting shift has vital practical and
material consequences in the real world, economically, ecologically, socially, geopolitically.
Then CBDC, or public digital or crypto currency, can be a digital asset of our public central
bank or nation that is widely available to the general public. In this respect, it will be
analogous to coin or paper money. It will differ from digital money available to the general
public today because a CBDC, AND all the coins and paper bills fungible with it, will then be
central bank or US money, a public asset, rather than a liability of the Fed or a commercial
bank, and there will be no more bankmoney created as debt. The general public think of
money as an asset, which it is for most of us. Our money is hard-earned through our labor to
produce goods & services for market and to earn enough to pay our bills. Why not comport
our money system with what people already believe is the case, rather than maintain our
flawed, mathematically- and physically-unsustainable existing system that serves the private
commercial banks, and their shareholders and other beneficiaries in the finance elite, at the
public’s—both people and government—and planet’s expense? �C) Potential risks
unaddressed: Establishing CBDC within our existing Federal Reserve System and without
ending commercial banks’ privilege to create out of private-interest-bearing credit what we
and our government use as money will not only miss this historic opportunity that we have to
do good, not only for our own children and grandchildren, but for posterity. It will also further
entrench and exacerbate the instability, injustice, unsustainability, extractive destruction of
people and planet, and geopolitical warmongering that the current money system causes not
only in the US economy and society but also those of other countries. If the Fed truly exists,
as you say, “to promote the effective operation of the U.S. economy and, more generally, the
public interest," then making CBDC part and parcel of full monetary reform is the best and, I
believe only, way to achieve that mandate in the 21st century and beyond. �Another potential
risk is the “narrower-purpose CBDCs” that you suggest “could also be developed, such as
one designed primarily for large-value institutional payments" (fn #19). That would further
entrench our existing bankmoney system and the power of the banks it serves, and
disenfranchise the People more than we are today. I do NOT support this.
As I indicated in response to #1, the potential benefits of CBDC that your paper identifies (pp.
14-16) and I support (broad public access to public digital money and to payment services
free from risk; improving cross-border payments and interoperability within and across
national currencies; cost-effective financial inclusion) can best if not only be achieved when
ALL our money—digital/crypto, coin, paper—is sovereign or public CB money. That is why
systemic monetary reform must be the basis upon which CBDC is introduced. It is not too
much to do both at the same time; in fact, both will work best that way. Then we need not
even call it CBDC, but simply US money, whether digital/electronic/crypto, coin, or paper. The
essential thing is that it all is publicly created and modulated as the sole US legal tender in
amounts in sync with our productivity so that its purchasing power stays stable over
generations. �You suggest that a benefit of CBDC is “to preserve the dominant international
role of the U.S. dollar” (p. 15). I do not think the dominance of the US dollar, established after
WWII, is or was ever good for the American people, not to mention other peoples. It was only
good for the banks and financial elite, in the US and globally. So, I do not want CBDC that
has this as a goal. Nor do I want us to establish a US CBDC, not to mention to rush to do so,
simply because other countries are doing so and the US corporate and financial elite fear
losing THEIR dominance and power to extract surplus value and natural resources not only
from people and planet in the US but all around the world. That is economically and
ecologically unethical, unstable, and unsustainable. Young people today will not stand for
this. Neither do many of us adults and senior citizens.�
inclusion?
I appreciate your stated concern for “economically vulnerable households and communities”
and “underserved and lower income households” (p. 16 & Appendix A). In fact, I attended
some of your FRBs’ “Racism and the Economy” series in 2020-2021. But, with all due
respect, to me it all feels like window dressing or lip-service unless CBDCs are part and
parcel of sovereign Just Money reform. If not, it is nothing more than another instance of
using ‘service to the poor and marginalized’ to get through a change that, in fact, serves the
financial elite at everyone else’s expense, most especially that of lower income people, who
ONLY pay for our money system (by earning NO interest while paying interest through the
price of everything they buy). Thus, it is up to you and Congress, or else a movement of We
the People, whether the CBDC we get is a net positive or net negative change. I am working
100% for a net positive effect for all (except, perhaps, the 1%). �I also appreciate and firmly
agree with your clear commitment (p. 16) NOT to do away with all physical money (coin &
paper) in the process of introducing CBDC or digital US money. Even if the seigniorage
earned from coin and paper money is less than from account/digital money (though you/we
must factor in the cost of electricity and water to keep computer servers going, and raw
materials to make the equipment) and even if more and more people use digital currency
more of the time, doing away with physical money will exclude some from the market and
hinder inclusion. Thus, we must retain some physical currency for inclusion and in case of
rolling blackouts. Already today it comprises under 7% of our money supply, so, unless our
electricity grid is seriously interrupted, we are unlikely to need more than that.��Finally, if you
and Congress institute US CBDC while leaving commercial banks free and expected to
create our means of payment in it and interchangeable with coin and paper notes, it will be
extremely worse for equity and inclusion. Doing that will entrench the money power in
commercial banks’ hands for the digital age, missing the opportunity this moment in history
affords us to supersede modern bankmoney in the name of justice, democracy, and
sustainability for all people and all life we share this planet with, now and for posterity. If you
and Congress do so, it will be because of the role of “money in politics,” and I don’t know how
any of you can, while so doing, look your children and grandchildren in their eyes and tell
them that you love them and assure them you care about all children. Whose interests are
your efforts at and research on “financial inclusion” going to serve if you leave private parties
with the privilege and authority to create our means of payment through interest bearing
debt?�
I agree the goals of maintaining price-stability and satisfactory and sufficient employment for
all adults up to retirement age so as to secure all citizens survival and flourishing from birth to
death are what any and every (public) Central Bank or Monetary Authority exists to achieve.
As you at the Fed surely know but seldom if ever admit, the Fed’s means for achieving
price-stability and full employment are limited because you do not control the money supply.
The commercial banks, not the Fed itself, create the money supply for the public. I imagine
this lack of control or direct influence is very frustrating for you, at least if you believe you
exist, as you say, “to promote the effective operation of the U.S. economy and, more
generally, the public interest.” Some say your work is like “pushing a string.”��In any case, to
answer your question, creating CBDC as a side-by-side option leaving commercial
bankmoney in place might be somewhat effective in warding against the encroachment of
100% private cryptocurrencies and so-called “stablecoins” on our money system by becoming
“money-like,” which will be an even more unregulatable and insane state of modern banking
than we already have with shadow-banking and MMMFs. But it will do nothing to help the Fed
achieve its monetary policy goals. To believe and to assert it will help is to sell yourselves or
the public a bill of goods, and I have to tell you this public isn’t buying it. If you are serious
about your professional responsibility not just to pursue but to maintain full employment and
price-stability (that is stable-value money, where the purchasing power stays steady or
ever-so-slightly improves over time, with time as in generations not merely months or years),
you must pursue CBDC only in the context of full monetary reform such as that laid out in the
2011-2012 NEED Act (HR 2990), which is almost done being updated as the American
Monetary Reform Act (AMRA) of 2022. �In implementing monetary reform such as that laid out
in AMRA and by Huber, McMillan, Omarova, AMI and AFJM, the Fed will become a wholly
publicly owned and independent unit within the Treasury. The goal of price stability over
months, years, and generations will be, with due diligence, attainable with digital US money
(so-called CBDC) a good, necessary, and majority part of our US money supply. And the
definition of “maximum-employment” can be corrected to mean (1) everyone who is able (2)
works a gradually decreasing amount of minimum hours/week for (3) a just wage given (a)
the amount of preparation needed to do that job well, (b) the societal need/demand for that
work, and (c) the physical demands of the job, and (4) has a gradually increasing
socially-guaranteed number of hours left over to participate in the gift economy whether within
or outside their job.
stability?
--Again, if you shift to a public "currency register" (Huber, 2017) or “People’s Ledger”
(Omarova, 2021) in the process of introducing CBDC or sovereign digital US money as part
of 100% public money supply, ending banks’ creation of money out of interest-bearing
credit/debt, it will be a net positive for financial stability. The more we all get accustomed to
this new money system, the more stable it and our economy will become. In this public,
sovereign, just money system, money will be wholly in the public sector, a liquid public asset
that lubricates our just and sustainable exchange, and the supply of which can be modulated
so money’s purchasing power stays stable. In this system, credit (saving and
lending/borrowing, and investing) will be wholly in the private sector, where financial
companies must sink or swim without public propping up, just like any other service sector,
and regulated no more or less than any other producer of a good or service for the
marketplace. �--If you establish US CBDC while leaving commercial banks with the legally
sanctioned privilege and responsibility to create most of our means of payment denominated
in US $s, it will be a net negative for stability, financial and otherwise, for people and planet in
the US and everywhere. Other private entities like FB with its Diem, cryptocurrencies, crypto
exchanges like FTX, Amazon and other corporate giants w/ whatever so-called “stablecoin”
they each come out with -- these will surely encroach upon whatever semblance of a public
sector money we have left under such a CBDC-bankmoney regime. It will be anything but
stable financially, economically, politically, and geopolitically. As McMillan makes clear in their
2014 book, The End of Banking: “In 2008, we were taken by surprise. We believed that there
was no alternative, so we kicked the can down the road and kept a dysfunctional banking
system on life support. We now know better: There is an alternative. It would be a shame if
we were not prepared next time. Let us not waste another financial crisis: We can do better
than banking” (p. 180). �
--If CBDCs are introduced as part-and-parcel of a shift to public/sovereign/just money, it will

take away the artificial propping up of the current financial sector. Investors will then have to
practice what they preach, and bear the full risk of their investments. Savings and loan
service providers will too, as will those who expect to protect the purchasing power of their
time deposits, not to mention earn any interest or dividend for letting others be productive with
that money during the time they don’t need it.��--But if CBDCs are introduced alongside and
fungible with bankmoney, it is a recipe for financial and economic instability, injustice, and
entrenchment of the power of a wealthy elite (and those who do their bidding in the halls of
Congress) at the expense of everyone else in the US and—if but only if the US maintains the
hegemonic global power of the US$ (which is a big IF anymore, I’m afraid to tell you, no
matter how big our military might is)—at the expense of everyone else around the world
except for other similarly positioned wealthy elite in other countries. �--Finally, money 100%
publicly created as our liquid asset and medium of exchange is systemically different from
bankmoney or "special drawing rights" and from any other privately created money-like
something called "stablecoins" pegged to bankmoney denominated in one or more national
currencies. Stablecoins are a contradiction in terms because they are no more stable than the
currency or currencies they are “pegged to”, and they are just as private as is that
bankmoney, which itself is not legal tender de jure but only de facto. So-called “stablecoins”
are an unnecessary, undemocratic element in our payment clearing system, but spawn from
the inherent logic of our private bankmoney system. Any “stability” they have or might gain is
owed 100% to the public-backing and legal sanction they buy politically, and they will make
our bankmoney system even more vulnerable and less stable than it already inherently is. It is
a travesty of democracy that, together with the FDIC and the Office of the Comptroller of the
Currency, a President’s Working Group on Financial Markets” (PWG) gathered 17 private
players (“market participants”) and a set of “experts and advocates” and trade associations
representing the finance sector to study and brainstorm on this, resulting in the Nov 2021
Report on Stablecoins. We need public sovereign Just Money, not more private players
getting in on the bankers’ deal at the people’s expense. �--All the risk and fret of risk that you
discuss in Appendix A, pp. 7-9, and elsewhere, can and should be avoided by making ALL
money be CBM, that is public, sovereign US $-denominated money, whether it is digital,
coin, or paper. It all, and only it, should be the sole and unitary legal tender in the US. Banks
and other peer-to-peer lending or investment firms can and will continue to exist as service
providers of transaction, savings, and loan services, functioning as intermediaries for—rather
than private creators of—our US money. This should be what you mean by “intermediated
model” (pp. 2, 13, 14, 15).
--Application of the “systemic solvency rule” in the accounting balance sheets of ALL
companies, both banks and nonbanks, financial and nonfinancial (see McMillan, 2014, ch 9).
The systemic solvency rule requires that “the value of the real assets of a company has to be
greater than or equal to the value of the company’s liabilities in the worst financial state” (p.
147). Combined with the separation of money into the public sector and credit into the private
sector, application of this rule will effectively end the creation of money out of credit once and
for all companies. �--Recognition conceptually and in accounting practice that money, sui
generis, is a public liquid asset not a liability. �--Implementation of NEED Act/AMRA
procedures, including establishment of (1) a Revolving Fund into which principals of all loans
in existence on the day the law goes into effect are paid through to as those loans are paid
back; (2) an independent public Monetary Authority w/in the Treasury (or eventually—through
a Constitutional amendment or a Constitutional Convention to draft a new constitution—as a
4th branch of government) whose task is to modulate the money supply so as to keep the
value (purchasing power) of money stable over time and whose power includes the monetary
policy tools of unconditional income and demurrage charge to inject or withdraw money from
circulation solely as quick-turn-around monetary policy measures; (3) full bailment for
transaction accounts, and recognition that FDIC-like insurance for banks is not needed nor
even helpful beyond the 5-10 year transition period; (4) pass through to state and local
governments of at least 25% of any and all new money injected annually. �--Establishment of a
National Investment Authority (NIA) as an entity, preferably under the authority of the House
of Reps rather than the Treasury, to implement long-term investment and lending for the
public good, as democratically determined, of money in the revolving fund and any new
money issued and appropriated to it by Congress, all within the quantity bounds set by the
Monetary Authority.��--Implementation of a Congressional practice or entity parallel to the NIA
for taxation policy that determines how much taxes to require from whom and to pay for what
internal functions of government, and to pay for which public goods, as democratically
determined. �--Establishment of protocol by which the independent public Monetary Authority
can enact the monetary policy tools of (1) an unconditional income to inject new digital
currency into circulation and (2) a demurrage charge to withdraw money from circulation,
each to be enacted solely as monetary policy measures. Whenever enacted, the former is to
be injected into the transaction account of each and every citizen and legal resident in the
US. The latter is applied regularly and only to that portion of transaction account balances
that exceeds a publicly established cushion above each account holder's average monthly
expenses for the prior 18 months.
--Physical cash (coin and paper notes) should NEVER be entirely eliminated. Its quantity in
circulation should always be kept in sync with people’s usage of it, and the Treasury should
help to avoid but be prepared with sufficient cash for possible emergencies that take the
internet or electricity grid down. �--Absolutely, the general public should always have access to
CBDC (or US digital money) that can be widely used for payments. What else is it or would it
be for, actually?! �--I suspect here you are referring to the “narrower-purpose CBDCs” that you
suggest in footnote #19 “could also be developed, such as one designed primarily for
large-value institutional payments and not widely available to the public” (p. 13). As I noted
above, I am opposed to such an idea. A limited-access and narrower-purpose CBDC can only
benefit the existing privileged beneficiaries of FR bankmoney system, namely the commercial
banks and their shareholders, with the former also being the shareholders of the 12 FRBs.
CBDC?
Domestic and cross-border digital payments will evolve, whether or not the US is participating
via a CBDC. We have long-since been involved in domestic and cross-border
digital/account-based payments and check-clearing systems with respect to existing
bankmoney, which, although fungible with US dollar-denominated coins, bills, and reserves
and denominated in US dollars, is all privately created as interest-bearing debt. �If the US and
other nation states do not develop CBDCs, wholly privately-created money-like instruments
will gain more and more traction, and the idea of them as “stablecoins” tied somehow to one
or more national currencies will too, even though it is simply a farce or charade even if they
get legally sanctioned as such. Of course, bankmoney is charade too, it’s just all we have as
money. It’s the money system that Congress established in 1913 for us to use, and we’ve let
every Congress since leave it in place, at times (1933, 2007-08) shoring it up and at other
times (1999, 2019) weakening it. What Congress does in 2022 and beyond, you Governors of
the Fed can influence for the better, and so can monetary reformers.��Establishing CBDC
within the existing Federal Reserve bankmoney system is likely to prolong the US monetary
union slightly longer than it will last without any US CBDC, and it will enable the US (and its
wealthy citizens) to play differently among other nations or monetary unions with CBDC. But
doing so will not result in stable, just, or economically viable domestic or international
exchange relations, not to mention ones that serve ALL the peoples whose names the
various currencies bear. Only establishing CBDC as part of monetary reform within which
CBDC and all forms of our nation’s money are solely and wholly publicly created and
modulated will enable us to achieve financially and economically stable, just, sustainable
societies within which democratic practice and cultural diversity can flourish. Let’s do that!
Together!
The US should attend to its own physical, environmental, social, economic, political, and
cultural well-being and stop trying to dominate the world through our monetary and military
might as we have done since WWII. We should not rush into CBDCs simply because we are
afraid of too many other countries doing so first. We can learn from others’ experience with
CBDC, if they develop it first. But we should not wait around for others to go first either. There
is enough information out there for us to study and learn our way, to take our time to get
there, and not to fear we will lose out. �We need a world without war, hegemonic powers,
autocrats and oligarchs and plutocrats. We need to start taking climate change and the end of
dependence on fossil fuels seriously NOW. In TEN more years it will be too late. We need to
end the dominance of the military industrial complex and guns in our domestic and
international relations. We need to get money out of politics, and we cannot do so within our
existing money system. We cannot do any of these necessary goods within our existing FR
and bankmoney system. Introducing CBDC as part and parcel of this existing money system
will be a travesty, and it will not achieve any of the stability, full employment, and sustainable
economy and economic development priorities that you profess and for which you, as the US
central bank, are or should be accountable.
By establishing a National Monetary Commission, both in Congress and in counties or

municipalities across the country, to educate and discuss CBDC and reforming our money
system to be 100% public, we would avert many potential risks associated with introducing
CBDC without such public education, inquiry, and debate. The membership of Alliance For
Just Money has ratified a Resolution for such a NMC, which you can read about here:
https://www.monetaryalliance.org/resolution-number-one/. �It seems like this would only make
sense to you too given that you state: “The Federal Reserve will only take further steps
toward developing a CBDC if research points to benefits for households, businesses, and the
economy overall that exceed the downside risks, and indicates that CBDC is superior to
alternative methods. Furthermore, the Federal Reserve would only pursue a CBDC in the
context of broad public and cross-governmental support…. The Federal Reserve will also
conduct targeted outreach and convene public forums to foster a broad dialogue about
CBDC.” (p. 21). �I commend your commitment to community-based research, dialogue, and
upholding the public good, but I can only hope that you mean it. If you do, I expect to hear
from you directly as I am prepared and positioned to help you to reach the public for such
forums and dialogue.
By having all money—whether in the form of coins, paper bills, or digital units of account—be
publicly created and, if need be for monetary policy reasons (i.e., to keep the purchasing
power of money in circulation stable), publicly extinguishable (via bonds or demurrage or
possibly taxation), every unit in circulation can be accounted for on a “currency register”
(Huber, 2017) or “People’s Ledger” (Omarova, 2021) and each unit, no matter its form, can
only ever be one, and only one, place in the economy at any given moment. But it can and,
as money, it should keep circulating to lubricate myriad exchanges of goods and services,
including via loans, forever. Such money can be both transparent and private with blockchain
technology—IF that’s environmentally scale-up-able energy- & water-wise, which I doubt—or
I’m sure some other privacy technology is being or could be developed. We don’t need much
currency to be physical, but some should always be physical, and if we go to rolling blackouts
or huge cyberattacking, etc., more will need to be physical. And physical currency facilitates
anonymous use. Finally, “illicit financial activity” is induced by the moral hazard inherent in the
creation of money out of credit. If we do away with that practice, we won’t eliminate all illicit
financial activity. But we will eliminate its systemic cause, and that will give education, ethics,
fellow-feeling, the golden rule, and scout honor (i.e., leaving the campsite or world better than
you found it, rather than even more trashed) a fighting (or peaceable) chance!
--We can foster money’s operational resiliency by employing the monetary logic of a
“currency register” (Huber, 2017) or “the people’s ledger” (Omarova 2021) and of money as a
public good, a public asset franchised to all the people, and their companies, whose name it
bears and commerce it circulates.��--Cyber risks? They are inherent in and caused by our
modern money system, whatever else incidentally may motivate them. If we eliminate the
dehumanizing, exploitive, profit-maximizing motive from our monetary system and geopolitical
relations, people will be less systemically instigated to engage in cyberattacks and
warmongering and warfare in the world. Human beings will never eliminate conflict from our
social relations, but we will lessen the amount of it and be better able to change how we
respond to it IF we understand and eradicate the systemic root of the problem, negating the
negative by superseding the flaws—the debt-based and private-interest-bearing traits—built
into our money.
Yes, but it and US minted coins, printed bills, and publicly created units of monetary account
should be our SOLE unitary legal tender. Once public money becomes the law of this land, no
longer may banks create means of payment denominated in dollars and lent into circulation
and accepted by the government as if it were legal tender. In other words, IF it is part and
parcel of sovereign, public, Just Money reform legislation, then absolutely yes, CBDC along
with coins, paper notes, and any other publicly created unit of account denominated in US
dollars and should constitute our legal tender, our most liquid asset. �Falling short of that,
CBDC should only be instituted in a way that is compatible with and that helps lead us to
systemic monetary reform. That means that CBDC, along with US coins and dollar bills, must
be publicly created and accounted for as a liquid asset that comprise our sole and unitary
legal tender, with (1) CB/US money accounts accessible to all US citizens and documented
residents, (2) all seigniorage going to the public sector, and (3) CBDC replacing
reserves—that is, the CBM that only Federal Reserve Account holders (mainly commercial
banks whose interests the FRS was designed to serve) have access to today. As such CBDC
will have to compete against commercial bankmoney. But CBDC will win out in the end
because it can better serve the public interest, economic and ecological good, educational,
physical, and cultural well-being, and democratic practice of the people whose name it bears
and commerce it lubricates.
--In its origination and injection into circulation, no, CBDC should NOT pay or earn interest. It
should originate as a public asset that is spent, given, invested, or lent interest-free into
circulation for the public good. That public good is the interest that it serves. All seigniorage
gained through its creation and first use must serve the public good. Any interest attached to
its origination would fuel an unnecessary and unsustainable growth imperative in our
economy. That is what we've increasingly had since the 1300s and it has led modernity into
the climate, ecological, and geopolitical catastrophes we suffer more and more from today.
Sure, there have been technological and scientific innovations along the way. But human
ingenuity and a public money system in a market economy and democratic society would
have led to them sooner or later anyhow, but with less damage and exploitation and with all
justly benefiting along the way. By eliminating interest from the origination and first use of
money, we can live our way into a sustainable and just postmodern age. It's about time!��--That
said, if and when for monetary policy reasons, a positive or negative rate of interest is needed
to modulate the amount of money in circulation and to keep it CIRCULATING, then interest
could be attached by the Monetary Authority to CBDC in transaction accounts. There must be
proper warning of any rate change; not long ahead, but long enough for people to make
decisions, which decisions are the very reason for the rate change, perhaps making the
change unnecessary or necessary to a lower or shorter extent.
There should be a level set—say a balance of $3000 above a transaction account holder’s
average monthly expenses over the past 12 or 18 months—above which a demurrage charge
is applied. Account holders know they can avoid this "parking fee" by shifting their excess
funds to an investment account or a time-deposit savings account. The latter is not in
bailment and, once we are beyond the transition period, no longer insured with FDIC-type
insurance, or else we don’t adequately remove the moral hazard from the system. But
removal of FDIC insurance should not be immediate, as people have to learn from experience
how a debt-and-interest-free, inflation-free public money system works before they will
understand and, thereby, trust what money as our public liquid asset or unitary means of
economic exchange is and how it works. �But there need be NO quantity limit to how much
CBM or US money someone can earn and how much of it someone may choose to invest—at
risk to those funds—for whatever they deem to be credit worthy goods and services.
--Payment service providers, whether public or private, physically located in the geographic
US should be the ones to provide transaction account holders with income and payment
services with respect to CBDC, coins, paper bills, and units in transaction accounts
denominated as US dollars.��--Private savings-&-loan institutions, peer-to-peer lending
platforms, and financial institutions we currently know as commercial banks can all provide
savings and loan or investment services, thereby serving as intermediaries for CBDC. But in
so doing none of them will have the privilege to do the main thing that banks now do and
benefit freely by (namely to create money out of credit, private-interest-bearing credit). They
will simply provide for a fee intermediating savings and lending/borrowing services and/or
investment services for prices that revolve around the average cost of providing such
services. �
Yes, transaction account holders can and should be able to keep limited amounts of CBDC
off-line on smart cards so as to be able to make digital purchases for basic living even when
the internet &/or electricity grid is down (though of course local merchants would have to have
some kind of solar, wind, or generator power to do so). A digital transaction using an offline
and/or off-grid method would store the transaction record with sufficient and traceable identify
verification at the point of sale for the transaction to be made without the payment being fully
cleared until the internet and/or electric grid comes back on. It does not seem like a big deal
or a technological problem to achieve this. Having some physical cash still in circulation will
help in such times too. Indeed, the days may come when we may need to have printed and
hand-written ledgers on-hand to be prepared for interrupted or unstable internet or electricity
access for any number of reasons or disasters, manmade and seemingly natural.
sale? If so, how?
--Of course. Again, it can be done via a smart card similar to what is already common in credit
and debit cards.�--We could also develop international CBDC smart cards that can make
payments in a diversity of sovereign currencies across national borders. �--And we can
develop national CBDC smart cards that allow for in-person payments in CBDC and/or a
diversity of state or municipal local public currencies (like those in Ithaca NY, Tuscon AZ,
Berkshires MA), if and as more of those sprout to encourage and protect local investment and
development in, by, and for depressed communities or regions.
We can and should have one national “People’s Ledger” or “currency register” upon which
every public and private payment platform depends and into which each is integrated as long
as it remains effective and efficient for its end-users. People’s, companies’, and units of
governments' transaction accounts should be publicly administered on the inside, with the
existence of every unit of money (whether coin, digital, or paper) in circulation registered and
clearing therein as it circulates, while multiple public and private providers will interface with
households, businesses, and local governments to provide them with transaction account
services with privacy and security protocol intact and within an appropriate competitive
regulatory framework such as exists within every industry and service sector. Savings and
loan platforms and investment companies should be wholly private, also with privacy and
security protocol and within a competitive regulatory framework to dissuade against
monopolies and cartels etc.
CBDC?
If and when we manage to eliminate the artificial, unjust, and unsustainable propping up of
the financial sector that occurs by Congress allowing and enabling private companies called
banks to create our means of payment denominated in US dollars, all commercial companies
and corporations will have to innovate to survive. But they will be able to do so at a sane,
humane, and natural pace guided by genuine need for innovation in order to produce a better
or less costly good or service. That’s another reason why the introduction of CBDC must,
must, must be part and parcel of public monetary reform. Such reform will put our money
system in sync with how people think it already is, and make it and the financial sector (of
savings, loans, and investments) far simpler and easier to understand and to participate
in—therefore becoming much more accessible/inclusive—AND more effective.��All private
companies, businesses, and corporations, including banks and insurance companies,
agriculture, manufacturing, and all manner of commerce one can think of will then exist within
a competitive market economy to achieve better goods and services. To survive in the
marketplace that serves both the private and public good, companies will have to factor in
ALL aspects of their production, rather than merely maximizing shareholder profits at the
expense of everyone one and everything else that they can get away with shortchanging.
They will be able to recognize and give credence to and stop polluting and exploiting the gift
economy that we are all party to and intimately depend upon. Government can and will then,
through our democratically elected representatives and judicial system, hold companies
accountable not to externalize environmental and social costs of production on current and
future generations so that adults in the room can start to repair, restore and regenerate the
world leaving it all at least as good if not even better for our tomorrow's children than what we
were bequeathed.�
benefits of a CBDC?
In addition to all the sovereign, public, Just Money references I have made or alluded to (and
can happily provide many more citations for), I recommend you study, learn from, and
consider the design principles of the 250 year old public banking system in Germany called
Sparkassen, which Mark Cassell sheds light on in English in his 2021 Banking on the State:
The Political Economy of Public Savings Banks. Sparkassen have an amazing design
structure of banks limited to localities nested in regional banks nested in larger regions nested
in the nation. Their design structure gives them the benefits of both decentralized
groundedness in communities, with bank employees having deep local knowledge of,
relationships with, and commitment to the economic players in that locality or region, and
regional and centralized accountability and pooling of risks. It makes for a vibrant and
economically viable, humane, and ecologically responsive network of banks that predate
today’s neoliberal banking regime and that have not merely survived but thrived amidst it and,
I believe, are best poised to know how to navigate our hopefully coming shift to a public,
sovereign, just money system and to flourish amidst it.��In conclusion, I want to commend you,
the Board of Governors of the FRS, for recognizing that “the introduction of a CBDC would
represent a highly significant innovation in American money” (pp. 3, 21), and that,
“accordingly, broad consultation with the general public and key stakeholders is essential” (p.
3). Indeed, both are very true, and I greatly appreciate and applaud your consulting with the
general public through soliciting these public comments. It has afforded me, organizations I
work with, and obviously many others an opportunity to speak to you directly on this vital
public matter at a potentially pivotal moment of history. �I also have to ask, though, who are
your “key stakeholders” other than that “general public”? And will you listen to them—esp. the
Money Power among them who are the commercial banks, especially the behemoths among
them—more than the real stakeholders: namely, the productive American people and,
indirectly, productive people everywhere, and the vitality of sustainability of the planet we
share? The possibility and fate of future generations of life on this planet rest to no small
measure on how you, Board of Governors of the Federal Reserve System, answer that
question. Know that we are watching. We encourage you to follow your professional ethics
and your mandate as public servants, to think critically and historically, and to do the right
thing, with courage, honesty, and integrity, and with humility and fellow feeling. Finally, the
authors and literature cited above and much more you will find referenced if not also linked to
in the 3-tiered bibliography under Resources at www.monetaryalliance.org. Thank you, stay
well, and Godspeed.
_________________________________________________________________________
Tejwansh S. Anand, University of Maryland, Smith School of Business and Weijia Zhang,
Wanchain
Industry
Academia
Country
State
Maryland
Email
The paper should lay out specific policies related to financial and technology literacy��While this
paper has discussed privacy issues in detail, the implementation of CDBC should ensure that
surveillance capabilities for the government related to CDBC are constrained by current
law��The paper should explore whether CDBC can help in ensuring compliance with current
law related to the sale or purchase of outlawed goods and services
The community has pursued alternatives such as stable coins (USDC, USDT, DAI, etc) and
Alliance Based Digital Currency (ABDCs such as Libra and its successor Diem were not
successful). We believe CDBCs have the advantage of government sponsorship and
therefore have less risks and volatility, provided they are backed by a stable, democratic form
of government. While the potential benefits of CBDC on payments can be achieved through
stable coin or ABDC, we believe CDBCs are likely to have greater adoption and stability.
inclusion?
While CDBCs in particular and blockchain in general are expected to positively affect financial
inclusion, this will not happen without a concerted effort to improve financial and technology
literacy. Without such literacy, CDBCs can have a negative impact on financial inclusion.
U.S.CBDC will greatly enhance Federal Reserve’s ability to effectively implement monetary
policy through the following:��Provides programmable money to government, business, and
retail users.��Maintain a transaction database to track assets and transactions while not
impinging on legitimate privacy rights��Control the policy for issuing CBDC assets��Monitoring
assets and transactions for regulatory compliance purpose�
stability?
A CDBC does not on its own positively or negatively impact financial stability. Positive impact
will accrue by clarifying the role of digital currencies, creating a framework for innovation and
integration, and the accompanying effort to foster financial and technology literacy.
CDBC will adversely affect the financial sector if it changes the role of trusted financial
intermediaries too drastically and without the appropriate rationale and literacy support.
As educators we believe the need to provide tools for the general population to learn about
CDBC in particular and digital assets in general. The introduction of the educational tools
needs to be accompanied by a nationwide campaign to reach all sectors of the country
including hard to reach populations such as rural and minority communities.
It is absolutely essential to preserve the general public’s access to a form of central bank
money in the short and medium term. Long term decision should be guided by adoption
trends and the impact of efforts to improve literacy,
CBDC?
Without the U.S. CBDC, some other countries CBDC, or cryptocurrencies offered by public or
enterprise blockchains might evolve to fill the gap in the absence of a U.S. CBDC.
Blockchain technology is evolving very quickly, at a rate exponentially faster than what was
previously observed with the Internet. The US is falling behind with CBDC and blockchain
uses for financial systems and other business applications. Similar to the historical Sputnik
launch, the U.S. needs to catch up by creating a framework for innovation and integration.
Blockchain has some technology related to privacy that can be leveraged by CDBC. These
include state channels, mimblewimble, zero knowledge proofs. There might be some
cryptographic research needed to implement privacy policy specifically for CBDC. We also
need to fund cryptographic research for quantum computers.
Cybersecurity is a big challenge for centralized or decentralized systems. A blockchain based

CDBC that ensures strong encryption and decentralization is likely to be more cyber resilient.
However, the U.S.CDBC should consider the complexity of blockchain security for both single
chain and multi chain systems. The quantum attack resistant design should also be
considered.
Yes. Benefits associated with CDBC are only possible if it is legal tender.
No. It will be best for CDBC to be treated as cash. Currently, cash does not pay interest. The
banking sector can offer products and services for consumers to deposit their CDBC with
them for interest.
To ensure stability, this might be a good design consideration, especially since

cryptocurrencies do not have such a limit and that can compromise their decentralization.
However, this is against the spirit of the American system where we do not limit the amount of
wealth a single end-user can have. We should consider limiting CDBC amounts in individual
transactions, instead.
To ease adoption it is important to minimize change. It will be best if the intermediaries
continue to be retail banks within the current regulatory structure. Changes to intermediaries
and regulatory structure should be explored post the introduction of the CDBC based on the
success of literacy efforts.
Yes. This is important. Users may not be online all the time. For small amounts, having
offline capability is feasible and required.
sale? If so, how?
Allow CBDC to be exchanged with stable coins and other tokens at market rates. This can be
done by cross chain interoperability through transforming CBDC to other tokens types that
are programmable with blockchain applications.
Yes, this can be done by cross chain transfers. Multiple standards have been worked on by
the :�Enterprise Ethereum Alliance (EEA) Cross chain Interoperability Workgroup�IBC (Inter
blockchain Connectors)�XCM (Cross Consensus Messaging)�
CBDC?
benefits of a CBDC?
CBDC can be designed as a fungible token or a hybrid token that is both fungible and
non-fungible. �CBDC should be designed as blockchain agnostic.�CBDC transactions should
be atomic transactions.
_________________________________________________________________________
John N. Howell, Ph.D.
Industry
Individual
Country
State
Ohio
Email
A potential benefit, not considered in this paper, is that CBDC can provide a pathway toward
ending bank creation of money altogether. Compelling reasons for ending bank creation of
money have been given recently by Omarova (The People's Ledger) and previously by many
others (See The Lost Science of Money, by Stephen Zarlenga.) In that way money creation
through the Fed can become available to serve the needs of society as a whole. Banks can
continue to meet borrowing needs by lending pre-existing CBDC. Money created by a central
bank can be directed to meeting public needs. �Another potential benefit of the shift from bank
created money to central bank created money is that it could begin to address the extreme
maldistribution of wealth that currently threatens democracy and social stability. New money
created by banks goes to those who already have money; it concentrates wealth. Spending
on public needs through CBDC provided to government has the potential to counteract wealth
concentration by distributing the country’s resources more evenly, and more justly. �
Yes. Digital currency could be issued by the Treasury Department instead of by the Fed. New
money could then be spent into circulation, as the greenbacks were, rather than being lent
into circulation. That could bring the expansion of public debt to a close. It would have to be
done with guardrails against government spending exceeding the capacity of the economy to
use it for expanded production of goods and services.
inclusion?
It could have a positive effect, but it depends upon how it is done. Automatic opening of Fed
Accounts for everyone, plus access through the post office would certainly improve financial
inclusion.
Monetary policy, via the setting of interest rates and open market QE, has never been very
effective in achieving these ends. �a) A CBDC which can be channeled into government
spending in the public interest could certainly do a better job of keeping people employed.
There is certainly much to be done that can be done by human power. �b) Having the central
bank actually control the money supply would do much to control booms and busts that are
known to be accentuated by bank creation of money. Price stability is shaken by booms and
busts, although it is also affected by other things. Central bank control of the money supply
could potentially eliminate or at least attenuate the boom/bust oscillations, but it would
depend on the ability of the government bureaucracy to be able to respond with adequate
speed.�
stability?
As pointed out in #4 above, central bank control of the money supply could switch the money
supply system from being an unstable, positive feedback system to stable negative feedback
system. In the current system of bank money creation, the money supply grows when growth
is not needed and shrinks when it is needed – the boom/bust amplifier. Central bank control,
done in partnership with the Treasury Department could reverse that and stabilize the system.
The financial sector will have to change in response to introduction of CBDC. If money
creation shifts from commercial banks to the central bank, banks will have to shift their
business plan. They will have to shift to credit intermediation from credit generation, in the
terms of Hockett and Omarova (The Finance Franchise). �Stablecoins are an entirely
unsatisfactory basis for a money supply. Despite promises of staying linked to the dollar
through risk-free investment in treasuries, they will go beyond it, just the Money Market
Mutual Funds did. Stablecoins will have to be bailed out in the next crash just as the MMMFs
were in 2008. �
During the transition banks from money creation by commercial banks to money creation by
the central bank, banks may have to borrow from the Fed in order to sustain their liquidity. In
the long run, investment money flowing into banks for lending on a credit intermediation basis
will sustain liquidity.
Yes.
CBDC?
In the absence of a CBDC banks will continue operating their payment services, but other
digital currencies will compete and are likely to destabilize the system.
The decision should be based on the fact that it will help the United States, not whether other
countries are doing it. But if we don’t move to have better control over our financial
resources, we will fall behind. Credit guidance, that is, directions from the central bank over
where newly created money goes, can play a major role. It was essential for the rapid
recovery of Japan following WWII, as documented by Richard Werner in his book, Princes of
the Yen, and for the rapid industrialization of China in the recent past decades.
Risk of change to financial-sector market structure. A non-interest-bearing CBDC is the way

to go. A CBDC must function to protect the payment system, not primarily serve as in
investment vehicle. Investments should reside in the private sector. CBDC must provide
safety, not a profit source. �Safety and stability of the financial system. It is not clear that limits
will need to be placed on CBDC holdings, especially if the CBDC is non-interest
bearing.�Efficacy of monetary policy implementation. The real purpose of monetary policy is to
determine how much money is in the system and how money is introduced into the system,
i.e., who gets it. Currently the Fed does not control the money supply. It influences it by the
setting of interest rates and open market operations, but these are weak tools. They are
clumsy and imprecise. With CBDC money creation by banks could be halted and the Fed
could actually control the money supply in the public interest. �
Government needs to know financial information from individuals in order to determine if they
are paying their taxes appropriately. Anonymity would only facilitate illicit activity. Powerful
private companies already monitor how we spend our money. I see no need for anonymity.
What is needed is more transparency, not less.
I don’t have any expertise to offer here. It is an important question.
Absolutely. Without it being legal tender, you would just be playing games.
No. As stated above, a CBDC must function to protect the payment system and to protect the
money used in the payment system by providing a safe place for money. It is not to function
as an investment vehicle. Investments and profit-making should reside in the private sector.
CBDC must provide safety, not a profit source.
This is not likely to be needed as long as CBDC accounts remain non-interest-bearing.
For CBDC to be inclusive, many intermediaries have to be involved, including post offices. As
long as the contracts with the intermediaries are well written, it could be a variety of firms.
Some provision will have to be made for them to be compensated appropriately for the work
they perform as intermediaries. In the case of usage of private firms, the cost could be born
by the individual holder of the Fed Account. In the case of usage of the post office or other
public offices, the cost, if born by users, must be kept low.
Probably not. This is a digital currency; that means online. Offline transactions can still occur
using US bills and coins issued by the Fed and the Treasury Department respectively.
sale? If so, how?
Yes. Payment by check or electronic transfer should be made possible to convert one’s bank
money to CBDC. Use of debit cards should continue with CBDC.
Different payment platforms will simply have to have their own CBDC accounts. As described
by Hockett and Omarova, this occurs now with “peer-to-peer” payment systems in that these
platforms all have their own bank accounts.
CBDC?
Technology does drive change, but it should not obscure the fundamentals of policy making
in a democracy. The fundamentals are that we need a monetary system, free of special
privilege, that serves all. We need a reliable and easily accessible payment system, but we
do not need to optimize wealth accumulation by pandering to the needs of financial traders for
ultrafast transactions.
benefits of a CBDC?
Design principles to achieve the potential benefits of a CBDC are the following:�a. In shifting to
CBDC money creation itself must shift entirely from commercial banks to the Fed, as detailed
in The Peoples’ Ledger. The payment system must come to reside wholly in an institution, like
the Fed, which can offer the full faith and credit of the United States Government. The
“tradeoff” here is that it will require a change in business plans for commercial banks, in which
their lending will no longer be based on deposits, but will utilize pre-existing money coming
into banks from savers as time deposits or from the Fed itself, if needed.�b. The Fed must be
enabled to fund the federal government directly with zero-interest loans, issued either in
perpetuity or with guaranteed, unlimited role-over privileges in order that government can
meet public needs by spending in the public interest, limited, not by money, but only by the
availability of labor and of sustainably available raw materials. �c. CBDC accounts must be
free of interest payments and be available to all who participate in the nation’s economy.
Access to accounts must be easily available through both private and public intermediaries,
for instance through post offices, as suggested above, for those without internet service.
�Further comment: The definition of a CBDC given in the 2nd paragraph of the Executive
Summary of the Fed’s document, Money and Payments: the US Dollar in the Age of Digital
Transformation is inappropriate. It is an anachronism, a holdover from the age of gold-backed
dollars, which no longer describes a monetary system of fiat money. There is absolutely no
justification for regarding a CBDC a liability of the central bank. Rather it must be described
properly as social equity (Kumhof et al. (2020)).�These features of a monetary system, which
can be utilized in the context of a CBDC, were put in the form of legislation and submitted to
Congress in 2011 as the National Emergency Employment Act. The Alliance For Just Money
(monetaryalliance.org) would be at your service for the fuller exploration of the ideas
presented here. �
_________________________________________________________________________
Cresencia D Banzuela
Industry
Country
State
California
Email
Is this another way of decoupling the US paper money which was decoupled from gold in
1970's that get us into 27 trillion dollar deficit . Is is backed by faith of US federal reserve
that never balanced US budget . Is this digital currency will be used to wipe the trillion dollar
deficit just by clicking the mouse ?
Too much control by government , they could certainly freeze anyone's asset digital money
just by opining against any politician policy . Central bank control not good for main st folks.
inclusion?
Totally negative, total control of people thru their money . I dont have cryptocurrency but
now I understand what they stand for( away from central bank control)
Price stability is the law of economics 101, supply and demand , too much of anything(
dollar) not back by any asset is worth less just like writing bounce check for stimulus
appeasement , the cotton paper where the money bill is printed on is worth more than the
$ 1 dollar itself.
stability?
How could a bounced check( $ dollar) converted to digital currency create financial stability.
Now if that digital currency is backed by our gold reserve or silver , etc. then it is true
stability , government spending within our means .
Digital currency is just a digital equivalent of paper money , same concept of manual
typewriter writing your documents now it is Word processor, reading encyclopedia now just
surfing the internet . Head honchos of government need to learn economics 101, their
policies destabilize the financial system, overspending beyond their means , no productivity
in the government only issuing checks backed by taxpayers money , so they raise more
taxes to finance their spending , vicious cycle since taxes is imposed in 1913.
This digital currency should be back by gold or silver unlike the fiat money $.
Central control again. People should have control over their hard earned money .
CBDC?
Digital,currency is just a tool or representation of any trade transaction, it is the same

repercussions of paper $ dollars if not backed by anything except the taxpayers revenue .
Neither the president nor yellen can back this up themselves , they are not the almighty.
Digital currency is bad if not back by any asset and will be used to wipe out the trillion dollar
deficit in paper only , we will wait for the next great depression then .
Digital current should be back by gold or silver etc assets
Should have this infrastructure of digital transactions perfected to maximum before

embarking on this ? Of course there are technical issues it is electronic economics/
commerce/ finance after all.
Cyber risks are inherent to this digital economics, same thing as paper money they can
get burned or value inflated if they dont change the underlying value of the money tender .
Only if we go back before 1970's , digital currency backed by real assets not by debts.
Interest is set by federal reserves if they are doing a good job at it, of course CBDB will
follow the market economics . Again it is a currency in digital form versus paper, same
animal , if it look, walk and sound like a duck, it is a duck.
It is a currency for the benefit of the owner which are the taxpaying people as long as it is
legally done. The limit of having money is dependent on one;s ability to earn it . Basic right
in the pursuit of happiness , if people are happy with more money , so be it . Why set a limit.
As long as those firm and intermediaries are legal . Same concept like credit card , every time
we use , intermediaries take a % off the transaction . It is a basic capitalism principle,
everyone entitled to get paid for their work .
Define when , what , how to use the off line capabilities to the people for transparencies .
sale? If so, how?
Should be like paper money. But dont take away the freedom of paying paper money from
the any citizen, do not coerced , threatened or use their information data just get on board.
This is technical and technological issues that should be tackled first and perfected. Same
as coin mint and paper mills to create the money bills. Now with digital currency, it is easy
just to click print money , easier to create fiscal debts and control the data linked to these
digital currency .
CBDC?
If your technology is not perfect yet , dont go into this not fully prepared .
benefits of a CBDC?
Same analogy , what was the potential benefits when taxes was imposed and federal
reserve formed in 1913, gold was decoupled from dollar in 1970's, we are $ 27 trillion in
debts, 8-9% inflation, highly paid but low productivity of employees. �BTW : Donot track my
email or reprimand me for this comments
_________________________________________________________________________
The Citizens Bank of Clovis
Industry
Country
State
New Mexico
Email
kcarruthers@cbcnm.bank
For community banks we could loose deposits as our customers could convert their assets to
the Feds CBDC thus reducing our ability to fund loans in our community.
the payment system is working fine.
inclusion?
I would think the only users of CBDC would be suffocated users. This would not enhance the
situation for the unbanked.
This would balloon the Fed's balance sheet and thereby distort its ability to effectively conduct
monetary policy to control inflation and promote full employment.
stability?
I don't understand how it would be positive and as noted above it would be negative.
the Fed would become a direct competitor to community banks. Impossible to compete with
the Government.
Don't establish CBDC.
The payment system is working fine.
CBDC?
Our customers have never complained about cross-border payments.
It should have no affect.
You have not made a compelling argument that CBDC would enhance privacy. There is a
fundamental conflict between privacy and efforts to use a CBDC to prevent financial crime.
No.
How could this be accomplished?
sale? If so, how?
CBDC?
benefits of a CBDC?
_________________________________________________________________________
Industry
Individual
Country
State
California
Email
Dear FRB,��I am concerned that the Federal Reserve does not consider how computers,
telephones, credit cards via spamming are not secure transactions. All electronic funds have
been hacked, to allow a persons life savings to be stolen by hackers with a CBDC will
undermine trust in banks.��I would encourage banks continue to use credit cards which are
essentially a CBDC. The advantage of credit cards is the interest it earns on sales for the
bank and the fact credit cards have credit limits, so a persons life savings are not depleted by
a hacker.��I would encourage banks to offer in person services at the branches especially for
more senior customers that do not use electronic transfers. The number of branches may be
reduced if needed for cost containment. The branches must be available for high dollar
transactions where facial recognition and thumb print biometrics are required to reduce risk of
theft.
See above
inclusion?
See above
The mandate of the Federal Reserve is an oxymoron. If you have open boarders how can
the US have full employment? Can the US employ the population of the entire world? If you
have full employment than prices are going to rise via inflation, how can you have price
stability? �Immigration must be managed so you neither have a surplus or deficiency of
workers. It should not be used to lower labor costs by hiring undocumented foreign nationals
over a countries own citizens. There maybe one exception to lower food costs where
Industry cannot find local citizens to perform the work ( agriculture). Migrant work permits can
be issued so the US benefits from foreign low cost agriculture laborers without having the
liabilities of granting them US citizenship. �
stability?
CBDC unfortunately will debase the currency faster than is currently being done. The reason
Bitcoin is popular is the idea of a limited quantity. Bitcoin is not practical because it does not
allow for expansion of currency, therefore there is no growth.�� The purpose of pegging the
dollar to gold is like bitcoin, it limits the physical or digital creation of money. The banks can
globally reprice gold and silver to 100% cover the M1 and M2 money supply. To expand
currency further the price of gold and silver could be repriced at a globally agreed upon
transnational rate. The increase in price of gold and silver price will allow for more currency
creation as well as the amount increasing via increased mining production.��Do not confiscate
gold or silver. We need people to invest in gold and silver mines to increase the global
currency supply. Silver is a by product of other mining, so increasing the price of silver will
allow more production of other metals.��
See above
See above
Bank credit cards
CBDC?
Some Chinese companies are defaulting on dollar denominated bonds. Instead of allowing for
this default it may be a better to allow them to settle their debt in commodities instead of US
dollars. It is better to receive gold, silver, copper, lithium, cobalt, nickel, etc. than receive
nothing. If defaults occur it can set off a global collapse. The banks can then create a new
commodities exchange to back the US dollar. Reference Zoltan Pozsar, Credit Susse,
Brenton Woods 3.
See above
See above
See above
See above
Yes
In “Road to Roota” it states money is used to determine allocation of resources. The problem
in a capitalist system is the danger of monopolies. Think of the game monopoly. When the
game is ending one player owns all the property and the other players must constantly
deplete their assets until they are bankrupt. Warren Buffet and other billionaires tried to
encourage billionaires to donate all assets above 500 million back to society. I would like to
see those assets used to create a sovereign wealth fund. The fund will allow all citizens of a
country to own stock via the sovereign wealth fund and benefit as the country benefits. It may
even pay dividends to shareholders.
See above
See above
sale? If so, how?
See above
See above
CBDC?
See above
benefits of a CBDC?
See above
_________________________________________________________________________
Industry
Individual
Country
State
California
Email
Dear FRB,��I am concerned that the Federal Reserve does not consider how computers,
telephones, credit cards via spamming are not secure transactions. All electronic funds have
been hacked, to allow a persons life savings to be stolen by hackers with a CBDC will
undermine trust in banks.��I would encourage banks continue to use credit cards which are
essentially a CBDC. The advantage of credit cards is the interest it earns on sales for the
bank and the fact credit cards have credit limits, so a persons life savings are not depleted by
a hacker.��I would encourage banks to offer in person services at the branches especially for
more senior customers that do not use electronic transfers. The number of branches may be
reduced if needed for cost containment. The branches must be available for high dollar
transactions where facial recognition and thumb print biometrics are required to reduce risk of
theft.
See above
inclusion?
See above
The mandate of the Federal Reserve is an oxymoron. If you have open boarders how can
the US have full employment? Can the US employ the population of the entire world? If you
have full employment than prices are going to rise via inflation, how can you have price
stability? �Immigration must be managed so you neither have a surplus or deficiency of
workers. It should not be used to lower labor costs by hiring undocumented foreign nationals
over a countries own citizens. There maybe one exception to lower food costs where
Industry cannot find local citizens to perform the work ( agriculture). Migrant work permits can
be issued so the US benefits from foreign low cost agriculture laborers without having the
liabilities of granting them US citizenship. �
stability?
CBDC unfortunately will debase the currency faster than is currently being done. The reason
Bitcoin is popular is the idea of a limited quantity. Bitcoin is not practical because it does not
allow for expansion of currency, therefore there is no growth.�� The purpose of pegging the
dollar to gold is like bitcoin, it limits the physical or digital creation of money. The banks can
globally reprice gold and silver to 100% cover the M1 and M2 money supply. To expand
currency further the price of gold and silver could be repriced at a globally agreed upon
transnational rate. The increase in price of gold and silver price will allow for more currency
creation as well as the amount increasing via increased mining production.��Do not confiscate
gold or silver. We need people to invest in gold and silver mines to increase the global
currency supply. Silver is a by product of other mining, so increasing the price of silver will
allow more production of other metals.��
See above
See above
Bank credit cards
CBDC?
Some Chinese companies are defaulting on dollar denominated bonds. Instead of allowing for
this default it may be a better to allow them to settle their debt in commodities instead of US
dollars. It is better to receive gold, silver, copper, lithium, cobalt, nickel, etc. than receive
nothing. If defaults occur it can set off a global collapse. The banks can then create a new
commodities exchange to back the US dollar. Reference Zoltan Pozsar, Credit Susse,
Brenton Woods 3.
See above
See above
See above
See above
Yes
In “Road to Roota” it states money is used to determine allocation of resources. The problem
in a capitalist system is the danger of monopolies. Think of the game monopoly. When the
game is ending one player owns all the property and the other players must constantly
deplete their assets until they are bankrupt. Warren Buffet and other billionaires tried to
encourage billionaires to donate all assets above 500 million back to society. I would like to
see those assets used to create a sovereign wealth fund. The fund will allow all citizens of a
country to own stock via the sovereign wealth fund and benefit as the country benefits. It may
even pay dividends to shareholders.
See above
See above
sale? If so, how?
See above
See above
CBDC?
See above
benefits of a CBDC?
See above
_________________________________________________________________________
Deborah Hozempa
Industry
Other:
Country
State
California
Email
Unconstitutional
Unconstitutional
inclusion?
Unconstitutional
Unconstitutional
stability?
Unconstitutional
Unconstitutional
Unconstitutional
Unconstitutional Unconstitutional
CBDC?
Unconstitutional
Unconstitutional
Unconstitutional
Unconstitutional
Unconstitutional
Unconstitutional
Unconstitutional
Unconstitutional
Unconstitutional
Unconstitutional
sale? If so, how?
Unconstitutional
Unconstitutional
CBDC?
Unconstitutional
benefits of a CBDC?
Unconstitutional
_________________________________________________________________________
Morgan Warstler
Industry
Individual
Country
State
Texas
Email
It has to be programmable.��programmable = public hosting��public hosting = 1A FREE SPEECH

say anything �this is very positive. Free public hosting has MANY future benefits all wrapped
around SAY ANYTHING.
no
inclusion?
stability?
CBDC?
sale? If so, how?
CBDC?
benefits of a CBDC?
_________________________________________________________________________
Industry
Individual
Country
State
Texas
Email
It’s hard to escape from an abductor ex is you can’t hide some paper money away. If my
wasn’t able to save money, I would’ve been stuck in an abusive relationship to this day. You
will be trapping 1000s of abuse victims is you do this!
No!
inclusion?
Negative! It hurts individuals and makes the weak vulnerable. It accelerates inequality!
It’s continuing to put bandaids on a wound instead of replacing the bandaids and letting it heal
stability?
It will leave minorities and the vulnerable behind who do not have access to technology!
It will increase wealth inequality!
Yes! Peolle who have no access to a bank or account will be left behind completely! Don’t do
this if you care about those in need
CBDC?
It devalues our dollar.
No!
It leaves behind marginalized communities. It violates privacy, and it only benefits those who
want to program and control victims.
Don’t do it! It’s not possible! It will hurt victims! I’m begging you!
Corrupt governments have the potential to be in charge of them, so it’s not gonna matter
anyway
No!
Don’t do it!
Don’t do it!
None! You’re gonna let corporations control us!
It’s called cash!
sale? If so, how?
Don’t do it!
Don’t do it!
CBDC?
Don’t do it!
benefits of a CBDC?
Don’t do it!
_________________________________________________________________________
Industry
Individual
Country
India
State
Email
THE KING SOLOMON POST � OM SHANTI OM (LET THERE BE PEACE IN �

THIS WORLD)�THIS IS SWISS/FRENCH/DUTCH/INDIAN/UNITED NATIONS/BRITISH
INTERNATIONAL DISPATCH ISSUED FROM THE WORLD SECRETARIAAT/DESK OF
LORD RAVINDER(,RABBINDER) KUMAR SHARMA (THE ROYAL
CROWN/RA-UNCODE(THE SUN GODD-THE SUPREME POWER-THE HEAD OF
CHAIRMAN-UNESCO AND WORLD BANK(,IMF) FOR THE IMMEDIATE RELEASE OF
BANKS IN GROSS,VOILATION OF FOREIGN EXCHANGE MANAGEMENT ACT 1999 AND
14/10/2019,IN SHIMLA HP INDIA AS A SUV OVERRAN ME CRUSHING ME ALMOST TO
DEATH BREAKING THE BONE OF MY LEG AND NOW A STEEL PLATE HAS BEEN PUT
IN THE BROKEN BONE OF MY LEG AND 3 TO 4 MISCARRIAGES AND ABORTIONS OF
MY WIFE WHO IS PRESENT QUEEN OF EGYPT FRANCE USA INDIA AND
SCOTLAND(UK) CARRYING IN HER VEINS THE HOLLY GRAIL AND HOLLY BLOOD OF
JESUS,CHRIST AND INVINCIBLE PHARAOHS FROM THE HOUSE OF LIFE EGYPT THE
BOOK OF BREATHINGS AND FRENCH(ARCADIAN) ROYAL LINE FROM THE HOUSE OF
KING DAVID WHO FORMED THE UNITED NATIONS DEPRIVING THE PRESENT
FRENCH THRONE OF ITS 3 TO 4 LEGITIMATE BIRTHRIGHT KINGS AND QUEENS THUS
I HAVE NOT ONLY BEEN TORTURED BOTH PHYSICALLY AND FINANCIALLY FROM
THE YEAR 2006 TO 2021-22 BY FEDERAL RESERVE BANK OF NEWYORK GOVT OF
INDIA RESERVE BANK OF INDIA AND INDIAN BANKS BUT I ALSO HAVE BRUTALLY
BEEN MURDERED ALL MY PAYMENTS FROM THE YEAR 2006 TO 2021-22 BE
IMMEDIATELY RELEASED UNDER AN URGENT INTERNATIONAL PRIORITY A CODE
ONE AND PAYMENT CODE 2AA OF UN PROTOCOL AND UNITED NATIONS
(PRIVILEDGES AND IMMUNITIES) ACT 1947 WHICH IS APPLICABLE TO THE STATE OF
HIMACHAL PRADESH IN THE UNION TERRITORY OF INDIA.� HOSANNAH FILIO
DAVID� HOSANNAH TO THE SON OF DAVID � FRENCH(ARCADIAN) ROYAL
LINE �MESSAGE STARTS:-�I AM THE FIRST BREEZE BLOWING IN THE DARK OCEAN OF
ETERNITY I AM THE FIRST SUNRISE I AM THE FIRST GLIMMER OF LIGHT A WHITE
FEATHER BLOWING IN THE DAWN WIND I AM RA I AM THE BEGINNING OF ALL THE
THINGS I SHALL LIVE FOREVER I SHALL NEVER PERISH .� FROM THE
HOUSE OF LIFE EGYPT � THE BOOK OF BREATHINGS�"Hail to the mysteries
jealously guarded by RA.� May the doors of vast HEAVENS open before me.�May my
past PRESENT and future LIFE BE glorious!� Verily I am powerful for I have completed
the cycle OF metamorphoses �I who speak I know OF hidden THINGS � I can traverse
THE UNIVERSE and take possession of my CELESTIAL HERITAGE, knowledge and an
abundance of wealth AND power, open the doors of it to me as I wish to receive it.�I claim
THE THRONE OF HEAVENS as my BIRTHRIGHT �What has one BEEN mine SHALL be
mine again."�Is there any WHO would CHALLANGE me????��I AM DIVINE LORD
RAVINDER(RABBINDER) KUMAR SHARMA THE MASTER OF TEN THOUSAND
CHARIOTS � GODD OF WISDOM � THE BOOK OF WISDOM �
LORD OF ALL HEAVENS � LORD OF ALL WORLDS � MESSAGE
ENDS�FEAR ME O YE ENEMIES OF EGYPT AND THIS WORLD �LORD RAVINDER
(RABBINDER) KUMAR SHARMA �BIRTHPLACE �VILLAGE AND
� CELL AND
WHATSAPP�EMAIL
Cxxxx
inclusion?
Xxxxx
Xxxxx
stability?
Xxxxx
Xxxxx
Xxxx
Xxxxx
CBDC?
Xxxxx
Xxxx
Xxxx
Xxxxx
Xxxx
Xxxxx
Xxxxx
Xxxxxx
Xxxxx
Xxxxx
sale? If so, how?
Xxxxx
Xxxx
CBDC?
Xxxx
benefits of a CBDC?
Xxxx
_________________________________________________________________________
Industry
Individual
Country
India
State
Email
THE KING SOLOMON POST � OM SHANTI OM (LET THERE BE PEACE IN �

THIS WORLD)�THIS IS SWISS/FRENCH/DUTCH/INDIAN/UNITED NATIONS/BRITISH
INTERNATIONAL DISPATCH ISSUED FROM THE WORLD SECRETARIAAT/DESK OF
LORD RAVINDER(,RABBINDER) KUMAR SHARMA (THE ROYAL
CROWN/RA-UNCODE(THE SUN GODD-THE SUPREME POWER-THE HEAD OF
CHAIRMAN-UNESCO AND WORLD BANK(,IMF) FOR THE IMMEDIATE RELEASE OF
BANKS IN GROSS,VOILATION OF FOREIGN EXCHANGE MANAGEMENT ACT 1999 AND
14/10/2019,IN SHIMLA HP INDIA AS A SUV OVERRAN ME CRUSHING ME ALMOST TO
DEATH BREAKING THE BONE OF MY LEG AND NOW A STEEL PLATE HAS BEEN PUT
IN THE BROKEN BONE OF MY LEG AND 3 TO 4 MISCARRIAGES AND ABORTIONS OF
MY WIFE WHO IS PRESENT QUEEN OF EGYPT FRANCE USA INDIA AND
SCOTLAND(UK) CARRYING IN HER VEINS THE HOLLY GRAIL AND HOLLY BLOOD OF
JESUS,CHRIST AND INVINCIBLE PHARAOHS FROM THE HOUSE OF LIFE EGYPT THE
BOOK OF BREATHINGS AND FRENCH(ARCADIAN) ROYAL LINE FROM THE HOUSE OF
KING DAVID WHO FORMED THE UNITED NATIONS DEPRIVING THE PRESENT
FRENCH THRONE OF ITS 3 TO 4 LEGITIMATE BIRTHRIGHT KINGS AND QUEENS THUS
I HAVE NOT ONLY BEEN TORTURED BOTH PHYSICALLY AND FINANCIALLY FROM
THE YEAR 2006 TO 2021-22 BY FEDERAL RESERVE BANK OF NEWYORK GOVT OF
INDIA RESERVE BANK OF INDIA AND INDIAN BANKS BUT I ALSO HAVE BRUTALLY
BEEN MURDERED ALL MY PAYMENTS FROM THE YEAR 2006 TO 2021-22 BE
IMMEDIATELY RELEASED UNDER AN URGENT INTERNATIONAL PRIORITY A CODE
ONE AND PAYMENT CODE 2AA OF UN PROTOCOL AND UNITED NATIONS
(PRIVILEDGES AND IMMUNITIES) ACT 1947 WHICH IS APPLICABLE TO THE STATE OF
HIMACHAL PRADESH IN THE UNION TERRITORY OF INDIA.� HOSANNAH FILIO
DAVID� HOSANNAH TO THE SON OF DAVID � FRENCH(ARCADIAN) ROYAL
LINE �MESSAGE STARTS:-�I AM THE FIRST BREEZE BLOWING IN THE DARK OCEAN OF
ETERNITY I AM THE FIRST SUNRISE I AM THE FIRST GLIMMER OF LIGHT A WHITE
FEATHER BLOWING IN THE DAWN WIND I AM RA I AM THE BEGINNING OF ALL THE
THINGS I SHALL LIVE FOREVER I SHALL NEVER PERISH .� FROM THE
HOUSE OF LIFE EGYPT � THE BOOK OF BREATHINGS�"Hail to the mysteries
jealously guarded by RA.� May the doors of vast HEAVENS open before me.�May my
past PRESENT and future LIFE BE glorious!� Verily I am powerful for I have completed
the cycle OF metamorphoses �I who speak I know OF hidden THINGS � I can traverse
THE UNIVERSE and take possession of my CELESTIAL HERITAGE, knowledge and an
abundance of wealth AND power, open the doors of it to me as I wish to receive it.�I claim
THE THRONE OF HEAVENS as my BIRTHRIGHT �What has one BEEN mine SHALL be
mine again."�Is there any WHO would CHALLANGE me????��I AM DIVINE LORD
RAVINDER(RABBINDER) KUMAR SHARMA THE MASTER OF TEN THOUSAND
CHARIOTS � GODD OF WISDOM � THE BOOK OF WISDOM �
LORD OF ALL HEAVENS � LORD OF ALL WORLDS � MESSAGE
ENDS�FEAR ME O YE ENEMIES OF EGYPT AND THIS WORLD �LORD RAVINDER
(RABBINDER) KUMAR SHARMA �BIRTHPLACE �VILLAGE AND
� CELL AND
WHATSAPP�EMAIL
Cxxxx
inclusion?
Xxxxx
Xxxxx
stability?
Xxxxx
Xxxxx
Xxxx
Xxxxx
CBDC?
Xxxxx
Xxxx
Xxxx
Xxxxx
Xxxx
Xxxxx
Xxxxx
Xxxxxx
Xxxxx
Xxxxx
sale? If so, how?
Xxxxx
Xxxx
CBDC?
Xxxx
benefits of a CBDC?
Xxxx
_________________________________________________________________________
Bob and JoAnne Hungate
Industry
Country
State
Arizona
Email
A. Crypto currencies are all commodities and need to be regulated as such.��B. Money should
be limited by appropriate law.��Coin and circulated paper should be limited as suggested by
Rogoff in The Curse of Cash. Because the use of this form is not traced it permits unlawful
activity. Crypto has facilitated, may be the main event, for similar secrecy benefit,��Seigniorage
should remain a monopoly for governments. Its profitability and value should accrue to the
issuing source, its monetary and fiscal management.��C. In effect most dollars are already
digital, expressed in balances is trusted places and mechanisms; banks, apple pay, etc.
Cross border transactions involving multiple currencies currently limit international trade,
lessening efficiency and creating opportunity for corruption.��D. There needs to be a well
regulated utility as the node for smoothing the ever growing cross-border trade. This should
take the form of utilizing Special Drawing Rights on the IMF for price of exchange
adjudication. There will need to be an excise tax levied on each transaction shared between
IMF itself and the countries of each currencies origin. China at one time proposed this
option. Both the US and China would benefit from its enablement. No money would change
hands. IMF would study activity, establish pricing between currencies Euro will have trouble
here because monetary and fiscal policy linkage does not exist. But the BIS is an efficient
system, can be extended, adapted to create multiple country structures.��E. Transparency
must be developed in the money system in order to force transparency in the political system,
enable democracy. The existing financialization has been a major cause of the rapid
increase in the concentration of wealth in all economies. The FED should take a world view
here, recognize the need for a sequel to Bretton Woods. For political reasons several
locations might be considered; Hong Kong, Kiev, Stockholm
Yes, and would require needed broad participation, agreement to build transparent financial
utility. Block Chain primarily benefits opacity of participants, wastes energy without true
benefit
inclusion?
Benefit if done as suggested in question 1. Currency manipulation would not work under IMF
appropriate analysis just as the FED now does. Country by country fiscal and monetary
management would drive each countries perceived product value as the IMF reflects in
exchange rates the weight of each countries production portion of the world economy.�
The recommended moves if accompanied by appropriate US establishment of a system of

excise taxes applied to producers of consumed products including s transaction tax could
restore the power the FED has lost,
stability?
Yes, positive if SDRs are used, control with intermediaries and countries. A market for
currency is a terrible idea, it would be unstable unusable for financial transactions.
Currencies are commodities. Regulation of their respective values must trace back to fiscal
and monetary discipline in originating and controlling counties. Anarchy in currencies takes
us back to the banking system replaced by the FED
Since the financial sector is fundamentally the cause of increasing concentration of wealth,
cheap creation of money there will be serious effects when the existing imbalances are
corrected.��Economists have failed the population. The evolved system now favors property not
society Capitalism in its current unregulated form is enriched through rent extraction from the
economy without societal return commensurate with the reward to property. Excise taxes
should be enacted to achieve a rebalancing.
No further suggestions after the next two but dialog and debate at all levels of society, not
just Wall Street, is essential.
No benefit if the regulatory utility is well designed, SDRs on IMF and excise tax on between
currencies exchange. At the levels Rogoff suggests cash is OK, most efficient, just a part,
extension of, barter that preceded it and will continue
CBDC?
From BIS and SDR use at IMF��by implementing answer in1.��
as stated in 5.
sale? If so, how?
CBDC?
benefits of a CBDC?
_________________________________________________________________________
Akemona, Inc.
Industry
Technology Company
Country
State
California
Email
Ravi.Srivastava@akemona.com
Kudos to the Federal Reserve for this excellent document. We noticed that the Federal
Reserve has not taken into consideration the environmental impact of replacing old and
damaged dollar bills and putting new bills into circulation. A rough estimate is that about 10
billion pieces of dollar bills of various denominations are replaced every year. This could be a
potential saving of tens of million pounds of paper, if printed bills were eventually replaced by
CBDC.
inclusion?
Cryptocurrency adoption in Latin America, where over 40% of the population is unbanked, is
higher than several developed countries. For example, in a survey carried out by Statistica
21% of the respondents in Argentina stated using cryptocurrencies as compared to 13% in
the United States and 4% in Japan. After adjusting for Internet access, we have seen this
correlation hold in other regions. This may indicate that unbanked population is more likely to
adopt a CBDC. Any steps that reduce the cost of digital money transfers and payments are
certain to drive financial inclusion with net positive effect.
stability?
Bank deposits are likely to be impacted unless banks adopt newer tools and methods for
seeking programmable parking and staking of CBDC. For example, when people go to sleep
across different time zones, they could programmatically park or stake their CBDC with a
bank and earn interest. In the morning, they could get their CBDC back automatically.
Similarly, the money that is not in use could be automatically parked or staked with a bank to
earn interest. This would be a more effective use of money. In the future, digital wallets could
be made intelligent and they could effectively execute cash management for individuals. This
is not science fiction, since cryptocurrencies are already showing the possibilities of
programmable money.
CBDC?
There should not be a limit on the amount of CBDC held by a single end-user. These limits
could potentially deter banks from creating financial products to incentivize individuals to
stake their CBDC with banks.
We believe that such "offline" capabilities could help people who do not have Internet access.
Such offline capabilities could be achievable through exchange of camera-scannable codes,
which are authenticated and authorized by transacting parties. The risk is that such an offline
digital wallet could be another point of vulnerability.
sale? If so, how?
The CBDC should be designed for transferability and other standard attributes of a currency.
Ease of use and acceptance at the point of sale should be left to the designers of digital
wallets.
CBDC?
benefits of a CBDC?
_________________________________________________________________________
VUBS LLC
Industry
Other: International Affairs / Escrow
Country
State
Tennessee
Email
inclusion?
stability?
CBDC?
sale? If so, how?
CBDC?
benefits of a CBDC?
_________________________________________________________________________
Industry
Country
State
Louisiana
Email
Sudden changes in value of digital currency caused by unanticipated events
Only with actual paper currency such as Fed Reserve Notes
inclusion?
It could, but not without a lot of education about it for people who tend not to use banks or to
minimally use banks.
How would a mechanism for implementing monetary policy operate without defeating the
original purpose and advantage of digital currency ?
stability?
I do not know, but I would assume that CBDC itself would be subject to the vagaries of
international events.
I assume CBDC would compete with other digital currencies and that thi would create new
problems.
I have no idea.
Absolutely yes. Cash is the safest currency for transactions.
CBDC?
People would just use other digital currencies, unprotected by a central bank.
The U.S. should be in the forefront; other nations will follow. The U.S. should put itself in the
lead regarding addressing and solving problems that emerge with CBDC. be prepred to
become aware of and address digital currency problems
Yes, but I do not know what they are. I presume the block chain protocol will be used for
CBDC .
Very sticky problem and I do not know if it is soluble. Why do consumers need privacy from
a central abnk, unless the central bank employs unscrupulous people.
There must be a team of cyber monitors that police the currency and its movements. Lack of
anonymity would be unavoidable. But honest citizens should not be against this.
Yes.
Yes.
Yes, but the limit should be high. A limit could help avoid sudden changes in the value.
There should be no intermediaries. This would hurt the financial industry but so what.
No. Cash (Fed Res Notes) should still be available as off-line money.
sale? If so, how?
Yes. It should take on the aspects of cash!
Do not know. Take a lesson from bitcoin and blockchain protocol.
CBDC?
Do not know
benefits of a CBDC?
Now am tired. Survey is too long.
_________________________________________________________________________
Michelle D
Industry
Individual
Country
State
Florida
Email
I don’t want you to be able to track my spending and adjust the money in my account based
off your decision or any type of social credit score.
Yes keep the system the way it is and stop wasting money.
inclusion?
Yes. If you take my money because you feel like it and I don’t agree with you there will be
protest and uprisings.
I don’t know but leave me out of it.
stability?
Negative. We are not a socialist country. People can work if they want financial stability
Yes if you decide to take my money away from me because I don’t follow your ideals there
will be nothing to spend.
No Social Credit Score
We need to continue to use cash if that is our preference
CBDC?
I don’t want the US to become like China that sounds like a nightmare
Don’t use it
Don’t use it. Provide anonymity. What I do with my money is not your business.
NO
sale? If so, how?
CBDC?
benefits of a CBDC?
_________________________________________________________________________
Industry
Other: Publishing
Country
State
California
Email
Provide digital property rights.� https://hackernoon.com/cbdcs-the-folly-of-digital-fiat�
inclusion?
stability?
CBDC?
sale? If so, how?
CBDC?
benefits of a CBDC?
_________________________________________________________________________
Wisconsin Bankers Association
Industry
Trade Organization
Country
State
Wisconsin
Email
sbirrenkott@wisbank.com
Lack of inclusion of the banking industry. For example, the potential that money would move
away from retail deposits and away from banks, which in turn would be unavailable to be lent
back into the community and economy.��Potential loss of consumer privacy, convenient
processing of transactions, and protection of funds (such as FDIC coverage) offered through
the banking system. Furthermore, lack of state and federal oversight and supervision. As a
general matter, unclear roles and participation of nonbank participants.�
inclusion?
WBA believes that FRB’s overall goals are commendable. However, the benefits of potentially
increased financial inclusion do not outweigh the risks. Many consumers already have a bank
account, or have access to a bank account. There are some who yet remain outside the
banking system, but Wisconsin banks continually explore initiatives, options, and movements
to create products, offerings, and incentives to provide basic accounts to reach the currently
unbanked.��WBA has found that within the unbanked population, there is often a lack of trust
for certain aspects of government involvement in personal finances. It is unlikely that CBDC
will achieve the goals of inclusion at least partially due to this reason. It is unlikely that certain
unbanked individuals will desire to open an account directly with the entity they distrust.
stability?
Similar to the potential risks above, if unregulated entities become intermediaries, additional,
separate ongoing oversight and examination would be required to maintain financial stability.
Potentially. Certain deposits stand to be lost to CBDC, including investments such as money
market funds, presenting disruption to the financial sector and the US Treasury markets. As
discussed above, this could restrict availability of credit and overall strain on the financial
sector and create questions as to whether the money would flow back to other deposit
options.�
CBDC?
sale? If so, how?
CBDC?
benefits of a CBDC?
_________________________________________________________________________
Secure Remote Payment Council, Inc.
Industry
Other: Cross-Industry Payments Coalition
Country
State
California
Email
m.arminio@secureremotepaymentcouncil.org
CBDCs must address the same issues as the traditional banking industry, namely privacy,
identity verification, fraud mitigation, safety and security. �A Federal Reserve-issued CBDC
would be a digital asset available to the general public, with no additional credit or liquidity
risk compared with physical cash. CBDC may be regarded as a proxy for non interest-bearing
cash and may offer a safer substitute for cash than stablecoin or cryptocurrency. There
should be no discount with the transfer of digital dollars and transactions should be executed
so that the funds can be used immediately on receipt. Revocability rules around the use of
CBDCs to purchase goods/services, withdraw, transfer or deposit should align with the
corresponding rules of physical cash.��The CBDC framework must be built to support
transaction processing to allow safe and secure movement of funds with some level of
protection, e.g., by creating a methodology that embeds authentication into the currency
transfer process. The framework must be flexible enough to make allowances for future
improvements and innovation, e.g., support for QR code technology, real-time payments, etc.
�For protection, CBDCs must be stored in and accessed via a secure wallet or app on the
mobile device. Wherever the funds are stored, the user must be able to access in order to
transfer value. The user must register the mobile device as the access device to validate the
user at the time of purchase. The registration captures the device ID and a password and
may perform additional step-up validation each time a purchase or transfer of funds is made. �
Some or all of the potential benefits of a CBDC could be achieved through the use of
real-time payments which provides immediacy of funds availability. This is a private sector
initiative for now, but FedNow potentially offers a similar path of immediate funds availability.
inclusion?
The net effect of a cash-like CBDC could be positive for financial inclusion by providing a fiat
currency for the underserved and unbanked. Users make the determination of how CBDCs
get stored. A large percentage of the underserved and unbanked population has access to a
government-issued smart device so CBDCs could be made readily available. Using the
self-custody wallet or a licensed custodian for the storage of CBDCs would legitimize the
wallet as a viable store of value in the payments ecosystem. Users may opt to hold their
CBDC tokens in such wallets as they do with physical wallets today with paper cash or coin.
�CBDCs also makes real time payments readily available and simplifies the process for
transferring value to make purchases and autopay bills. �Regulation would be necessary to set
the ground rules for usage, privacy, security and anonymity. If CBDCs are deposited into an
account, these funds always need to be made available to the user because CBDCs
represent physical cash.�
NA
stability?
NA
U.S. CBDCs should be established as a sovereign financial instrument, and thus equal and
interchangeable with physical cash. The U.S. maintains its sovereignty in the international
marketplace with CBDCs unlike stablecoin and other nonbank money which are neither
sovereign financial instruments nor controlled by a government. �Unlike physical cash, CBDC
opens up auditability of how/when/where digital dollars are spent.��If issued by the Federal
Reserve, CBDCs become a liability to the Federal Reserve’s balance sheet. As such, the
Federal Reserve needs to guarantee CBDCs availability including support for offline
transactions. Federal and State regulation for digital cash might add a layer of complexity
regarding which law prevails. U.S. cash is Federal cash but there are state regulators can set
their own rules on usage. Ultimately, we will need one set of rules governing state usage. �
NA
Yes, U.S. digital and physical cash will coincide as sovereign, legal tender. This also allows
physical cash to be phased out and removed from circulation.
CBDC?
Absent a U.S. domestic and cross-border digital payment, the Real-Time Payment (RTP)
rails, SWIFT gpi and other private firms like Ripple might support digital cash transactions.
CBDC would likely follow the same cross-border rules as physical cash. �Models adopted by
other countries might come into play, in the form of shared platforms. �
The strength of the U.S. dollar in international trade must be protected. �U.S.-issued CBDCs
could preserve the dominant international role of the U.S. dollar as the world’s reserve
currency and continue United States influence of standards for the global monetary system.
�Support for CBDCs will also be a factor in global interoperability. �
In creation of new technology even more emphasis must be placed on security to counteract
fraud. The Federal Reserve should encourage standards for positive identification to prove
legitimacy of user and they should even add the requirement for a secondary ID. We
recommend a layered, step-up approach to security, inherent to the point of transaction.
�Security measures must be strong enough to assure that administrators of CBDCs can never
create or “print” false value into circulation. �New payment methods should incorporate
leverage the existing payment infrastructure where appropriate and incorporate innovation to
improve speed, safety, and interoperability. Security measures such as encryption,
multi-factor authentication (MFA) and tokenization should be employed but without prescribed
solutions.��With Federal Reserve currency, the onus on the Federal Reserve whose policies
can create or quash competition.�
Anonymity and privacy must be addressed for CBDC usage particularly in cross-border
transactions, financial inclusion, and public access to digital cash. The CBDC technology and
framework must be designed with the appropriate checks and balances to protect the
customer privacy while delivering faster and cheaper payments.��Cash is anonymous and thus
there is no audit trail, except when cash is transacting with a financial instrument such as a
DDA account. In contrast, every CBDC transaction is auditable. Depending on how it is
designed and used, CBDCs have the potential to be directly tracked by the federal
government, thereby creating direct privacy implications.��Onerous privacy and security
measures can detract from transaction activity, so the market needs to figure out how to
handle this to avoid conflict of interest. One way to manage this is to have customers opt in
and opt out around these financial instruments.��Privacy of data collected (in registration,
buying and selling, etc.) on CBDCs must be independent of the Federal Reserve and perhaps
this function should be parsed to other stakeholders. Privacy is owned by states today and
their buy in would be necessary. �One of the benefits of the CBDC audit trail is that it can
solve some AML challenges plaguing physical cash.�
CBDCs must be designed to address the challenges with issuance/enrollment, privacy,

network infrastructure security and reporting, e.g., patterns, analytics, transaction policies.
The design must support multiple providers / stakeholders to assure resiliency into the
infrastructure and to provide transparency.��Technology must not stifle innovation, rather create
a monetary foundation for commerce and trade that is stable and make sure digital and
physical dollar is equal as a legal tender. We must build resiliency in the movement and
protection of information and protection of an individual’s privacy, while keeping the process
simple. Technical standards from accredited standard organizations will be key including, but
not limited to, ISO 20022.�
CBDCs should be considered a legal tender, in alignment with U.S. cash issued by the
Federal Reserve. This is the foundation of the U.S. monetary system. �Both digital and
physical cash is sovereign money, e.g., the safe property of the customer who owns the
money and should be considered U.S. currency whether physical cash in hand or digital. �
If digital cash is going to be considered sovereign cash and those funds are kept in a
depository account that can be used by that financial institution to make loans, then the
financial institution should be able to offer the depositor interest on that digital currency.
If this is sovereign currency, then there should never be a limit on the amount of CBDCs any
one individual can have.
Just like with physical cash today, Central Banks – i.e., the Federal Reserve – should
continue to issue and maintain liability for digital cash (CBDC) and should be able to distribute
CBDC to any institution which meets the appropriate safety, security and regulatory standards
set for custody (storage plus access) and acceptance of digital currency.��No issuance of
CBDCs should occur without built in checks and balances similar to the way physical cash is
issued today. �
CBDCs can be direct or indirect, with accounts residing on a self-custodial wallet / app or in a
wallet / app powered by a licensed custodian. �Funds movement is needed in offline mode,
especially to secure goods in emergency situations. Storage on the mobile device can be
done in an encrypted wallet. Offline capabilities must be supported by both cold and hot
wallets, as users must be able to make transactions even when the data service is not
available. User should be able to perform transactions using the chip on the mobile device.
�There must be some rules and regulations in place that cover the movement of digital
currency just like those that exist for standard currency. These rules and regulations must
address a myriad of issues such as user validation in offline mode, technical backup to
access stored files, rights to access customer files, device security, user validation, etc. �
sale? If so, how?
The type of payment accepted at the POS should not matter as the end user will expect that
all forms of payment will be supported. CBDC acceptance at the POS should be a familiar
customer experience for the user. Merchants should not be required or mandated to accept
CBDC as a payment type rather they should be able to accept the product based on
consumer demand. �Of course, any payment solution must be easy to implement at the POS
in either hardware, firmware and/or software. However, this may be a challenge for older
devices.��The design of CBDCs should focus on chips, mobile devices and wallets.�
One way to achieve transferability across multiple platforms is to design a shared platform
where participating central banks that issue CBDCs can transact directly with each other.
APIs will support transferability across multiple payment platforms to enable interoperability.
CBDCs must support cross-border transactions including international wire transfers. This
platform should support the existing clearing and settlement systems, and the gateways
services of the traditional payments infrastructure wherever it makes sense.
CBDC?
Real Time Payment (RTP) rails have been built for The Clearing House and are being built for
FedNow. This could mitigate the need for CBDCs.��Future technological innovation may add
functionality and value-added services and support more payment processing options like QR
code technology and real-time payments.�
benefits of a CBDC?
The design principles should build in added security (particularly Know-Your-Customer)

especially during the onboarding process and leverage the existing payment infrastructure
wherever possible. For example, the settlement and clearing system for real-time payments
is a good start.��There are outstanding questions about support for overdrafts, e.g., will
financial institutions allow overdrafts and would they need to occur immediately? While we
proposed that CBDC transactions are irrevocable, some financial institutions may want to
establish their own policies on reimbursements for exigent circumstances or as a matter of
customer service.�
_________________________________________________________________________
Mr.Bordin Chamras
Industry
Country
Thailand
State
Email
inclusion?
stability?
CBDC?
sale? If so, how?
CBDC?
benefits of a CBDC?
_________________________________________________________________________
Star One Credit Union
Industry
Credit Union
Country
State
California
Email
garyr@starone.org
CBDC will create a separate financial system that will compete against the existing banking
system. Eventually, the CBDC system will perform many of the same functions as the
existing banking system but will be riskier and more expensive for the US Government and
the public.
FedNow is a better way for the public to perform digital transactions with US currency.
inclusion?
Existing laws and regulations imposed on financial institutions to help protect consumers and
prevent illegal activities, such as terrorism and money laundering, have an adverse effect on
financial inclusion. If CBDC is subject to these same laws and regulations, which seems
likely, the adverse effect on financial inclusion would be similar. For CBDC to promote
financial inclusion, the Federal Reserve or its third parties would need to provide banking
services similar to what financial institutions offer; such as checking accounts, loans,
customer service (in-person and digital) and payment systems. It’s unlikely the Federal
Reserve, or its vendors, would be more efficient or effective in providing these services.
Serving the public directly would also put the Federal Reserve in direct competition with
financial institutions; which may cause the Federal Reserve to violate its mandate as imposed
by Congress.
CBDC growth would decrease the amount of deposits and assets in the banking system and
other financial organizations. Since the Federal Reserve relies on these deposits and
financial assets to implement monetary policy, CBDC would likely adversely affect the
Federal Reserve’s ability to achieve its goals.
stability?
CBDC would cause disintermediation and would weaken the existing financial system. CBDC
would increase the cost of funds of financial institutions and reduce credit availability to the
public. As a result, customers of financial institutions would pay more for their loans. CBDC
could make runs on financial institutions more likely since depositors could instantly transfer
their funds to CBDC at the first signs of distress at an individual financial institution. The
current payment system has the ability to function when parts of the system are “offline”.
Financial institutions are able manage this risk because of the relationships and knowledge
the financial institutions have of their customers. It’s unlikely a centralized, government run
CBDC system could manage this risk as effectively as financial institutions can. CBDC’s net
effect on financial stability would be negative.
CBDC would cause deposits to flow out of federally insured institutions. CBDC would be
considered safer, more secure and a bigger competitive threat to federally insured institutions
than stablecoins and nonbank money. As a result, CBDC would have a greater negative
affect on the financial sector.
I am not aware of any tools that would mitigate the adverse impact of CBDC.
A significant portion of the existing cash usage will not transition into CBDC (or other digital
currencies) if the Patriot Act and other similar laws that are currently imposed on financial
institutions are applied to CBDC. The anonymity of cash will ensure its continued usage.
CBDC?
FedNow will support domestic and cross-border digital payments more effectively than
CBDC.
CBDC issued by other nations will not have a material impact on the United States if FedNow
is used instead of CBDC in the future. Implementing FedNow will ensure the US financial
system remains strong and the US dollar continues to be the world’s primary reserve
currency.
No.
If the laws to prevent illicit financial activity that are currently imposed on financial institutions
are applied to CBDC, it would be impossible to provide consumers with the same level of
privacy and anonymity of possessing cash.
Implementing CBDC would centralize and concentrate operational and cyber security risks
with the Federal Reserve. The Federal Reserve does not have experience in managing
these types of risks. FedNow would operate within the existing financial system; which
consists of approximately 10,000 independent financial institutions that have been
successfully managing similar operational and cyber security risks for years. FedNow would
provide more diversification and additional layers of security.
No.
The US Government should support FedNow for federally insured financial institutions and
not issue a CBDC.
not issue a CBDC.
not issue a CBDC.
not issue a CBDC.
sale? If so, how?
not issue a CBDC.
not issue a CBDC.
CBDC?
not issue a CBDC.
benefits of a CBDC?
not issue a CBDC.
_________________________________________________________________________
Industry
Technology Company
Country
State
California
Email
Central banking liabilities. This paper poses an endless line of risks involved that are only
created through the creation of the CBDC. This is, because of the centralized nature of the
information the government will be involved in millions and billions of userbase data.
With government involvement, there will be little capitalistic enthusiasm. It will dry up
opportunities for free markets. However, by simply leaving CBDC out of the picture, free
markets through their own ex[eriece will achieve a national standard of dollar-based
denominations.
inclusion?
Negative.
Negatively in that, it will disrupt markets and confuse market makers.
stability?
Negative,
Yes, it will centralize and destabilize banking and financing.
No centralization of information.
CBDC?
Blockchain, exactly how they are being performed today.
It should not, however it can view how things were done and learn from them. Not to jump in
because other nations are doing so.
Yes, do not create the CBDC
No easy way to find out. Research markets.
NO, do not create the CBDC
sale? If so, how?
It will always be changing and could become outdated with technologies.�Do not create the
CBDC!
CBDC?
It will prevent technological innovations. �Do not create the CBDC.
benefits of a CBDC?
Do not create the CBDC.
_________________________________________________________________________
Nicholas W Saccone
Industry
Individual
Country
State
New York
Email
The percentage of the population that are not technically savvy and have not adopted existing
technologies into their lives. They will get left behind.
inclusion?
It is a double edge sword. It is increasing financial inclusion by allowing lower income

Americans easy access to financial services but excludes the Americans that have not
integrated technology into their everyday lives. I believe the percentage of the population that
is included is greater than the percentage of the population that will be excluded though.
stability?
Use Flexa as a payment processor. Biggest concern is the CBDC being implemented into
retail and wholesale payments. Companies like Flexa are extremely scalable and can be
implemented into the current payment infrastructure. The system uses it's native token (AMP)
as collateral to guarantee instant and secured payments at a fraction of the costs as the
current payment processors. The biggest thing is scalability though, consumers must have
access to spend their digital tokens at retail stores as soon as the CBDC is approved. This
means there needs to be a way to have current payment terminal hardware updated to be
able to accept it.
CBDC?
Have commercial banks hold digital token and have fully compliant payment processor
controlling all retail transactions.
sale? If so, how?
CBDC?
benefits of a CBDC?
_________________________________________________________________________
Sustany Capital
Industry
Other: Venture Capital
Country
State
California
Email
chris@sustany.co
For a nation’s economy to function effectively, its citizens must have strong,
and enforceable property rights, as these are the foundation of economic
prosperity. In the United States these rights are guaranteed by the Fifth and
Fourteenth Amendment of the Constitution. The executive agency responsible for
promoting economic prosperity and ensuring the financial security of its citizens
is the Treasury Department, while the country’s central bank is currently
responsible for managing the people's primary system for property exchange - its
currency.This RFC response is the third step in an ongoing public discussion
between stakeholders about a U.S. central bank digital currency (CBDC). For
practical purposes this Response will use the CBDC definition of the discussed
paper, as a digital liability of the central bank that is widely available to the
general public, and analogous to a digital form of paper money. This Response has
been designed to foster a broad and transparent public dialogue about CBDCs in
general, and about the potential benefits and risks of a U.S. CBDC in particular.
This Response is not intended to advance any specific policy outcome, but will
address both the observable externalities of the management of the existing U.S.
currency mechanisms, as well as outline the dangers of action and inaction of the
Federal Reserve in respect to the issuance of a CBDC.Payment technologies
offered by the Federal Reserve have not evolved in step with today’s network
technologies. As of now, the central bank provides currency to the public only
in the form of Federal Reserve Notes (Cash) printed on cotton and linen-blend
fabric, available in seven denominations: $1, $2, $5, $10, $50, and $100. While
legally classified as IOUs, these bills – and smaller denominations in coinage –
provide citizens and non-citizens strong protection akin to property rights,
enabling the bearer to settle transactions without a third-party by transferring
the note.However, as the precipitous drop in velocity of physical Cash shows,
Federal Reserve Notes are on average used less than five times a year to purchase
domestically- produced goods and services. As such Cash is almost entirely
unsuitable to the functions of an effective economy, forcing citizens to use
commercial banks’, and nonbank currencies which are burdened with an ever-growing
number of frictions, including censorship, time delays and fees. The latter
amounts to more than 1.9% of all currency transferred - in other words: after
moving any amount of currency fifty-times, nearly 100% of the transferred value
has been absorbed by middlemen.We see a large number of potential benefits of a
U.S. CBDC implemented as digital bearer instrument, for future applications, while
also addressing the externalities of the legacy currency systems, including but
not limited to:1. Ending the Wholesale Warrantless Financial Surveillance of
U.S. Citizens2. Mitigating against Loss of Purchasing Power3. Financial
Inclusion4. Promotion of US Values5. More Immediate Financial Disaster
Response6. Securing the Global Dominance of U.S. DollarAs of today, the
goals of U.S. central bank’s monetary policy are to promote maximum employment,
stable prices, and moderate long-term interest rates. - For the nation’s economy
to function effectively, human capital must be allocated efficiently. However,
legacy technologies frequently lead to misallocation of human capital. In
particular obsolete network technologies – such as systems of money (currencies),
using data siloes, require human intervention akin to dispatchers in legacy phone
networks. Keeping citizens occupied with non-productive labor, prevents these
individuals from acquiring skills in demand by the free market.Internet
technologies have proven to be the largest contributor to employment opportunities
over the past twenty years. Decentralized software solutions – such as blockchains
– are now extending the capabilities of this global network over pure information
distribution to a new network layer of value distribution. The latter already
enables a myriad of employment options. However, a climate of “regulation by
enforcement” has driven much of the development of this promising new economy out
of the United States. A U.S. CBDC designed as digital bearer instrument, allowing
for “programmable money” solutions can reverse the trend, and ensure viable
employment options in the space within the United States.
--------------------------------------------------------------------------------
------------------------------------------------------( ͡° ʖ ͡°) ☞ Given
the limitations of this online form, we are submitting the complete response by
snail-mail, while also publishing it in a public forum for continued discussion,
and peer-review.SEE: https://hackernoon.com/cbdc-a-mandate-for-digital-property
No. - A U.S. CBDC in the form indicated by the Paper - a digital liability of a
central bank that is widely available to the general public, and analogous to a
digital form of paper money must be pursuit with urgency to address the
externalities of the legacy currency system, and to remain globally
competitive.HOWEVER, the rollout and distribution must involve the commercial
banking system, beginning with a wholesale version of a U.S. CBDC, while setting a
fixed date for the implementation of a retail CBDC (details to follow – see answer
to question 22).The contributors to this response have studied global CBDC
efforts, as well as private market currency solutions for several years – and in
some instances for decades. Our views are guided by an understanding that any U.S.
CBDC must, among other things•secure the property rights of citizens better
than the legacy currency systems,•provide benefits to households, businesses,
and the overall economy that significantly reduces the costs and risks associated
with the legacy currency systems;•protect consumers rights of freedom of
expression, self-determination and privacy;•protect consumers and businesses
from criminal activity, and government overreach;•have broad support from
citizens holding or using U.S. currency today.To answer the question of
"potential benefits of a CBDC" requires to first establish the negative
externalities of current implementations of 'digital currencies', further
necessitating an understanding of the terminology, as well as current
technologies. Currencies are systems of money. Setting legal tender laws aside,
money is an agreement between two or more individuals or entities usually employed
to solve a coincidence-of-wants problem (anything can be money).From the user’s
perspective, and in the context of digital technologies, the unit of account is
already experienced as an interface function of his/her application. As such the
medium of exchange has de facto defaulted to bytes. Legacy technologies, such as
database-maintained digital ledgers storing “bytes of money”, carry an inherent
principal-agent risk, and are not censorship resistant. Potential benefits from
a digital currency can likely only be achieved through a a CBCD that is a true
digital bearer instrument, which is optionally custodied by a commercial bank on
behalf of the actual owner of this digital property, without the ability of the
institution to revoke control over these assets without due process. The
implementation of a CBDC must therefore enable financial service providers (FSPs)
- including commercial banks and credit unions - to offer 'CBDC Cash Accounts'
(CBDCCA). The central bank should not offer accounts directly to users, but
require that all commercial banks allow any user to a) convert commercial bank
money into a U.S. digital bearer CBDC, b) convert Federal Reserve Notes to a U.S.
CBDC. The latter should be exempt from “KYC” procedures for amounts below a
certain amount – i.e. $15,000. Commercial banks may charge a reasonable amount to
custody CBDC, and should otherwise be prohibited from assessing fees to withdraw
CBDCs – in particular when users chose self-custody.In a departure from the
current demand-deposit account system paradigm, CBDCCAs would take on the form of
'digital lock boxes', fulfilling the proposed requirement of a CBDC analogous to a
digital form of paper money. FSPs would offer 'blind custody' solutions,
curtailing the principal-agent problem inherent in legacy account-based systems. A
robust ecosystem of these custody solutions has developed over the past five
years, and is readily available to serve the legacy banking system with
appropriate technologies.--------------------( ͡° ʖ ͡°) ☞ Given the
limitations of this online form, we are submitting the complete response by
and peer-review.SEE:
https://hackernoon.com/cbdc-a-mandate-for-digital-property
inclusion?
3.1Could a CBDC affect financial inclusion?As of today, the unbanked as a

percentage of the population is greater in the United States than in all other G7
countries and far more concentrated among those at the lower end of the income
distribution. Today people are most-often excluded from the financial system due
to their socio-economic status and/or because they cannot meet the requirements
imposed on the commercial banking sector. According to a 2019 survey conducted by
the Federal Deposit Insurance Corporation an estimated 5.4% of U.S. households
were unbanked” in 2019, which means that in 7.1 million US households not one
person had a checking or savings account at a bank or credit union. Of these 29
percent cited that they “don’t have enough money to meet minimum balance
requirements”, another 16.1 percent of unbanked households cited that they “do
not trust banks”. Lastly, 20% of unbanked do not have the necessary personal
identification documents to establish a bank account.The net effect of a CBDC on
financial inclusion will largely depend on the specific implementation. If the
CBDC design will indeed be analogous to a digital form of paper money - and in
particular not require government-issued credentials - a relevant portion of the
unbanked will be able to participate in the financial system, using a digital
bearer instrument.3.2.Would the net effect be positive or negative for
inclusion?If implemented as a digital bearer instrument available without the
need for government-issued credentials, a U.S. CDBC will provide an overwhelmingly
positive the net effect, decreasing the suffering of not only millions of
Americans, but potentially hundreds of millions of people around the world who
currently use Federal Reserve Notes as their only safe-haven from government
overreach, and hyperinflation. This requires that a U.S. digital bearer CBDC can
be stored in any available un-hosted (non-custodial wallet), and specifications
for these are made available open source.------------------------( ͡° ͜ʖ
͡°) ☞ Given the limitations of this online form, we are submitting the complete
response by snail-mail, while also publishing it in a public forum for continued
discussion, and peer-review.SEE:
The legacy financial system disproportionally disadvantages citizens having to use

cash as their only means of compensation. With the ascendants of the ‘gig
economy’ recent job opportunities have opened up to induvial that are able to
receive payments in digital form. However, citizens without bank accounts are
excluded from these positions.Furthermore, a CBDC implemented as “programmable
money” can enable entire new industries, enabling employment opportunities for
U.S. citizens in particular if fostered in the United States, rather than leaving
these to other nations.Programmable money can also provide granular, real-time
price information across a wide area of consumer products, offering better
insights into price stability, and looming inflation.---------------( ͡° ͜ʖ
͡°) ☞ Given the limitations of this online form, we are submitting the complete
response by snail-mail, while also publishing it in a public forum for continued
discussion, and peer-review.SEE:
stability?
In as much as the Fed's discussion paper raises the concern that new payment services
"could pose financial stability, payment system integrity, and other risk, if the growth of
nonbank payment services were to cause a large-scale shift of money from commercial
banks to nonbanks", it should be noted that the five largest electronic payment processing
companies by market share (PayPal, Stripe, Amazon Payments, Braintree, and Block (now
Square)) are already indeed not commercial banks. In as much as these entities are subject
to quarterly assessments, and general scrutiny by investors, and a collapse of one or more of
these private entities is unlikely to pose a risk to financial stability.�Financial instability in the
U.S economy was in the past primarily caused by market distortions, such as the creation of
fiat currency supply for non-productive activities. These distortions were frequently
compounded by commercial bank money systems and products build upon those. The
opacity of legacy system masked the buildup of systemic risks, and was largely responsible
for the near collapse of the economy in 2008, causing nine million Americans to lose their
jobs, ten million to lose their homes, and destroying nearly one-third of GDP.�As such, a
CBDC – made available to commercial banks as digital bearer instrument and (ultimately)
“programmable money” must first and foremost transparently report on – and surface -
structural problems, and have the technical capability to provide real-time reporting functions
to all market participants. – The ‘net effect’ is bound to be overwhelmingly positive.�
As with Federal Reserve Notes, a CBDC implemented as a digital liability of the central bank
that is widely available to the general public, and analogous to a digital form of paper money
would not adversely affect the financial sector. To the contrary, a U.S. Dollar denominated
digital bearer instrument would enable the financial sector to provide competitive solutions to
end users – i.e., “programable money” - with the underlying security layer of a central bank.�It
must further be noted that the “financial sector” does not exist as an end to itself but is a
conduit to facilitate real economic activities. And, in as much as a CBDC introduces
efficiencies to the primary use cases of currency (lending, store of value, spending/payment),
it will encourage commercial banks to adopt equal or better technologies.
7.1.�What tools could be considered to mitigate any adverse impact of CBDC on the financial
sector?�This distribution of a U.S. digital bearer CBDC should be implemented analogous to
the way physical Cash is being distributed today.�Commercial banks must be allowed to
create hosted “branded wallets” which can hold CBDCs from any central bank, as well as any
privately issued digital assets. The ability to create branded CDBC wallets should be provided
as software development kits and must be available to both custodial (hosted), and
non-custodial wallet providers. The latter ensures the “cash-like” quality of a CBDC, while
fostering financial inclusion for individuals currently excluded from the legacy financial
system.
Yes (assuming the question refer to paper money). Technological complex implementations
will always encounter periods of unavailability - i.e., 'network outages' caused by natural
disasters, wars, or simply human errors. Paper money must be widely available to address
these situations.
CBDC?
“Payment” is too vague of a term to be discussed in any meaningful way. However, in as

much as digital bearer instruments of any unit of account can settle with finality in near real
time, and provide “programmable money” optionality, these are already technical reality which
cannot be ignored without suffering the consequences of technological debt. The latter can
already readily be observed in the decline of USD denominated transactions of global
economic activity.
CBDC's implemented as true digital bearer instrument with ability to create "programmable
money" provide an instant competitive advantage to the economies of any nation
implementing it. This technology exists today, and its adoption is actively being pursued by
other large economies. The United States must urgently increase its efforts to catch up to
these developments, to avoid putting its own economy at a distinct disadvantage.
From a technological perspective the medium of exchange has observably defaulted to bytes.
The unit of account of any currency is as such a mere user interface function. Which is to say,
discussing the latter amounts to arguing about the color of bytes�Currencies are network
technologies which exist in the wider context of the internet. Engagement with the latter is
largely a matter of client technologies - i.e., digital wallets. The ability to freely use the latter,
while supplementing it with nation-state enforcement mechanisms that protect human agency
outweighs the importance of a discussion of 'currencies', including CBDCs.
The question entails a false choice, assuming the intellectual integrity in reference to a
CBDC's analogy to physical cash. The latter medium of exchange currently provides
complete anonymity, enabling a cottage industry comprised of licensed financial service
providers who profit from illicit activities. However, as with previous questions, the answer is
largely dependent on the technical implementation of a CBDC. Assuming the latter will indeed
take on the form of a digital bearer instrument, any measures directed at curtailing 'illicit
activities' cannot to be implemented at the level of a digital bearer instrument, but can readily
be addressed using big data analytics.
Cyber resiliency is primarily achieved by the decentralization of individual data controllers.

These suffer from an inherent principal-agent problem ("admin access"), exponentially
increased by legacy technology, in particular database solutions. Unavoidable cyber risks are
those inherent to the human condition, as most cyber security breaches are not a result of
technical intrusion but hacking by the means of social engineering.
Yes, however only in respect to its acceptance by government agencies. With the exception
of federally chartered banks, organizations and private persons should not be legally required
to accept a CDBC.
No. Central Banks must be provably market neutral. The Fed was established to provide price stability
and prevent periodic banking crises. It has accomplished neither but instead caused price instability and
massive banking failures, by distorting market forces. The Fed’s near‐ zero interest policy has set the
economy on an unsustainable course: With inflation at record highs and interest on various types of
savings accounts at less than one percent, those who thought to have been acting financially
responsible and saved are de facto being penalized for trusting the central bank, and forced to accept
what is, in effect, a negative rate of interest. Credit is no longer being allocated by the market but to
classes of borrowers as determined by political interest.
No. Also: what qualifies as an "end-user". Would the largest corporations be "end-users"?
In order to fulfill the requirements of a CBDC analogous to a digital form of paper money, the
role of intermediaries should default to "blind custody" (unless otherwise determined by the
property owner), analogous to the functions physical lock box vendors - including commercial
banks - provide today.
Yes. Several solutions exist today which work on the principle of unspent transaction outputs
(UTXOs), and/or prepaid credit or calling cards.
sale? If so, how?
Yes. - QR codes and Near Field Communication (NFC) have long been used for payment
functions, and most point-of-sale systems support their implementation already.
To achieve transferability across multiple payment platforms, a CBDC design should be

compatible with the Ethereum Virtual Machine (EVM). While originally developed for the
open-source Ethereum blockchain, EVM has emerged as the de facto standard globally. The
paradigm provides standalone implementations across the most used programming
languages (Python, C++, JavaScript, Go, and Haskell), and a majority of existing
decentralized network systems (i.e., blockchains and directed acyclic graphs) opted for EVM
compatibility. Already more than one hundred client applications (“wallets”) utilize the
standard, with an estimated 2.7 billion users as of March 2022.
CBDC?
Predictions for how future technological innovations can affect design and policy choices for a
central bank issued digital bearer instrument can be deduced from past technological
innovations such as the introduction of the voice-over-internet protocol (VoIP). While some
governments penalized their own citizens, making it "illegal" to use VoIP client software
(presumably to protect state-owned telecommunications carriers), other nations embraced the
technology, and allowed new industries to be build atop of the protocol. This greatly
benefitted the citizens of these countries, which were heretofore metered by the Minute for
every phone call. Telecommunications companies adopted the protocol for their backbones,
and phased out obsolete infrastructure.�Digital bearer instruments build atop decentralized
software solutions such as blockchains, have been successfully tested for more than a
decade, and reliably move tens of billions worth of currency daily. According to The 2021
McKinsey Global Payments Report, revenue from global payments exceeded $1.9 trillion in
2020. In the light of that year's global gross-domestic product of $84.7 trillion (source: World
Bank), it could be said that each product or service incurred an extra 2.2% tax. - Not enabling
the US Dollar to operate as a frictionless digital bearer instrument, is not akin to keeping the
rotary phone alive in the age of smart phones, it is comparable to forcing internet users to
affix stamps on their emails. Less messages are being sent, fewer commercial transactions
are taking place, innovation is stifled.�
benefits of a CBDC?
The difference between the various categories of “money” is mostly rooted in the
complexity of the agreement, or what might be referred to as meta-data associated
with the value shown as contract value or account balance. The higher complexity
paired with – in the legacy system - often unstructured meta-data frequently
requires manual intervention, batching, and other procedures performed by the
financial service providers maintaining these contracts via legacy database
solutions. The costs of these inefficiencies are currently borne by the account
holder in form of fees that include margins for the financial service providers
which control these outdated systems.Decentralized software systems - such as
blockchains and directed acyclic graphs, using cryptographic primitives, can
address these frictions via standardization of metadata into digital bearer
instruments (“tokens”) and automated transfer mechanisms via smart contract
systems. The latter requires a multidimensional implementation consisting of
horizontal, and vertical metrics. The former references the different contract
categories (“money”), while the latter will generally reference the velocity
within the category. Horizontally these functions are already being implemented in
digital wallets with hundreds of projects either live or in development.
Vertically it can be observed that several projects are already taking market
share within categories such as mortgages, municipal bonds, and
payments.Competition may arise from digital currencies issued by other
nation-states. While foreign exchange markets are generally not designed to cater
to the payment needs of consumers, digital currencies issued by central banks may
remove friction introduced by intermediaries in the form of time delays and
fees.Depending on interoperability and design choices, citizens exposed to fiat
currencies with rapidly decreasing purchasing power could opt to store value in a
currency of their choosing and only convert to the local fiat when necessary for
payment functions. This can only be observed for physical cash today.Setting
further classifications into consumer, commercial, and more granular segmentations
aside, investors may be tempted to consider the final cumulative value for 2020 as
the total addressable market. A U.S. digital bearer CBDCs follow protocols, and
consequently, form new standards across these categories. Aside from providing
transparency in this way, this design provides future utility as the desired
“programmable money”, as divided into four main sections: creation, moving,
storing, governance – each section with their own subsections of entity, use case
and function (who/why/how).U.S. CBDC design must consider the creation process
of all money across a number of categories which in step one could greatly improve
the overall transparency, and manageability of the movement of money, and related
values – i.e., seigniorage and demurrage. These categories might include
mortgages, certificates of deposits, corporate debt, student loans, auto loans,
credit card debt, checking accounts, and HELOC.While CBDC design papers largely
omit discussions around the instantiation of fiat currency. It is necessary to
examine the current creation process of fiat currencies which are largely brought
into existence by the process of the collateralized lending activities by
commercial banks (e.g., mortgages), a business model not readily available to
competing private currencies.It can readily be observed that a small but
flourishing lending market is evolving in the decentralized finance space.
Although these solutions are today largely limited to digitally native
assets.Central bank digital currencies might open access to these solutions to a
broader audience, should they be interoperable with these innovative solutions.
However, residual frictions, and - most importantly: continued debasement of fiat
currency - will mean that fiat currencies may be relegated to their unit of
account function, while interest-bearing digital assets will be the new status
quo.As the Paper defines a CBDC as a digital liability of a central bank that is
widely available to the general public, and analogous to a digital form of paper
money, any friction not inherent to Cash must therefore be considered a trade-off.
And, in as much as these manifest in friction to the exchange of a digital bearer
instrument, client technologies (i.e., “wallets”) will either mitigate it (best
case), or avoid using a U.S. CDBC designed in this way altogether (worst case) –
similar to communication protocols implementing “least-cost routing” around more
expensive network participants.------------------( ͡° ʖ ͡°) ☞ Given the
limitations of this online form, we are submitting the complete response by
and peer-review.CURRENT STATE OF DICUSSION HERE:
_________________________________________________________________________
Arbi Llaveshi
Industry
Technology Company
Country
State
New Jersey
Email
The 2008 financial crisis has been the central event which has colored many Americans’
perspective on private financial institutions. In its wake Americans have become familiar with
systemic risk within our financial system and aware of the moral hazard that exists when even
money storage (a fundamental necessity of holding money in the modern age) is privatized
within the United States. If a CBDC was implemented in an effective manner, it would likely
drive many Americans away from traditional banking institutions over time. It would be very
difficult for private institutions to be considered “Too Big To Fail” if their failure did not risk
liquidity issues for average consumers. While the Fed looks to limit systemic risk within the
financial markets it is difficult to imagine it doing so in such an intertwined system. Adding
powerful competing options for wealth storage would be an excellent tool to increase
consumer protections directly and weaken the leverage of larger institutions thereby reducing
moral hazard in a commensurate manner. �The suggestion to issue CBDC’s and leave
intermediate institutions to manage their transactions was frankly painful to read. Who-ever
wrote this report is aware that cash usage is precipitously declining in the United States. This
decline has been so rapid that certain states and cities have had to pass legislation
mandating that stores accept cash. Our society’s rapid digitization is resulting in declining
access to a competitive market for individuals who solely pay in cash and we need a digital
dollar to normalize access to online consumer markets. The Federal reserve act should be
amended to authorize direct federal reserve accounts – third party digital wallets would just
create a system which is more difficult to unwind and handle, a digital dollar held within a
central and secure database could be easily audited, could be conditionally transparent for
easy auditing while maintaining privacy, and would tremendously reduce laundering and other
financial crime. �Truly transparent and centralized CBDC’s would also allow for easier
algorithmic auditing and tracking allowing for easier flagging of fraud and pinpointing high
priority audit targets for the IRS.��I read in the technological experimentation section that there
is a consideration to leverage blockchain??? My mans what are you doing. Just create a
central server that functions as exchange, manage all transactions internally, secure it,
version it constantly, and create a wing of fed officials that oversee its management. This is
not hard, if Alexander Hamilton knew you could effectively and easily manage cash
transactions within the U.S. through one institution and you didn’t he’d be rolling over in his
grave. �
No, and I don’t really care to think of any, the consideration here is how to get ahead of the
fact that the dollar has already effectively been digitized by private institutions giving them
immense leverage over monetary policy that the fed once had with the simultaneous
understanding that if anyone in the international community wakes up tomorrow and has a
single good idea about this the dollar’s dominance and status as a reserve currency has
effectively been nuked.
inclusion?
Could it? Yeah, if you give individuals debit cards like they get their social security with 0
overdraft and craft a CBDC that is not just a dollar but also functions as an allocatable asset
you would definitely create an influx of lower income individuals who are incentivized to utilize
it. There’s an assessment that if CBDC’s were too attractive they’d reduce the sale of treasury
bonds and T-bills? Why do you need treasury bonds, you already have everyone’s money? If
you really want “bonds” you could create scaling incentive structures with CBDC’s, americans
could allocate a portion of their CBDC’s for “bond allocation” for a certain time period, say
5,10,15,20 years and then you could pay them interest with more CBDC’s and charge them
penalties for early withdrawl. Boom, synthetic bonds and a GIANT jump in “synthetic bond
demand” while reducing risks on a run and taxing it if it does occur.
Reduce Moral Hazard, Systemic Risk, Create a direct pipeline for monetary policy at the
citizen level and expand the tools the fed would have to affect consumer spending. Seems
good to me.
stability?
Well if implemented properly you eliminate the possibility of bank runs forever, the dollar
stays as the dominant reserve currency for the next century. On an ancillary note, issuance of
a CBDC would fulfill the demand for a CBDC which is now being proxied by crypto-currency
speculation and numerous digital currencies that are pegged to the dollar. Issuance of a
CBDC would severely harm the value of those currencies in the future, this is not to say that it
would eliminate it, the value of crypto-currencies to money laundering institutions and drug
cartels is immense in the digital age – but isolating and labeling third party currencies as
common refuges for illicit funds and subsequently scrutinizing them heavily would cause their
value to drop. A major drop in value followed by heavy auditing would make it difficult to pull
cash out and turn the assets illiquid. In the far future there will be a digital dollar, centralizing
its record would make it very difficult to launder.
CBDC’s make the financial sector un-necessary for wealth storage, if implemented properly
with associated individual accounts linked directly to the federal reserve, it would make wealth
storage through banking optional. It’s difficult to imagine a CBDC service banks could
leverage which would be profitable, there would be a significant decline in margins for
financial institutions. Lending rates would likely go up, and it’s unlikely that checking and
savings accounts would disappear, their interest rates would probably go up to entice
consumers to park their money outside of CBDC’s. Lending margins would probably become
extremely slim in an attempt to compete which would create a more direct and transparent
stake for a consumer when they allow a bank to hold their money. A CBDC would be more
directly and quickly impactful than a stable-coin. Most individuals investing in stable-coin
today do so through third party institutions, this means that whatever bank is giving them
claim to the stable-coin is still probably investing their money in one way or another. If they
have an independent wallet investing in said coin then it would be outside of the bank’s
management, but a massive shift to this type of wealth storage is unlikely.
Any tools used would proportionately diminish the positive impact, There was a suggestion
somewhere to create CBDC’s but then prevent direct consumer ownership of them. What are
you even doing at this point? You could try to limit the amount of CBDC’s held and that would
probably push people to other methods of wealth storage or just competing CBDC’s
depending on the economic environment.
No, the Fed should just wait for the US banks to create their own digital currencies along with
all of the other crap out there. We killed the national bank in 1811, let’s kill the coinage act in
2022.
CBDC?
This really depends on external governmental decisions and the modeling of any foreign
CBDC’s and the currency strength of a competing CBDC. The ECB is considering a digital
Euro and if it is issued successfully and made openly accessible it is my firm belief that it
would have the ability to supplant the dollar as a reserve. Consumer accessibility would be
fundamentally critical for any nation – backed digital currency. A digital euro that’s centrally
regulated would be an extremely easy and dependable wealth store for external consumer
investors. It is difficult to imagine why any reasonable American investor would prefer to
maintain the bulk of their assets in American dollars with all of the related banking risk if there
was a nationally backed digital currency which was easily transacted. That’s the game in
essence, if an institution with a powerful pre-existing currency decides to digitize before the
dollar and does it in an accessible manner then there will be a seismic consumer shift if not
domestically then abroad. The question then becomes why use localized currencies at all?
Cash usage is dropping precipitously, some institutions are starting to flat out refuse it or have
made it impossible to use in the first place. Every once in a while a country will have a
monetary mishap and experience hyper-inflation. The currency that people switch to at that
point is a true indicator of the control. In the past it would be dollars in Venezuela, but dollars
are hard to access – you need to go out and buy them or have bought them early before your
hyper inflation. Now it’s 2025 and your county is going through hyper inflation, but you’re not
impacted by it much. Your phone is already wired to an ECB account, you’ve been dealing in
euros for the past year – it’s easier to buy things online that way, and no-one is regulating all
of the third party sites that send you things anyway, even if they did your money doesn’t lose
value – and the stall owner down the street is accepting dollars or euros and you’re in no
mood to go shopping for dollars.
The moment another large economy nation decides to create an open and accessible CBDC,
the U.S. will already be behind.
The Fed should be more agnostic to profit margin risks of private banking institutions,
Centralize the CBDC consumer accounts with a decryptable hash and store the associated
keys offline Solely for Auditing.
Easy, make your CBDC a closed loop, prevent unregistered actors from transacting, make
the CBDC open to registration with verification globally.
Yes.
It doesn’t really matter, Ideally yes – it should be structured to allow holders to opt into returns
based on modeled synthetic treasury notes or bonds. This would incentivize lower income
individuals to move to digital payments and allow them to easily enroll into programs that
would lift some out of poverty. On the other end, banks could lose their profit margins when
lending, and people with checking accounts would have higher interest returns for their
investment and no-one wants that.
No, you’re just creating an ineffective instrument then. Would you limit the amount of cash
someone can hold?
CBDC’s should be centralized, intermediary firms should only exist to supplement

transactions, if CBDC’s are not centralized these firms should be required to only supplement
free transactions.
This is called cash.
sale? If so, how?
CBDC’s should be auditable, centralized, and reversible. Many issues exist with crypto
models which for some reason were mentioned in the experimentation section. If a CBDC
transaction is irreversible it is impossible to safely transact because numerous issues could
occur at the point of sale making their usage unreliable. Intermediaries could act as trusted
authorities for transaction reversal.
You have an account with an associated key, The intermediary platform picks up the key and
queries for a value, if the query returns true it sends a subsequent transactional request for
said value.
CBDC?
CBDC implementation will catch on as necessity for large external economies, creating
openly modeled CBDC’s that can be easily transacted will have significant competitive
advantages for a national currency, if the Fed was really invested in creating CBDC’s and
modeling for the future then creating a CBDC exchange and making CBDC’s convertible
would allow it to maintain a first mover advantage after the international community follows
suit.
benefits of a CBDC?
Just bring back the national bank, a digital central currency demands it, please for the love of
God – if Europe moves on an open digital currency before the U.S. the dollar is gonna get
blown out.
_________________________________________________________________________
Industry
Individual
Country
State
Nevada
Email
Security of the system. It may be easy to take the whole system down with an EMP or
massive solar flair. It might take time to bring it back up. In the interim people would not be
able to even buy groceries. That can happen now, but with physical currency transaction can
still occur.
Not sure
inclusion?
Yes. It would be of great cost to update all systems throughout the country. Like all software
there will be bugs and hiccups. It takes years sometimes to get a perfect or seamless
working piece of software. This is a major undertaking and I can see with some small bugs
within the software trillions could disappear.
It obviously would allow the government to track funds for taxation seamlessly. Not sure if
economy can survive the current inflation long enough to implement. People are falling out of
work, because they just can't get ahead of the inflation. Young adults are entering the
workforce later and staying with their parents longer.
stability?
Not sure it can. Look at Bitcoin. It is a very volatile currency. I think with a world full of
hackers it might be vulnerable.
If system goes down it will effect the entire financial sector. It is putting your eggs all in one
basket. Right now each bank has their own systems and accounting. This sounds like it will
be controlled by a single system within the FED. All systems that are written in
code/computer language are always susceptible to errors, hacking, and failure.
I think some sort of physical currency is always important. Even if power grids go down for a
time, people will not be able to have commerce.
CBDC?
I think this is the best argument for CBDC. It would cut out all the currency exchange rates
and cost to exchange currency. It could be an easier process.
I think cyber risks will be the biggest challenge for CBDC. As I said before if it is written in
software someone out there can hack it. I also think we have a very fragile electric grid within
the US and other countries. It will become even more fragile as we try to eliminate fossil fuels
and carbon. A terrible winter in Texas brought down their grid. I think there are a lot of
factors in trying to change everything too quickly. The massive drought in the west will also
effect the grid in the west. A lot of their power is generated through damns. If there is not
enough water to fill the damns power will not be generated. We will also be tasking the
current power grids as we all be electric cars and are charging them constantly.
Yes
I think this will be the end of interest.
Yes. There are areas all over the United States that do not even have cell service. Small
businesses have to use the internet through satellite.
sale? If so, how?
CBDC?
benefits of a CBDC?
_________________________________________________________________________
Emerging Payments Association Asia
Industry
Trade Organization
Country
Australia
State
Email
policy@emergingpaymentsasia.org
The Board has rightly identified several policy considerations and risks. In our EPAA Position
Paper No. 1: CBDC we supplement these. One of the big risks, posed even without CBDCs,
is the disruption of the money system. A lack of confidence, accessibility, and convenience of
the money system can create rival systems, or worse negatively impact the free-flow
globalisation of commerce we have today. �In addition, the Board should consider a US
CBDC, like the US dollar, as core to an international money system. This means integration
with other CBDC/money systems, and at some level, acceptance of alternate systems and
users. Exclusion of participants on political grounds is problematic, and it is important to
remember the architecture of the current system in the aftermath of two world wars. It was not
possible for any government to control who could hold and exchange their paper notes, and it
is perhaps wise to draw the conclusion, that the mutual support provided through those
policies has led to global commercial integration, development (through the IMF and World
Bank) and more importantly, the relative peace that we have enjoyed for 80 years. �The
implication of our suggestion is that the US should seek to consider an International CBDC
system that would allow emerging powers to accept and play on the same field, and obtain a
security of their deposits. At a minimum this may be international CBDC integration. �With
retail CBDCs it may be possible to centrally issue what is today private money. This may
improve financial institution lending regulation, but at the same time reduce the potency of
private banks that have supported economic growth across the globe. �Finally, the innovation
potential of a CBDC is too numerous to enumerate here, we have some in our attached
position paper. Central banks should seek to architect a CBDC system so that it could, if
desired, expand into different innovative areas, accepting a risk of trial and error.
In its simplest form CBDC is an extension of electronic money, and by itself electronic money
is evolving to be similar to digital currencies. Popular blockchain is decentralised in nature, so
a centralised CBDC may not benefit from an open ledger, as much as a cryptocurrency does.
Consideration should be given to high availability, and particularly offline transactions.
inclusion?
Clearly a CBDC could impact financial inclusion depending on implementation. There is a

move to better identity of account holders. Non-legal entities, and people seeking to receive
payments without the knowledge of authorities may seek alternative payment systems.
Maintaining paper cash could solve the problem in the short term, but the decline of cash may
wedge this population out of the system. While this may seem like a desired outcome, without
social policies to resolve (for example) illegal immigration, tax avoidance and money
laundering, an alternate network may emerge. �On the other hand, CBDCs could positively
impact financial wellbeing for the disadvantaged population. �It is worth reflecting on the US
Declaration of Independence, and the founders desire to eliminate tyranny by design. Indeed,
many of the problems that gave rise to independence was to do with greater government
visibility and intercession of transactions (e.g. stamp duty and taxes). A CBDC, poorly
designed, could increase central control, and result in greater inconvenience. This is not to
discourage a US CBDC, for CBDCs are inevitable. This is to encourage a well-designed
system with decentralised checks and balances.
A centrally controlled CBDC can enhance the Federal Reserve’s ability to implement
monetary policy, especially when interest rates are low, and that lever has reached implicit
limits. Examples include CBDC sub-accounting, or CBDC labelled for different purposes
(food, health, accommodation or investment) with expiry to assist an economy recover where
it is required – immediate employment, without impacting longer term inflation. A CBDC can
still be used to control monetary policy in the traditional way, and increasingly it can be used
to implement fiscal policy.
stability?
Financial stability is founded on the market knowing what will come next. Intrinsically a CBDC
gives greater control to the issuer, so this adds a level of uncertainty to the market introducing
a possibility of instability. Greater monetary control that CBDCs offer can counteract existing
risks in the current money system, however, as before, stability is based on the perception
and confidence in the government and regulator in seeking to maintain a stable financial
system. �However, it should be noted that now more than before, there is a risk that external
system influences financial markets more in the future, so a robust and well adopted CBDC
system that seeks to provide greater benefit than alternatives, if properly governed, would net
increase market stability.
A CBDC in its simplest form as a wholesale Federal Reserve balance can do little harm. If it
were a retail currency, and if it encompassed private bank issues money, the risks of the
currency impacting the sector increase. If the Federal system takes on more deposit and
lending activity from private banks, this will at lease impact those institutions directly.
Hypothetically if the CBDC was decentralized, or existed independently from centralized
systems, say as a signed or hashed cryptogram, and that system were to be hacked by a
quantum computer, hypothetically, this could adversely affect the financial sector if there were
no mitigants. In the design of a CBDC, care should be taken so that adverse effects are
minimised, even if risks materialise.
We list a few mitigants: �Wholesale CBDC only : No retail benefit. Questionable business case
for CBDCs �Centralised online ledger: Does not work offline, risk of central outage
�Non-integration with other digital currencies: May result in a superior non-US CBDC solution,
diminished value of the US dollar �Continue cash: Limited benefits of ubiquitous CBDCs
�Quantum-proof design: We have learned that no system is immune to security threats
�Anonymous CBDCs: Problems associated with cash continue (money laundering, terrorism
financing, etc) �KYC identification of holder: Does not support anonymous payments – could
allow a secondary system to emerge to support illegal payments �Implement a like-for-like
CBDC system to replace existing: Reduces innovation
Electronic payments today exist largely as promises-to-pay between private institutions, and
for the general public there is little or no concern of systemic risk for payments. The big risk
for consumers is that their savings remain intact, and they can always access it to make a
payment. This guarantee from the government, whether written on a paper note or
guaranteed in law is perhaps equivalent.
CBDC?
Despite its popularity Bitcoin and other crypto-currencies have failed to replace traditional
means of payment: local or cross border. The work done by the Financial Stability Board
(FSB) looks positive in improving cross border payments. US CBDCs will nevertheless need
to interact with other CBDCs, either through existing payment rails or new ones, so the
introduction of a US CBDC will do little. If the Know-Your-Customer problem (KYC) is handled
by governments through nationalised but decentralised digital identity systems, through
payments between individual retail international CBDC accounts, and cross border payments
are checked by regulators at the border, this will remove a major headache and source of
regulatory (and through the threat of fines, private institution) stress. It could create a global
walled garden where people could freely exchange money, institutions did not need to
screen, individuals could maintain some privacy, and national systems ensured individuals
are legitimate, and money transfers are tracked for tax, and policing purposes. �Without
CBDCs the task is possible, but more difficult as KYC continues to be handled by private
institutions, as it is today.
CBDCs are in an early stage of experimentation, so some domestic diversity of

implementation may be recommended. If it proves successful, it is imperative that
interoperability be given some thought, to enable a few use cases: �Cross border institutional
payments �Cross border retail payments �Central bank currency reserve integration �Domestic
payments and savings utilising alternate digital currencies and assets �An international
CBDC/currency, e.g. Banker potentially for retail not just sovereign settlement
The biggest risk is during an experimentation phase. Smaller geographies such as smaller
countries, smaller states or localities should be allowed to experiment to find suitable facets of
CBDCs that can be consumed for broad adoption. �Consideration should be given to an
overarching decentralized digital currency framework, with US CBDCs issued in a similar way
to current US Dollars, however states, localities, corporates and even individuals allowed to
issue their own digital currencies as a “promise to pay” that is rolled up into larger DC
instruments once cross-network payments are required, or if the promise needs to be
underwritten by a more robust authority. This mechanism can be used to roll-up into an
international framework, with each cell given the freedom to innovate and explore local
benefits of digital currencies autonomously.
Using a decentralized identity framework, such as that established by the W3C, decentralized
identifiers (DID)s currently trialled by the US Dept Homeland Security’s SVIP, the European
Union and others – so that the identity of the CBDC holder (or DC holder) is known only to the
issuer, with privacy protected by law, so that for general payments the identity need not be
known, and where there is a need for identity, say for delivery versus payment use cases, or
even retail refunds, a privacy preserving verifiable credential can be provided.
As a premise, it should be assumed that nothing is hack-proof. A CBDC would likely be

issued on a centralised (or private) ledger. This provides a layer of protection such that the
network could be locked down and isolated in the event of a breach. CBDC design should
accept that Quantum computer capability could be available at least to national governments
at a point not in the distant future, so the solution should be Quantum computer
hack-resistant. Algorithms such as SHA 256 have proven to be robust, but this level of
robustness should be exceeded for a US CBDC. There should always be recourse in the
event of fraud or error, so a decentralised system for CBDCs may not be advisable
(notwithstanding that it is possible for a centralised CBDC system to operate within a
decentralised system).
There are several aspects to legal tender that should be considered, as the term is not well
defined. We avoid dealing with the definition issue by focussing on use cases involving legal
tender. �(i) First that the receipt or payment of CBDC is equivalent to the payment of money for
US Federal debts. �(ii) Second that the receipt or payment of CBDC is equivalent to the
payment of money for state, corporate and individual debts in US jurisdiction. �(iii) Third that
the recipient must accept a CBDC payment (if offered) for the resolution of a monetary debt.
�(iv) Fourth that the recipient can demand a CBDC (and no other) as payment for the
resolution of a monetary debt. �(v) Can a debt be settled without CBDCs? �For a time CBDC
payments will co-exist with other forms of money so an early mandate of (iii) and (iv) may be
envisioned but not practical. Indeed in practice, it is the case today that current legal tender
(paper notes and coins) is not always accepted practically as payment especially online.
�Implementation of (i) and (ii), at least legislatively seems fair. �As for (v) there should always
be alternative mechanism to settle a debt, whether they be monetary or non-monetary.
sale? If so, how?
CBDC?
benefits of a CBDC?
_________________________________________________________________________
FreedomWorks Foundation
Industry
Other: Grassroots Organization
Country
State
Email
klaverty@freedomworks.org
On behalf of the below-signed individuals and 10,988 co-signers, FreedomWorks Foundation

appreciates the opportunity to offer these comments regarding the Federal Reserve’s request
for public input on implementing a central bank digital currency (CBDC). �The rise of digital
assets is a revolution in the digital and financial world; for the first time, individuals can make
direct money payments across the globe at the speed of the internet. The widespread use of
digital assets would allow consumers to transfer money near-instantaneously rather than rely
on a series of intermediaries to conduct a single transaction. It is, however, essential to
continue a robust cash economy where consumers can enjoy the benefits of financial privacy.
�John Tamny�Vice President�Director of the Center for Economic Freedom�FreedomWorks
Foundation��Beverly McKittrick�Director of the Regulatory Action Center��FreedomWorks
Foundation��Kilian Laverty��Policy Assistant��FreedomWorks Foundation�
There are currently numerous products such as stablecoins, digital assets whose value is
pegged to a fiat currency that can satisfy the needs of consumers and bring our economy into
the 21st century. Stablecoins can lower payment costs, increase payment speeds, and
promote access to the payment system. Despite stablecoins revolutionizing the digital asset
marketplace, the President’s Working Group on Financial Market’s (PWG) report on
stablecoins is catalyzing a push by government officials to crack down on stablecoins, and
craft new regulations and erect barriers to entry. The attack on stablecoins is inseparable
from developing a CBDC, a state-sponsored substitute that would crowd out private-sector
competition. �One of the most significant features that draw people to digital assets is
decentralization. There is no central authority that manages the supply and value of most
digital assets. Instead, most digital assets democratize their management amongst their
users. A CBDC runs counter to this premise. �
inclusion?
stability?
Unlike existing forms of digital money, a CBDC would be a liability of the Federal Reserve. If
the Federal Reserve were to issue CBDC in an account-based model, consumers would hold
deposit accounts directly with the Federal Reserve. This would, in effect, mobilize the Federal
Reserve into a commercial bank. �A CBDC would fundamentally change the structure of the
U.S. financial system, altering the roles and responsibilities of the private sector and the
central bank. A CBDC can undermine our current banking system that relies heavily on
deposits to fund loans. A widely-available CBDC would serve as a close or near-perfect
substitute for commercial bank money. Reducing aggregate deposits into commercial banks
will inevitably reduce access to credit and increase costs. �
CBDC?
The Federal Reserve’s exploration into CBDC raises serious questions regarding the
continued development of the digital economy, consumer privacy, and the eventual transition
to a cashless system of payments. The United States must not follow countries like China
down the path of digital authoritarianism but instead preserve a payment system that
promotes consumer privacy and security. �
The implementation of a CBDC in the United States would fundamentally change the United
States' financial sector and pose serious concerns. Creating a CBDC that does not enjoy the
same anonymity benefits of cash will open the door for large-scale abuses and should not be
implemented in any way by the Federal Reserve. The United States must move our economy
into the 21st century by embracing the rise of cryptocurrencies and other digital assets but
cannot forsake consumer privacy in doing so.
A CBDC is a hazardous tool that could pose significant privacy concerns for American
consumers. A widely-used CBDC would create a trove of financial data in the same way that
commercial banks and nonbank entities do so today. The account-based model of CBDC
leaves consumers vulnerable to government abuses and the security risks of a single
centralized point of failure. Any United States CBDC would need to be issued in an
intermediated model that would provide a degree of separation between consumers and the
central bank. Any CBDC implemented must offer the same convenience of cash and the
same privacy protections.��Traditional cash payments provide consumers with a wide range of
benefits from privacy to personal autonomy. Physical cash is the only form of payment that
does not require a third party such as electricity or an internet provider. This, coupled with the
benefits of privacy and anonymity, supply an invaluable service to consumers that CBDC
cannot replicate or replace. �
sale? If so, how?
CBDC?
benefits of a CBDC?
_________________________________________________________________________
Knox Networks, Inc.
Industry
Technology Company
Country
State
New York
Email
nthakur@knox-networks.com
While the Federal Reserve’s paper has not expressed a specific preference between a
“general purpose” or “intermediated” CBDC model, it should be noted that the selection
between the two will pose significant policy considerations. �For example, the history of the
Federal Reserve indicates that direct-to-consumer relationships are not preferred. If any,
there is a preference to preserve the two-tiered banking system. Taken together, this
suggests that an intermediated CBDC is the preferred model. �Any CBDC will need to be an
extension of the existing banking system to avoid disintermediating current credit and
financial service providers while protecting the financial system's liquidity. �To achieve offline
transactions and other features that mimic cash, an intermediated CBDC model needs to
strongly consider the means by which the consumer uses and accesses the currency without
intermediated custodial accounts. This also includes the opportunity for consumers to receive
instant access to government payments through intermediaries in the case of financial
emergencies such as stimulus checks and relief aid. �Additionally, CBDC should, and must be,
designed such that programmable features used by software in place at the banks (or other
prudentially regulated entities) capture key digital identification considerations. (Please see
responses to Questions 3 and 12 for more details on the importance of capturing digital
identity in the discussion.)
All of the potential benefits of a CBDC could be better achieved through file-based programmable
money (digital cash) technology in an intermediated CBDC model versus through stablecoin
technology. The use of the term “file-based programmable money”, refers to a fixed-value
denomination file that includes a non-malleable cryptographic proof of historical ownership. This file
could be issued against an issuer’s account reserves held at a monetary authority, or it could be issued
by approved delegated currency issuers (DCIs), which include financial intermediaries such as
commercial banks. In this type of solution, these files would be direct liabilities of the monetary
authority and a form of CBDC.1. The primary benefit of file-based programmable money is that
each bill is its own individual ledger and can be passed from user to user, just like cash. This individual
ledger design allows for increased scalability and security. Other benefits include confirmation that the
money is not double spent while transactions are ACID+D (atomic, consistent, isolated
(concurrency-protected), durable, and deterministic, with specified and guaranteed service levels:
99.999% uptime), 24/7, and near-instantaneous; capable of facilitating offline transactions;
interoperable with financial standards (e.g., ISO-20022, SWIFT, NACHA) and payment
networks.For the CBDC to be operational, it is essential to solve the problems associated with
double-spend and double-credit attacks, enable offline payment capabilities and create a barrier to
illicit finance. The primary benefits of cash are its value as a widely accessible means of
non-account-based payment, which file-based programmable money can achieve. A CBDC should
extend the benefits of a bearer instrument, a non-account-based system, by allowing for large and small
transactions to be facilitated for people of all socioeconomic backgrounds, across borders, and at all
times. A CBDC should also enable proactive monetary analytics of the modern economy and its
participants. For a CBDC to be suitable for global economic use, solving the problems associated with
double-spend, offline capabilities, and creating a barrier for illicit finance are essential. Other
proposed improvements to the payments system focus on widespread promotion of faster database
processing. For example, FedNOW promises improvements to faster processing with its improvements
to FedWire but relies on legacy ways to think about batched ownership of currency and increasing the
throughput of just one database. These proposed improvements, however, are seeking to expedite the
wrong process. The way to speed up settlement without sacrificing precision and safety is through a
narrower focus on the potential of file-based programmable money. In contrast to the kind of
improvements offered by FedNOW, file based programmable money captures ownership and transfer
data. More specifically, file-based programmable money allows each dollar bill in circulation to be its
own ledger, a cryptographic proof with embedded settlement and transaction history. Furthermore, the
file-based programmable money would be backed by reserves necessary for the relevant regulatory
regime (e.g., bank deposits, etc.). A vital characteristic of file-based programmable money is its
ability to be interoperable with existing, emerging, and updated financial standards (e.g., ISO-20022,
SWIFT, NACHA) and different payment networks, which preserves monetary sovereignty. See
response to Question 20. 2. Capturing only bill-based information solves privacy concerns
associated with consumer usage of CBDCs. Relying exclusively on bill-based information that does not
include PII/consumer information for traceability means having an intermediated CBDC designed as
file based programmable money. The system should be designed with self-sovereign identity in
mind. For example, the data and analytics on the bill itself should be pseudonymous, separate from the
consumer's data. Analytics can be extracted at the bill level and prove helpful in tracking net-value
volume flows between participants, calculating holding periods for each digital dollar for historical
owners, and generating information for suspicious activity reports, among other use cases. User
identity must be kept separate to avoid a surveillance state. A digital identity solution that captures the
PII and any KYC requirements necessary for a transaction should be done in a privacy-enabled way
through encryption techniques such as zero-knowledge proofs. Consumers or the relevant banks will
hold PII directly and share in a secure manner upon consent.In sum, the potential benefits of a
CBDC are achieved with programmable features attached to the digital dollar that are generally
exchanged through the retail environment. Exchanges between central and commercial banks occur
with a set of universally recognized standards for digitized money (like ISO-20022).
inclusion?
Yes. With the right design, an intermediated CBDC with the features of file-based
programmable money could significantly increase financial inclusion. �To maximize financial
inclusion, the CBDC should prioritize a mobile-first, person-to-person design that can work
within the existing two-tier banking system. By focusing on people first, the CBDC could
achieve a means by which central banks, commercial banks, and consumers can transact
with one another seamlessly. Importantly, to be inclusionary, the CBDC needs to be designed
in a manner that is not account-based and includes offline transactions, allowing for properly
KYC’ed nationals/foreigners and the unbanked to hold CBDC. �An extra benefit of this
approach is having the option to use an embedded digital identity solution for the consumer
that captures the PII, and any KYC requirements necessary for the transaction in a privacy
enabled way (through encryption techniques such as zero-knowledge proofs). This way,
consumers can own their data, and when they choose to share that data, it is done so with
minimal exposure. However, a financial institution may choose to leverage their existing
digital identity solution when using file-based programmable money. �As noted in response to
Question 2, it is necessary to preserve the anonymity of today's cash transactions (whether
by choice or necessity of consumers) against the need to prevent illicit financing with a CBDC
through bill-based captures of information. �While a non-account-based CBDC should allow
individuals to hold U.S. Dollars on mobile devices without the prerequisite of a bank account,
the importance of commercial banks and well-regulated financial intermediaries cannot be
overstated. Their role should and must continue. The design of any CBDC should create the
opportunity for commercial banks and financial intermediaries to play a significant role in the
distribution of CBDC into the economy. Additionally, any consumer who is un- or
under-banked has access to well-regulated financial products and services from the
traditional banking sector. We see a well-designed CBDC as one mode that could drive
inclusivity for those on the system's periphery to seek access. �Put simply, a CBDC should
not dis-intermediate the customer relationships commercial banks develop and use to make
informed credit lending decisions. Nonetheless, the intermediated CBDC with file-based
programmable money features should not require a bank account to hold and transact.�
N/A
stability?
If appropriately designed as an intermediated CBDC with file-based programmable money

features, the effect of CBDC on financial stability would be negligible.��A CBDC should not
include features that would hinder the U.S. Dollar as a store of value and safe-haven asset.
Such features, such as a restriction of the amount of CBDC able to be held, would be
antithetical to what the Dollar is today.��Outside of a CBDC, capital controls can be used to
ensure the safe flow of funds between financial asset classes in a financial crisis. �One key
advantage to a file-based programmable money system is that it will help financial stability by
giving the Fed access to real time information that may help it make timely and critical policy
decisions. In particular, file-based analytics can be extracted through time stamps and public
key information. This capture helps track net-value volume flows between participants,
calculating holding periods for each file for historical owners and file suspicious activity
reports, among other use cases.
CBDCs affect the financial sector differently from stablecoins or cryptocurrencies because
CBDCs have credibility inherited from the trust that the public already has with the issuer, the
Federal Reserve. �In contrast, stablecoins and cryptocurrencies are largely unregulated, and
there is no federal insurance for loss of funds. Stablecoins present additional risks, including
loss-of-value risks via stablecoin runs or fire sales, lack of a consistent set of regulatory
standards, on top of traditional payment system risks, such as credit risk, liquidity risk,
operational risk, and settlement risk that are not present when the coin is issued by a
well-regulated statutory body that represents the full faith and credit of the U.S.��The base risks
of all stablecoins relative to CBDC are compounded by risks presented by the three
predominant forms of stablecoins: algorithmic, collateralized, or both. An algorithmic
stablecoin may struggle to maintain stability as it relies on uncontrollable factors such as
market demand, incentives, and pricing. Collateralized stablecoins come with an inherent
incentive for issuers to invest the assets, creating risk related to the speculation appetite of
the issuer. Or, if the stablecoin causes the loss of retail deposits and the reserve assets that
back stablecoins do not support credit creation, at scale the use of stablecoins could increase
borrowing costs and impair credit availability in the real economy, as the President's Working
Group pointed out in their November 2021 document. A stablecoin that is algorithmic and
collateralized will likely suffer from these sets of additional risks. �Unlike a stablecoin, CBDCs
are an accurate representation of the value of the U.S. government (or other international
sovereignssovereign issuing them). As observed in the current Russia-Ukrainian conflict,
geopolitical conflict may impact the value of the sovereign. Some stablecoins will not correctly
represent this geopolitical risk such that they may be immune or diversified enough to the
point that political and economic sanctions regime impacts are muted. CBDCs may be
desirable relative to stablecoins simply because they reflect the actual, real-world positions of
the sovereigns that have issued the CBDC.��Barring international political conflict (of which
economic sanctions of unknown impact are assured), CBDCs, on the whole, are a more solid
and reliable form of value exchange than their stablecoin counterparts. Because they are
tightly regulated and limited by explicit statutory authorities, a CBDC issued by the Federal
Reserve or the Treasury shall include the safeties and risk mitigants necessary for a national
currency.
In a file-based programmable money system double spend attacks and insertion of

counterfeit files cannot happen when the relevant cryptographic signatures are checked prior
to settling a transaction.��In a situation where a participant cannot check the cryptographic
signatures prior to settling a transaction, for example, in an offline situation, there are several
features that can be used to minimize adverse consequences. For example, the system can
limit file-based programmable money transacted offline, by only allowing a single transfer
before needing to connect back to an authorized signature (e.g., commercial bank or
monetary authority). This is described as a “single hop” offline transaction.
Yes. As society becomes increasingly interconnected both online and offline, governments
should have a financial instrument that can offer similar benefits to cash while capturing the
consumer preference for electronic, non-account-based payments. A CBDC should co-exist
as a viable format of U.S. currency. �A well-designed, intermediated CBDC with file-based
programmable money features should enable low- or zero-cost transfers without requiring
individuals to maintain a bank account for participants to transact. Such a CBDC would allow
anyone in the world to accept U.S. dollars versus only those who have a U.S. dollar-based
bank account. This cash-like quality is vital for the CBDC because it ensures that the U.S.
dollar maintains its use as a world reserve currency and a unit of exchange for international
business.��The government should sponsor, but need not develop, such a system to ensure
adequate financial oversight and controls to guard against private variants of the U.S. dollar,
which may introduce fraud and settlement risks in the global financial system. Working in
conjunction with government agencies, private sector developers can undertake the technical
work necessary to facilitate such a solution. Government agencies can ensure that critical
public needs are adequately served, and equities met through public policy guidance.�
CBDC?
N/A
The United States does not want to be forced to follow the decisions made by other large
economies and nations that may issue a CBDC. Delay in developing its own CBDC will allow
nations with other models to advance ahead of the United States, potentially leading to
solutions that disfavor U.S. policy priorities and U.S.-based private sector leadership. Instead,
the United States should play a decisive, timely, and leading role in this area, focusing on
interoperability, privacy, security, and scalability of any CBDC. The United States is also well
situated to focus on ensuring any CBDC works well with private-sector innovations. It will be
critical for the United States to think globally when analyzing the opportunities created with
CBDCs, including global credit access and interoperability with traditional and emerging
financial standards (e.g., ISO-20022, SWIFT, NACHA). �In a world in which commerce is
increasingly global, it is crucial to develop an interoperable model compatible with other
CBDC solutions that may have varying degrees of privacy, governance standards, or security
precautions. The U.S. government should work closely with emerging US-based private
sector leaders, various international organizations, trade blocs, currency unions, and
regulators to establish global standards and interoperability definitions for all CBDC systems.
N/A
A CBDC that continues to use the current banking system’s identity verification can provide
privacy to consumers without providing complete anonymity and facilitating illicit financial
activity. Moreover, current technologies that can be integrated with file-based programmable
money provide the ability to have traceability/bearer PII information owned by consumers
directly and that is accessible at an encrypted level to third-party intermediaries and
commercial banks. As noted in response to Question 2, is it important for any solution to
strike the balance of preserving the anonymity of today's cash transactions (whether by a
consumer's choice or necessity) against the need to prevent illicit financing with an
intermediated CBDC with programmable money features. A key benefit of file-based
programmable money features is that transactions can happen anonymously, yet there is a
mechanism to access relevant PII if a financial institution needs to do so for various
regulatory or other legitimate reasons. In that response, we emphasize the CBDC issuer
(Treasury or the Fed) would have access to settlement information and transaction history,
but not the PII of the consumer/bearer. �Separating the bill-based transaction and settlement
interest from the PII of the consumer-bearer fits well within the use of a two-tiered banking
system. The PII information is captured by the wallet authorizing third-party intermediaries,
and commercial banks are permitted to access and limit controls within those institutions to a
set of individuals. This partitioning of access built upon the idea that transaction and
settlement information is captured on the bill itself, and the wallet would capture the PII, KYC,
and AML information. The benefit of this partitioning of access would provide relative
anonymity at the transaction level but allow for oversight and disclosure when the appropriate
legal thresholds were satisfied.��Data privacy, pseudonymity, and data security features can be
obtained by implementing best-in-practice technologies developed and used in the private
sector without involving the CBDC issuer (Treasury or the Fed). File-based programmable
money, will offer these features and help solve these critical issues. �Consumers interact with
pseudonymity and cryptographic proofs in this system while keeping sensitive data in the
wallet. The consumer will have full data ownership over the information in the wallet. The
consumer opts in to send cryptographic credentials out of the wallet to banking providers
through zero-knowledge proofs. Each file preserves the pseudonymity of cash within this
architecture no matter who the owner is because this is not an account-based system.
However, analytics can be extracted from the file-based programmable money through time
stamps and public key information. This capture helps track net-value volume flows between
participants, calculating holding periods for each file for historical owners and file suspicious
activity reports, among other use cases. �We suggest the US government embrace file-based
programmable money in concert with consumer-held and controlled cryptographic keys,
pseudonymous with digital identities, as a technical solution that affords the ability to have
essential data privacy and security and the ability to unmask transactors where and when it is
needed and only after the legal necessity for such unmasking has been demonstrated by
proper authorities.�
Although cyber threats are already a part of the current payment, clearing, and settlement
system risks, introducing a retail CBDC would present an entirely different cyber resilience
challenge, especially as such a CBDC model is likely to be open to a vast number of
participants. This exposure could make the system more vulnerable as it provides multiple
new points of attack, including the impact of cross-border CBDC payments on AML/ CTF
requirements. A variety of novel cyber attacks will be introduced, as is common with any new,
large-scale system that facilitates the flow of vast sums of money.��While some of these risks
are unavoidable, various system design choices could mitigate their impact. An important
design feature of a CBDC may require new thinking about database sharding and replication,
networking, and transaction durabilities, among other considerations. With file-based
programmable money, each file contains its unique cryptographic record of ownership that
any bank can issue with legal reserves and transfer without a central accounting system to
increment and decrement balances of holders. This enables better privacy and security. The
actors only know individual balances of the system who need to know, e.g., the monetary
authority, commercial bank, and the individual. Files allow for illicit activity to be caught before
a transaction takes place because the files can be cryptographically verified locally to prove
whether the file is legitimate. The fact that files are held locally improves the speed, scale,
and throughput of the system with fewer downtime risks. �This private-sector technology also
fosters operational resilience improvements with offline transaction support, unbanked
support, and interoperability with emerging financial standards such as ISO-20022.�
Yes. To be considered a valid substitute for physical cash, a CBDC should be an acceptable
form of payment for general obligations, including retail transactions, taxes, or settling debts
owed to creditors.�
No. An interest-bearing CBDC could start to compete against existing depository institutions
(commercial banks) and reduce demand for existing financial instruments (e.g., money
market funds or treasuries) that serve this purpose today.��A non-interest-bearing CBDC could
also encourage innovation in the private sector, incentivizing the creation of various
CBDC-based financial products across emerging protocols.�
No. Placing a limit on the ownership of money prevents CBDC from becoming a safe-haven
asset. If the market cannot freely express short-term risk preferences due to an inability to
transfer funds, the functions of a free market are jeopardized.��Instead, commercial bank
issuance limits and individual transfer limits are better suited to mitigate high-volume outflows
that may pose risks to various markets and asset classes or cause other financial system
instabilities.�
Preserving a two-tiered banking system is necessary. Commercial banks should continue to

own the relationship with the customer and play the role of distributing CBDC into the general
economy. Commercial banks should provide delegated authorization on transfers of
file-based programmable money between end-users as a low or zero-cost service. �In
exchange, the commercial bank is permitted to issue and distribute funds through lending
products and other financial services (e.g., remittance, foreign currency exchange). The
monetary authority or central bank may also provide authorized signatures on files and should
perform this service at no cost.
Yes. CBDCs should have offline capabilities. CBDCs should be designed to achieve similar
features as physical cash with as minimal drawbacks as possible in comparison. Because
physical cash can be used offline, so should CBDCs.��The best design for a CBDC is an
intermediated CBDC with file-based programmable money features. Please see the
responses to Questions 2, 12, and 13 for more information about how these features help to
balance privacy and security interests. �While offline transactions open risks of double
spending in the system, file-based programmable money that can provide sufficient
mechanisms to guard against those liabilities within the financial system, and bad actors can
be sanctioned and prosecuted. �Further, the victims of fraud or point of sale purchasers
seeking recourse should be able to avail themselves of the same or similar protections
afforded to today’s card users who may be unsatisfied with purchases. A similar framework of
consumer protections would be necessary and likely need to be attached at the financial
intermediary level- the consumer wallet level and administered by a federal regulator like the
Consumer Financial Protection Bureau, Financial Criminal Enforcement Network (FinCEN), or
the FDIC. �But more importantly, the offline capabilities of this system enable resilience to
network outages (e.g. natural disasters) where connectivity is unavailable. There are various
strategies that can be used to guard against exponential liabilities in an offline situation,
including limiting the number of transactions that can be done offline. �
sale? If so, how?
Yes. A CBDC available for retail transactions must provide the speed and resiliency one
expects from credit and debit card processors. The offline features of file-based
programmable money enable point-of-sale (PoS) transactions despite events when a
connection to the internet is lost. This is vital for situations, such as a natural disaster, which
might otherwise restrict the transfer of value between consumer and merchant in PoS
transactions that are capable offline.��Offline transactions can be transacted over near-field
communications (NFC) chips on smart devices available on the market today. Modern PoS
terminals that are smart devices, such as phones and tablets, can adopt files with minimal
changes to existing software.
Technologies that support platform business models, allowing third parties to build services
on top of a CBDC system, are well established (e.g., use of application programming
interfaces – APIs). The challenge in interoperating with existing payment arrangements will
depend on their designs, but most have standardized mechanisms to make inter-account
transactions. Support of both traditional and emerging financial standards (e.g., ISO-20022,
SWIFT, NACHA), will likely play a part in enabling interoperability with other payment
systems. In a CBDC system with intermediaries, its design will need to support payments (be
it online or offline) between customers of one intermediary and those of another, while
supporting portability to avoid users being locked into a single intermediary.�
CBDC?
The advent of quantum will pose a challenge to any CBDC. However, an intermediated
CBDC with file-based programmable money features could go far to solve this problem.
Specifically, the design of the CBDC as being contained in files could allow private-sector
players, to future-proof the cryptographic files to be post-quantum resistant, providing
interoperability with asymmetric cryptographic post-quantum techniques (e.g. isogeny,
hashing) and standards as they emerge.
benefits of a CBDC?
A non-account-based architecture that does not rely on the strict ordering of transactions is
the exemplary CBDC design choice for handling scalability challenges. Using the two-tiered
nature of the banking system as it is today and leveraging commercial banks to be
participants in operating the system allows for greater efficiencies in transaction throughputs
and more efficient distributions of capital into the economy.��We expound on the qualities of a
well designed CBDC in responses to Question 2, 12, and 13. �
_________________________________________________________________________
Industry
Country
State
Illinois
Email
A CBDC Supporting Economic Harmony and a Vibrant Humanity on Earth��This survey

response aims to look at CBDCs within the context of the major challenges facing us today:
pandemics, war, pollution, and climate change. The Fed needs a broader outlook with
increased responsibilities to reach its potential to help combat all of these. Ultimately, the Fed
will need to be aligned with other central banks and the BIS to work with governments and the
U.N. to promote economic harmony here-to unseen. While CBDCs will be a focus of this
paper, digressions will be commonplace. It is hoped this can be the start of a deeper
relationship to look at the possibilities for a better world.��Not raised in the "Money and
Payments…" paper is how a CBDC comes into circulation. One way is for money to be
initially issued/created through a loan or investment on the part of a commercial bank. A
depositor at that bank withdraws money, moves it over to their Fed account, and obtains
CBDC. Another way is for the Fed to decide how much money can come into existence. That
amount of money can be purposed by Congress to be loaned or spent into circulation.�The
American Monetary Institute (AMI) policy is that commercial banks are to be weaned off all
credit-originated money and indeed become true intermediaries between depositors (who
want to invest their money at interest) and borrowers. At this point, the Fed would have
greater influence and control over the amount of money - digital and paper money - in
domestic circulation. We can call the Fed originated money social equity money for
educational and practical purposes. It need not be considered a liability but definitely would
have to be issued in that sweet spot between inflation and deflation.��Along this path one
scenario (and there are other viable possibilities) for how deposits at commercial banks can
be handled is as follows: depositors would have a choice to earn interest or not. Depositors
wanting to earn interest would be told they are making an investment, and investments
involve risk. Depositors still interested in investing could choose to obtain a high, medium,
and low-interest rate for their investment. For example, investing in uncollateralized credit
cards would earn a high-interest rate. Investing in people's collateralized mortgages could
earn a medium interest rate while investing in commercial paper with certain preferred
guarantees might earn a low-interest rate.��Depositors not wanting to invest would have their
deposits given over to the Fed, and that money would be held there, and the need for FDIC
insurance would cease to exist. Besides these efficiencies and cost savings, other benefits
will be laid out in the rest of this survey.��One huge benefit would be that Treasury Bonds,
Notes, and Bills would no longer be necessary, as the Fed could create this money. The
government and taxpayers can save crucial money by not paying interest on Treasury
securities and thereby stay out of debt to private investors.��Businesses and other financial
institutions are now dependent on Treasury securities to meet various financial requirements
in our present world. These markets can wind down, and other mechanisms can be put in
place to replace Treasury securities.��How would all these adjustments be made? How much
money could be safely created to keep the economy safe between inflation and deflation?
How could the U.S. citizens be protected from the whims of Congress wanting to create too
much money? How should we think about money for employment purposes and getting the
needed money around to all the sectors of the economy? For better or worse, the Fed is at a
crossroads with choices. The choice to go forward in this direction would give the Fed an
educational role, policy choices, and to decide as intelligently and scientifically on the
aggregate supply of money. It is the belief of AMI that to monitor all these questions and
more, the Fed needs to become a public institution and become the fourth branch of
government.�
Let's continue looking at the world's challenges, including economic migration. That foreign
banks and American banks offshore create eurodollars goes beyond the scope of this paper
but remains an area for research and crucial policy development. Alternative proposals like
having an international currency along the lines of carbon credits and revisiting the previous
policies of parity and parity tariffs are also being considered. The goal is to make seigniorage
and regulate a dollar's value work towards justice and equality.��What is parity(?) and the parity
tariff?�Parity was, and is, a U.S. law that was in effect from 1942 until 1953 and is a period
worthy of study. These policies might be reformulated to meet today's challenges as they
successfully met the challenges of WWII and its aftermath. Parity works on the notion that we
are all interdependent in society and that we need to be paid sufficiently to have a healthy life.
The parity tariff is simplified here based on the principle laid out by Carl Wilken in 1947 titled
Prosperity Unlimited - The American Way (out of print presently).�Although this goal is beyond
the scope of this survey, a microcosm of this perspective is shared here to give an example of
the imagination we need to face today's challenges. The idea is similar to Henry Ford paying
his workers well enough so they could afford to buy his cars.��High domestic prices are
necessary for a higher standard of living, especially for the workers who produce those
products. Equivalent imported goods coming into these advanced economies at a lower price
have an import tariff tax equalizing the import and domestic price. The money collected goes
into a bank account. After some time, each country balances the accounts, with the poorer
countries receiving the profits that formerly went to the importers. The poorer countries could
then spend that balance of money in the country they exported to during that period and pay
for the goods at the domestic price level of that advanced country. By doing this, the domestic
price level in the more advanced country is maintained. At the same time, this parity tariff
program helps the poorer country bring up their standard of living.��Here is a simple example of
the above. A California producer of avocados sells in the domestic marketplace an avocado
for $0.75. The grower can pay their bills and make a small profit at that price. I live in Chicago
and can buy that domestic avocado from my favorite chain store for $1.00. The importer for
that chain store also buys an equivalent avocado from Mexico for $0.50 and sells that
avocado to me in Chicago for $1.00. The difference between purchasing the California and
Mexican avocado is $0.25. This money would not be profit for the importer or my favorite
chain store or savings to me. Instead, it would be hit with a tariff that protected the domestic
price in California. After the accounting back and forth was done over time, the tariff money
would assuringly show a balance of imported tariff money coming in from Mexico. Mexico
could use this balance to buy U.S. goods at U.S. domestic prices.��This parity tariff system
would be an economical way to bring the world up to our standard of living and reduce the
need for economic migration. A lot that goes on in the name of developmental economics
becomes a debt trap for poorer countries. Parity economics and the full employment goal of
the Fed would help eliminate suffering here and abroad.��The responses to the first two
questions give our perspective on how a CBDC should come into existence. The goal is to
make money neutral and not favor a private elite group of bank owners and officers, but to
make a system work that favors all people equally. If the New Fed is making jobs available
on-demand, there will be the money available for people to afford their mortgages with little to
no need to have a run on the banks. However, making things work well in this country does
not eliminate the pressing problems affecting the whole world. Rather than have a currency
that dominates the world with unfair privileges, we need to develop parity tariffs and other par
economic ideas to create a supportive and nurturing humanity and not wanton greed and
profit. By this time, we should know that the Earth cannot give us compounding interest rates
and unlimited growth but hopefully can meet our real needs.�
inclusion?
Imagine we had a monetary system where if a person wants to help society, there would be a
decent job found for them. There might be less violence and real helpful productivity gains. Is
this possible today? If you create money only for actual employment rather than to financially
speculate or simply throw money at a problem, the answer is yes.��Take the example of
Colonial Pennsylvania and the paper monetary system they created there. It says right in the
1723 law that issued the money that this law is�"… intended for the benefit of the poor,
industrious sort of people of this province, at an easy interest, to relieve them of the present
difficulties they labor under…."
(http://www.palrb.us/statutesatlarge/17001799/1723/0/act/0261.pdf, p328). �It was a paper
money system the purpose was to support a medium of exchange for all the productive
aspects of the economy. By the late 1720s, young Ben Franklin understood and wrote about
the procedure. We credit him for starting the Post Office, Sanitation, Fire Departments, etc.
He didn't have the money to do all this, but he knew how the Pennsylvania Assembly could
create the money (think Fed and CBDCs) and have it recirculated to put people to work.
Despite the French-Indian War in the 1750s, Colonial Pennsylvania ran the least inflationary
monetary system during the colonial period and, by one source (Lester, Richard; Monetary
Experiments, 1939, reprinted 1971, p.108) in any 52 years of U.S. history. They focused on
work and jobs and not on making certain people privileged rich. If the Pennsylvanian
Assembly could do all that with little background in political economy, then the Fed should
undoubtedly be able to do it today. Yes, inclusion all the way!�
We are now aware of climate change, pollution, and the need for humans and life on the
planet to harmonize with the Earth itself. This goal should help define where the jobs need to
be. The goal is to create money for jobs to meet the pressing needs of society and the planet,
not for financial instruments in a secondary market.��In a command economy you can create
money to employ everyone. Create money in excess of that is inflation. AMI does not want
to support a command economy, but does want the people hired who want to help society.
Priorities are employment with good benefits and retirement. Simply, if a person wants to
work, there is a job available to them. �We want this for ourselves, and by extension, our
family and neighbors, and outwardly to everyone. The goal for the New Fed is the full
availability of jobs without inflation.�
stability?
Let's consider the difference between commercial banks bringing new credit/money into circulation
versus the New Fed bringing new money into circulation. The New Fed can bring money into
circulation, not tied to collateral or interest rates. What is the difference?In a debt-based monetary
system with profit and growth as the central themes, collateral will tend to replace trust over time.
Finding collateral will be the basis for obtaining a loan and wealth creation (Milton
Friedman).Michael Milken has spoken about the need to collateralize the commons, i.e., the public
sector. He was saying that we are running out of private collateral to maintain growth. In theory, a bank
could, over time, own the water rights of Bolivia or own Antarctica.Besides the problem of
collateral, there is the problem of interest rates. In a debt-based money system, the loan principal
becomes the new money coming into circulation. The interest payments have not been created, and it is
paid along with the principal. In stagnant times with few new loans being made, this debt-based money
system can still work if the banks, who earn the interest rates, can get that money back out into
circulation so the borrowers can earn that money to make the payments on their loans.However, if
relatively few people and companies obtain an excessive amount of the money supply, there is less
money available for borrowers to earn and make their loan payments. Debt can increase beyond the
available income earned to pay off the debt. Human-caused or naturally caused circumstances all too
often means that bank loan officers lose confidence in the overall economy cyclically, and debt defaults
occur.Here is the monetary reformer and environmentalist's plea to ourselves and the people who
lead our monetary system: Interest Rates, Collateral, and 1,000,000 Living Species to Be
Lost:Interest rates put the economy on a treadmill in a debt-based monetary system. Everyone in
the aggregate has to push to pay the overhanging debt.Together, interest rates and collateral will
automatically push humans towards profits and growth over the needs of sustainability, a healthy
environment, and in the aggregate, a healthy planet. We are in the midst of losing a million species,
one-quarter of the plants, at a rate perhaps only exceeded by giant meteors hitting the Earth in earlier
geological times.We live in a system where the earth credits and humans debit. When will we pay
back Earth and have a pristine planet again? Our money and banking system today is like the
cheerleaders at a sports game, promoting more human debiting. Suppose a newly created CBDC
(purposed by Congress) is coming into circulation while the banks are still issuing new money via
loans. In that case, the Fed's action may serve as an occasional relief valve to one significant, onerous
tendency of our present debt-based monetary system in "side-by-side" money creation. However, the
overall challenges will remain in place to undermine our humanity, and perhaps competitively so.
Instead of money, profit, and growth leading the way, we need a monetary system that promotes
patience, love, caring, curiosity, and understanding so that a pristine Earth can meet our and everyone's
actual needs. The time has come, and if not now, when?
Yes, we can have private, non-profit, or public banking systems that can stand on their own
two feet, and if they do well, they can make a living equal to any other sector in the economy.
They can provide efficient fee-for-services and investment opportunities.��Suppose we have a
New Fed and a Congress concerned about jobs for everyone who wants them. Can the
Federal government still invest new money into the banking system for mortgages, student
loans, and business investments? The New Fed would have to help determine the level of
spending and perhaps coach Congress as its investment banker. Maybe instead of direct
student loans, Congress could allocate money based on student attendance at higher and
adult education places for jobs at those institutions. Perhaps Congress could give money for
new home mortgage loans knowing that money will put people to work.��After Alexander the
Great died (323BC), one of his generals, Ptolemy, obtained control of greater Egypt. Until the
Romans took over in 30 BC, a banking system developed and infused into the government.
For example, the government made investments in papyrus paper for writing purposes, which
was financially successful. Perhaps the New Fed could support Congress taking an equity
position in some adventure and making some profit(?). AMI has no present policy on this, but
this writer thought it was an idea worth mentioning (Heichelheim, Fritz M.; An Ancient
Economic History, Vol. III, 1968, p. 112-125; a marvelous description of this ancient but
sophisticated banking system).��Stablecoins and local currencies both have merits.
Cryptocurrencies are pretty problematic. Questions around seigniorage, energy requirements,
and fairness to the broader communities where they operate need to be considered
case-by-case. That Silvergate bought the non-profit Diem stablecoin technology makes me
curious, and at this time, the answers are not available.
Some financial innovation products such as interest rate swaps and auction-rate bonds can
turn the banking world into a casino, and great harm can be done. If the New Fed controlled
the money supply with the purpose of funding society’s work, these questionable practices
could be eliminated.��Money Market Mutual Funds came about to meet the practical need to
get around the interest rate ceiling in the time of high inflation during the 1970s. If the New
Fed can do its job keeping the economy in-between inflation and deflation, the need to go
around the existing system can be avoided. People desiring high interest need to secure
credit cards or take an equity interest in a start-up company.��Suppose banks and financial
non-banks are allowed to continue creating the money for society as we have operating
today. In that case, the above problems and more will not change. CBDCs will simply come
into existence as part of the system that protects relatively a few people maintaining an unfair
privilege and its advantages. The Fed needs to work in an enlightened way with all citizens
and the legislature to remake itself to meet today’s challenges.
It can be anticipated that cash usage would decline. However, as a medium of exchange,
cash would still offer the best privacy and, for many, an essential measure of confidence in
the monetary system overall. Next to holding gold and silver is cash for many people
worldwide.
CBDC?
At Chase Bank, Zelle and other products quickly make payments across the country within
those networks. In time, with or without CBDC, these products will develop, but much more
slowly than the potential of a CBDC internationally connected.�
The old saying, “No one likes to change except a wet baby.” In the name of efficiency, we
move on. What will happen to Western Union and their business? How can they evolve into a
new future? The currency exchanges may have other products to keep them going, but they
may not wholly survive. The good news is that there will be other good jobs available to help
serve society. Being interested, having the ability, and applying oneself will help steer oneself
to the desired job, but being open and trying something different but valuable will also benefit
society and should be personally rewarding.��As far as CBDCs are concerned, one can only
imagine that U.S. citizens would not want to be left behind.�
If cash is maintained, and the Fed is ready to look at maintaining full employment seriously,
everything else can be made to work out. Because of a pandemic and supply delays,
disruptions in the economy can be modeled and forecasted much like we forecast the
weather today. �In Colonial Pennsylvania, there was £85,000 in circulation before the
French-Indian War started in earnest in 1755 after Braddock's Defeat. For approximately five
years, that war continued in North America. A dramatic £485,000 was created and put into
circulation "for the King's use" to fight that war. Taxes took away nearly £85,000 leaving
£485,782 in circulation by mid-1760. By the early 1760s, there was price inflation, but not the
500+% predicted by the amount of additional money for some reasons. Another factor was
that the Pennsylvania Assembly, from 1762 to 1769, taxed out of circulation £25,000, which
helped lower prices by 13%. �Today, with modeling tools and education, the citizens can learn
what is needed to come out of a crisis with inflation. Citizens would know what is happening
and could support of their own volition what is required to get to the desired result.��This
transition to full employment based on worker desire would be a change in mindset.
Education would play an important role. Ultimately, the central banks would have to work
together with BIS and economists to develop a plan to accommodate the world's population
living in harmony on this planet.��As a past anthropologist and environmental science teacher,
this writer can tell you that there will be no lack of jobs to help maintain harmony with Earth.
The good news is that the Earth can be forgiving and patient as we give back the credit that
we have debited. Also, some will bring up population control. Instead, I would suggest using
the term "population education" and an honest explanation of how the monetary system can
support us individually and society overall. People can make good decisions.�
The lack of monetary privacy can bring up a lot of fear. Yes, there should not be illicit financial
activities, and today's governing bank money laws can be applied to CBDCs.�
This question goes beyond the policy questions that AMI has considered. Learning from the
world of cryptocurrencies and stablecoins such as Diem might be a start.�
Yes, it will give citizens more trust and confidence in this form of money.�
Naturally, interest might well kick-start the currency and then be dropped later. However,
interest should be unnecessary due to natural curiosity and the services that such accounts
will be able to offer. Interest should be associated with risk, and there is no risk here.�
No. However, today, there is a problem along these lines in our monetary system. When you have
super-wealthy people, they can influence the markets. We might need laws to govern how large
amounts of existing money come into the American economy so that the Fed and Congressional
policymakers can make adjustments for needed job creation and price stability. For example, suppose a
rich person wants to open a plant and hire many workers with decent salaries and benefits. In that case,
the Fed and Congressional policymakers might not have to consider creating the money to put these
people to work if they need jobs or more work.
This question brings up fundamental structural issues and the meaning of "intermediaries."
The word intermediary in banking and money textbooks starts with a general meaning: "a
bank borrows short and lends long." Today, all the way up to the BIS website, you can find
"intermediary" used in this most general sense. The AMI uses this term more precisely when
a bank or non-bank financial institution uses actual depositors' money and transfers that
money to a borrower. The money used in that transfer is not the bank creating credit. It is the
depositor(s) investing.��Since 1971, when money market mutual funds were created as a move
toward financial innovation, the Fed and other central banks have gone on a faster track of
losing control over their respective national monetary systems. With cryptocurrencies and the
Diem promoting a stablecoin, the Fed and other central banks will continue to lose market
share and the corresponding seigniorage privilege.��The fundamental question is, to whom
does the seigniorage privilege belong? In the United States, the seigniorage privilege
belonged to Colonial Pennsylvania with its alternative paper money system. During the
American Revolution, the "Continental," despite England successfully counterfeiting it, the
seigniorage was gained by the Continental Congress. During the American Civil War and
after, the Greenbacks were the seigniorage privilege of the Union government. History shows
that if the bankers control the seigniorage privilege, then over time, they will control the
financial system and then the government.��If there is equality, where money is neutral, then
the seigniorage privilege belongs to the people or its representative government. It certainly
does not belong to a private class of citizens called the bank owners and their officers and
lobbyists doing their bidding.��Is the Fed important? Yes, it is, and it's so essential that there
should be a New Fed, and it should be the fourth branch of government, crucial in its realm,
and equal in status to the other branches.��How can seigniorage equality be achieved? The
answer is in many different ways. The Treasury could obtain the full seigniorage privilege, or
all the nation's people could gain the seigniorage privilege by having all new money go
equally into their Fed Accounts. An intermediate possibility is for cities and states to set up
public banks and be allowed the seigniorage privilege of issuing money for work. Or,
differently, the cities and states could simply obtain the necessary financial distribution to do
their hiring or procurement, or lending.��To avoid inflation means you do not allocate money to
solve a problem by throwing money at a problem; you create the financial resources when
you have the people and the resources to solve the given problem or achieve an opportunity.�
Yes. One idea is that a person could go to their post office or participating financial center
working with CBDCs. They could simply swap CBDCs for cash and use it offline.�
sale? If so, how?
Yes, but maybe there should be limits, especially at first, as we go through a learning curve.�
You are working on those capabilities now. Good luck, and we support all the technical
success that is possible and feasible.�
CBDC?
One day we might want to separate banking and lending as two separate practices. The first
would be a fee for services. The second would be a worldwide peer-to-peer lending
platform(s). If you invested a $1,000, you might have 1/10 of a penny in a million homes - a
genuinely diverse and hopefully a stable investment.�
benefits of a CBDC?
It is certainly a different day. We have population and demographic challenges. We have

pollution, climate, and pandemic problems. We have resource problems. We have the
problem of a lack of collateral and trust in our present financial system. However, if you are
ready to tap into the love people have, you will find that while the Earth itself and the Fed may
not meet all the wants and greed, but will be able to work out a plan that amply meets the
needs of the people. It will be a society led more by curiosity than the need to win and have
more and more.��In one way, we are democratizing money with CBDCs. However, in another,
we, as a society, are ignorant and have lost our way in how a monetary system works. Slowly
and continuously, the Fed, as part of the banking system itself, has protected a plutocracy of
its kind that, in the words of my senator, Dick Durbin, "owns this town "- referring to
Washington, D.C. I don't think that was the intent of Congress when they passed The Federal
Reserve Act.��The Dodd-Frank law did make regulatory changes to prevent another Great
Recession. But, within a few years of its passing, the bankers' lobby had that law dismantled,
and we are at the place as we were prior to that law. Today, we are entering a whole new
territory of possibilities while, at the same time, we are patching this monetary system to keep
it functioning through today's challenges.��However, the inherent structure is driving humanity
off a cliff. Citizens look at their circumstances and don't understand them, and many follow
untruths and conspiracy thinking. In part, we have a fragile democracy and further potential
for political upheavals. This situation reminds me of early ancient Greece, where the citizens
would turn to a tyrant and hope for the best.��The way out of this is honesty and education and
acknowledging we need to work toward democracies on all levels and not a plutocracy. We
have to make money neutral again and not give some people an unfair advantage that recent
history has shown that they will use to privilege themselves at the expense of others.��The Fed
reminds me of the wizard behind the curtain in the Wizard of Oz. The Fed needs to come out
from behind the curtain, be with all the people, and work for all the people. Thank You for this
opportunity!�
_________________________________________________________________________
TecSec. Incorporated
Industry
Technology Company
Country
State
Virginia
Email
jayw@tecsec.com
While what the document stated is correct, technology is available that will expand these
functions.��Additional benefits from a properly formed CBDC (supported by accredited
standards) would support the objectives of faster payments and promulgation of ISO 20022
thru the use of: �A new payment system, when implemented correctly, requiring strong
authentication and strong enrollment procedures for all participants, would eliminate a
significant amount of the crime.��In support of these objectives, technology reform must also be
considered to mitigate the new risks that are surfacing. One sector of technology that can
help this necessary objective is associated with an agile cryptography framework. It would
provide self-protecting data objects that are independent of the network choices and
indifferent to storage, based on dynamic key management. This mitigates the problems of
quantum rather than the static processes used today that are associated with the quantum
computing environ which is nearly upon us. The advent of agile cryptography can offer a new
technical enhancement that supports the network of networks necessary for the CBDC to
flourish. This technical enhancement, agile cryptography, is available and codified in ANSI
standards.�
Under a Hybrid CBDC model, the U.S. Treasury would be the issuer, the Federal Reserve
would distribute it to U.S. Depository Financial Institutions, and Depository Financial
Institutions would hold the deposits on their balance sheet and distribute the Hybrid CBDC to
customers.�We believe that a Hybrid CBDC would displace most of this value, as a
bank-centric Hybrid CBDC with superior privacy, security and regulatory protections and the
backing of the U.S. Treasury and Federal Reserve would be a superior product offering to all
the existing crypto currencies�
inclusion?
A new CBDC payment system based on a Hybrid CBDC could be revolutionary and very
positive for Depository Financial Institutions and for society at large. For example, the
following Use Cases would generate very favorable outcomes for society at large and create
over $593.4 billion in value:��Adoption Opportunity��Value��Identity Assurance Federation (e.g.,
NACHA’s Phixius)��$1.55 billion��Bank Owned Credit Bureau��$35.2 billion��First Class Email��$516.2
billion��U.S. Dollar Hybrid CBDC Stablecoin Issued Via Depository FIs��$10.4
billion��Micropayments to Fund the Sale of News Articles��$25 billion�+�QR Code Network to
Trigger Real-Time Payments at Retail Merchants��$1 billion�+�Replacement for SWIFT��$1
billion�+�Health Information Exchange��$1 billion�+�Single Window for Cross Border Trade
Facilitation & Supply Chain Billing �$1 billion�+�Unbanked Financial Inclusion Facilitation��$1
billion�+�Total��$593.4 billion�+�The value of the use cases for a Hybrid CBDC is further validated
by the market capitalization of the universe of cryptocurrencies, which as of April 6, 2022 was
$2.01 trillion dollars. We believe that a Hybrid CBDC would displace most of this value, as a
bank-centric Hybrid CBDC with superior privacy, security and regulatory protections and the
backing of the U.S. Treasury and Federal Reserve would be a superior product offering to all
the existing cryptocurrencies. �Hybrid CBDC has many use cases where it could be used as
an electronic form of currency, reducing paper cash, coin, and paper checks in circulation. A
Hybrid CBDC is analogous to a digital form of check processing. Though check volume is
decreasing, it may never fully be able to be phased out due to consumer dependencies and
habits without legal regulation similar to PSD2. A reduction in check volume and processing
brought about by a Hybrid CBDC may be beneficial to the industry and lower overall
operational costs. �Hybrid CBDC could provide benefit to the un-banked and under-banked
population and help increase financial literacy in the population at large�
If a Hybrid CBDC is implemented the way we recommend, there would be no impact on the
Federal Reserve’s ability to effectively implement monetary policy in the pursuit of its
maximum-employment and price-stability goals. �
stability?
Ideally, the Hybrid CBDC could be a new layer of a database that can be Distributed Ledger
Technology or blockchain based. It would hold the ISO 20022, (designed to offer structure,
reduce exceptions, and if done securely, reduce cost) compliant transaction and remittance
records that serves as the source of truth for each transaction and maintain the persistent
protections necessary to maintain customer trust. This document would be native to a new
technology overlay layer that would be XML enabled and leverage the Network of Networks
approach (e.g., ATM Networks), that could provide a solution set using the building blocks to
solve these issues in electronic payments fraud. The four key common core components are:
�a.�An Enrollment and Authentication Identity Assurance Service;�b.�Cloud Based Big Data &
DLT Database where the data is protected leveraging envelope security to provide fine grain
control of access and use of the data. Such a system would enable the creation of a zone of
privacy for individuals and corporate data which is not possible today with existing payment
systems;�c.�Network of Networks approach to keep costs low in providing interoperability with
existing legacy systems;�d.�Real-Time Payments functionality including Settlement utilizing a
Dollar Stable Hybrid CBDC Coin. There is a strong network effect that means that
cooperation among banking industry players and the Treasury and Fed would create more
value rather than each bank issuing their own;��
If it is only a store of value not connected to payment services, and if the CBDC deposits are
not held by Depository Financial Institutions, it would be directly competitive to bank deposits
and because Depository Financial Institutions in a fractional banking system are dependent
upon deposits to make loans, it would reduce the funds available for lending by Depository
Financial Institutions, damaging the economy��The Clearing House has built a real-time
payment system, RTP, the Fed is building a real-time payment system, FedNow, and the
Card Networks have real-time payment systems. Unless a CBDC payment system provides
functionality beyond the capabilities of these real-time payment systems, a clear business
case in favor of building one cannot be made and transactions in CBDC and other
cryptocurrencies might occur through existing payment systems.��The reserve currency status
of the U.S. Dollar, which is based on laws, contracts and trust, could ultimately be at risk if a
U.S. CBDC is not developed, as other countries that have those attributes are working on
developing CBDCs, and payment systems that would facilitate their wide use in
commerce.��The problems with the existing payment systems are:�a.�There is an entire fraud
ecosystem around existing payment systems. �i.�The Fed statistics indicate that annually more
than $11 billion of electronic payments fraud occurs. �ii.�The current system allows anyone to
open a bank account using only Personally Identifiable Information (PII), yet the PII can be
purchased for pennies per person on the dark web. The Identity Theft Criminal Ecosystem
enables identity theft. Identity theft today is the most expensive crime in the United States,
more than double the cost of property theft, which is the second most expensive crime. �iii.�As
to what kinds of fraud exist, the Fed has created an excellent document that creates an
ontology of electronic payments fraud types .�b.�The issue is that we don’t have strong identity
management to know who our customers are at enrollment or when transacting. Therefore,
we do not have certainty as to who is receiving money, initiating a request for money or
paying money. And this problem increases as we try to move faster, reducing the time for
analysis, control and assured transaction settlement��In a Pure CBDC payment system, the
deposits are held on the balance sheet of the Fed and not at Depository Financial Institutions.
The banking industry does not support building a Pure CBDC based on the Fed’s Project
Hamilton infrastructure because those deposits would be held on the balance sheet of the
Fed and that would divert substantial �deposits from the existing banking system, perhaps
fatally undermining the economics of the existing fractional banking system.��A Pure CBDC is
essentially analogous to a digital form of paper money (reference the self protecting data
objects). Depository Financial Institutions view currency as a pure cost. Currency is costly
to handle, costly to store and costly to hold. Depository Financial Institutions try to minimize
holding currency as much as possible for these reasons, and because it has a negative
impact on bank capital. The negative impact on bank capital will lower the availability of loans
in the economy from the fractional banking system.�
value rather than each bank issuing their own;�Such a network layer would also ingest and
export data to and from the legacy payment systems.��An Agile cryptography framework would
standards�
Yes. Hybrid CBDC could provide benefit to the un-banked and under-banked population and
help increase financial literacy in the population at large
CBDC?
Unless a CBDC payment system provides functionality beyond the capabilities of these
real-time payment systems, a clear business case in favor of building one cannot be made
and transactions in CBDC and other cryptocurrencies might occur through existing payment
systems.��The reserve currency status of the U.S. Dollar, which is based on laws, contracts
and trust, could ultimately be at risk if a U.S. CBDC is not developed, as other countries that
have those attributes are working on developing CBDCs, and payment systems that would
facilitate their wide use in commerce�
The reserve currency status of the U.S. Dollar, which is based on laws, contracts and trust,
could ultimately be at risk if a U.S. CBDC is not developed, as other countries that have those
attributes are working on developing CBDCs, and payment systems that would facilitate their
wide use in commerce
export data to and from the legacy payment systems.�
Cloud Based Big Data & DLT Database where the data is protected leveraging envelope
security to provide fine grain control of access and use of the data. Such a system would
enable the creation of a zone of privacy for individuals and corporate data which is not
possible today with existing payment systems;
The only points of integration between the Network of Networks layer and the legacy payment
systems would be via an “edge server” that holds XML tagged data securely exported or
imported from a Depository Institution’s legacy payment systems or from the Network of
Networks layer. The integration required is equivalent to a banking corporate treasury
workstation. The integration is modest, should only take weeks and have a modest cost. By
design and purposefully the amount of IT integration with the systems of legacy Depository
Institutions is kept to a minimal level. Since most corporate treasury workstation solutions
support data exporting and data importing, the challenge is mostly reduced to mapping and
by using state of the art mapping automation tools, which have low six figure costs, the
technical challenge is low and the technical risk is low. The only point at which there is a
point of integration in the payment lifecycle is when good funds are to be loaded into a
deposit account hosted at the Network of Networks layer or taken out of the Network of
Networks layer and sent back to the legacy deposit system of a Depository Financial
Institutions, and Depository Financial Institutions would hold the deposits on their balance.
This is as simple as a credit or debit message using the corporate treasury workstation
between the traditional Depository Institution and the Network of Networks layer. Adding the
latest in security functionalities to the Hybrid CBDC would ensure a security profile that would
include necessary security criteria. All the other functions occur within the new Network of
Networks layer.��Our current electronic payment systems allow lightly authenticated individuals
to participate in electronic payment systems and initial payment requests and receive funds.
Well established best practices with respect to security are not being adhered to. The Fed’s
Secure Payments Task Force created a list of the best practices that should be adhered to, to
make the bank payments system secure however many of these items have never been
implemented. Those security criteria are:�S.1 Risk management�S.2 Payer Authorization�S.3
Payment Finality�S.4 Settlement approach�S.5 Handling disputed payments�S.6 Fraud
information sharing�S.7 Security controls�S.8 Resiliency�S.9 Persistent End-User Data
protection�S.10 End-User/Provider Authentication�S.11 Participation requirements
Authorization�a.�Depository Financial Institutions do this in the name of “good customer
service”, as we don’t want to burden our good customers by requiring them to jump through
hoops, as we are afraid that if we do, the customers will go across the street to another bank
that doesn’t require them to do it. If these rules are baked into a new Hybrid CBDC payment
system as a minimum requirement, this problem can be solved. If we build a new payment
system, we could choose to do it right and require strong authentication and strong
enrollment procedures for all participants. If we do that, we can eliminate a significant
amount of the crime.�b.�In support of these objectives, technology reform must also be
considered to mitigate the new risks that are surfacing. One sector of technology that can
help this necessary objective is associated with an agile cryptography framework. It would
standards.��
Yes, but only if properly implemented to avoid competing with banking institutions and
aversely effecting value of US Dollar.� In a Pure CBDC payment system, the deposits are held
on the balance sheet of the Fed and not at Depository Financial Institutions. The banking
industry does not support building a Pure CBDC based on the Fed’s Project Hamilton
infrastructure because those deposits would be held on the balance sheet of the Fed and that
would divert substantial deposits from the existing banking system, perhaps fatally
undermining the economics of the existing fractional banking system.��A Pure CBDC is
essentially analogous to a digital form of paper money (reference the self protecting data
objects mentioned above). Depository Financial Institutions view currency as a pure cost.
Currency is costly to handle, costly to store and costly to hold. Depository Financial
Institutions try to minimize holding currency as much as possible for these reasons, and
because it has a negative impact on bank capital. The negative impact on bank capital will
lower the availability of loans in the economy from the fractional banking system.��A Hybrid
CBDC could effectively address all of the concerns that we have raised above. Under a
Hybrid CBDC model, the U.S. Treasury would be the issuer, the Federal Reserve would
distribute it to U.S. Depository Financial Institutions, and Depository Financial Institutions
would hold the deposits on their balance sheet and distribute the Hybrid CBDC to customers.
�We don’t believe that non-banks or non-bank depositories should have a role in directly
providing Hybrid CBDC services; however, third-party processors may have a role in support
of Depository Financial Institutions, provided that the proper risk controls are in place. Banks
may choose to engage vendors to provide some or all of the functionality of a Hybrid CBDC,
analogous to how processors are often engaged by Depository Financial Institutions now to
provide some or all of legacy payment system functionality. �The use of third-party processors
for Hybrid CBDC can allow smaller Depository Financial Institutions without the needed
technology to participate, similar to how Depository Financial Institutions use third-party
processors to provide ACH services to their customers today.��
If CBDC is legal tender, then it should pay interest; following the current standards
No. This is legal tender.
A Hybrid CBDC could effectively address all of the concerns that we have raised above.
Under a Hybrid CBDC model, the U.S. Treasury would be the issuer, the Federal Reserve
would distribute it to U.S. Depository Financial Institutions, and Depository Financial
Institutions would hold the deposits on their balance sheet and distribute the Hybrid CBDC to
customers. �We don’t believe that non-banks or non-bank depositories should have a role in
directly providing Hybrid CBDC services; however, third-party processors may have a role in
support of Depository Financial Institutions, provided that the proper risk controls are in place.
Banks may choose to engage vendors to provide some or all of the functionality of a Hybrid
CBDC, analogous to how processors are often engaged by Depository Financial Institutions
now to provide some or all of legacy payment system functionality. �The use of third-party
processors for Hybrid CBDC can allow smaller Depository Financial Institutions without the
needed technology to participate, similar to how Depository Financial Institutions use
third-party processors to provide ACH services to their customers today�
A digital event is an on-line event.
sale? If so, how?
export data to and from the legacy payment systems.��
The only points of integration between the Network of Networks layer and the legacy payment
systems would be via an “edge server” that holds XML tagged data securely exported or
imported from a Depository Institution’s legacy payment systems or from the Network of
Networks layer. The integration required is equivalent to a banking corporate treasury
workstation. The integration is modest, should only take weeks and have a modest cost. By
design and purposefully the amount of IT integration with the systems of legacy Depository
Institutions is kept to a minimal level. Since most corporate treasury workstation solutions
support data exporting and data importing, the challenge is mostly reduced to mapping and
by using state of the art mapping automation tools, which have low six figure costs, the
technical challenge is low and the technical risk is low. The only point at which there is a
point of integration in the payment lifecycle is when good funds are to be loaded into a
deposit account hosted at the Network of Networks layer or taken out of the Network of
Networks layer and sent back to the legacy deposit system of a Depository Financial
Institutions, and Depository Financial Institutions would hold the deposits on their balance.
This is as simple as a credit or debit message using the corporate treasury workstation
between the traditional Depository Institution and the Network of Networks layer. Adding the
latest in security functionalities to the Hybrid CBDC would ensure a security profile that would
include necessary security criteria. All the other functions occur within the new Network of
Networks layer.��
CBDC?
A new payment system, when implemented correctly, requiring strong authentication and
strong enrollment procedures for all participants, would eliminate a significant amount of the
crime.�In support of these objectives, technology reform must also be considered to mitigate
the new risks that are surfacing. One sector of technology that can help this necessary
objective is associated with an agile cryptography framework. It would provide self-protecting
data objects that are independent of the network choices and indifferent to storage, based on
dynamic key management. This mitigates the problems of quantum rather than the static
processes used today that are associated with the quantum computing environ which is
nearly upon us. The advent of agile cryptography can offer a new technical enhancement
that supports the network of networks necessary for the CBDC to flourish. This technical
enhancement, agile cryptography, is available and codified in ANSI standards��Ideally, the
Hybrid CBDC could be a new layer of a database that can be Distributed Ledger Technology
or blockchain based. It would hold the ISO 20022, (designed to offer structure, reduce
exceptions, and if done securely, reduce cost) compliant transaction and remittance records
that serves as the source of truth for each transaction and maintain the persistent protections
necessary to maintain customer trust. This document would be native to a new technology
overlay layer that would be XML enabled and leverage the Network of Networks approach
(e.g., ATM Networks), that could provide a solution set using the building blocks to solve
these issues in electronic payments fraud. The four key common core components are: �a.�An
Enrollment and Authentication Identity Assurance Service;�b.�Cloud Based Big Data & DLT
Database where the data is protected leveraging envelope security to provide fine grain
export data to and from the legacy payment systems.��
benefits of a CBDC?
The points of integration between the Network of Networks layer (modular in design) and the
legacy payment systems would be via an “edge server” that holds XML tagged data securely
exported or imported from a Depository Institution’s legacy payment systems or from the
Network of Networks layer (based on published standards). The integration required is
equivalent to a banking corporate treasury workstation. The integration is modest, should
only take weeks and have a modest cost. By design and purposefully the amount of IT
integration with the systems of legacy Depository Institutions is kept to a minimal level. Since
most corporate treasury workstation solutions support data exporting and data importing, the
challenge is mostly reduced to mapping and by using state of the art mapping automation
tools, which have low six figure costs, the technical challenge is low and the technical risk is
low. The only point at which there is a point of integration in the payment lifecycle is when
good funds are to be loaded into a deposit account hosted at the Network of Networks layer
or taken out of the Network of Networks layer and sent back to the legacy deposit system of a
Depository Financial Institutions, and Depository Financial Institutions would hold the deposits
on their balance. This is as simple as a credit or debit message using the corporate treasury
workstation between the traditional Depository Institution and the Network of Networks layer.
Adding the latest in security functionalities to the Hybrid CBDC would ensure a security profile
that would include necessary existing standards based security criteria. All the other
functions occur within the new Network of Networks layer.�Concluding Comments�In
conclusion, we recommend that the Fed evaluate with respect to a Hybrid CBDC the
following:�A.�The cost of building a Hybrid CBDC and the business & revenue case for it;��B.�The
cost and potential revenue benefits to Depository Financial Institutions of providing Hybrid
CBDC services; �C.�A plan prioritizing the roll-out of Hybrid CBDC backed use cases and their
timing, which analysis should also take into account the enhanced information security
requirements, as well as the priorities and needs of the U.S. population including barriers to
adoption and mechanisms for breaking down those barriers. �D.�Assisting industry to create a
minimum baseline of security and operational controls for handling Hybrid CBDC that would
then be turned into an FFIEC regulatory requirement for all Depository Financial Institutions
providing Hybrid CBDC services.�
_________________________________________________________________________
Chamber of Digital Commerce
Industry
Trade Organization
Country
State
Email
marian@digitalchamber.org
Additional benefits, considerations and risks include:�� a. Consideration: Global

interoperability amongst other CBDCs (as well as digital assets writ large) is critical. We
anticipate a future in which almost anything of value could be tokenized (securities, art,
commodities, etc.). Ensuring CBDC’s can flexibly interoperate with other digital assets is also
important. We support the open-source approach proposed on 3 February, 2022 by the
Boston Fed and Digital Currency Initiative at M.I.T. � b. Consideration: We recommend that
the Fed consult with the BIS, other central banks such as Bank of England, Monetary
Authority of Singapore, and Bank of Canada (who along w/ Boston Fed are working with MIT)
to identify benefits and risks related to global CBDC interoperability. We also recommend the
Fed identify potential fintech partners that can provide knowledge and technology solutions
for interoperability.�� c. Risk: We believe the paper emphasizes Know Your Customer
(“KYC”) and Anti-Money Laundering (“AML”) compliance at the expense of consumer privacy.
As federal lawmakers continue to debate a national privacy law that covers all types of data,
the US should ensure that a US CBDC emulates cash and prevents against tracking
individuals’ purchasing behavior. �
In the eyes of many, the US already uses digital money. We make retail transfers and
payments through Venmo and PayPal. On the wholesale side, we have digital RTGS
systems, ACH, and soon, FedNow. The U.S. also utilizes digital money transfer systems like
Western Union and MoneyGram that use SWIFT + CHIPS, etc. Why can’t we simply continue
doing what we’re currently doing and just make it better? The answer is that the existing
payments infrastructure is antiquated. It’s hard to do atomic settlements over networks that
process in T +2/3. Furthermore, these systems employ layers of middlemen, correspondent
banking, or other intermediaries, which are costly and inefficient. �One of the obvious
differences between a CBDC and current digital money is programmability: the ability to insert
a smart contract in the currency. This is impossible to do through existing payments
infrastructure.�
inclusion?
A CBDC could favorably affect financial inclusion. According to a FDIC 2019 survey,
approximately 7.1 million US households remained unbanked, and access to a digital wallet
could improve access to financial services. Some have suggested that the government could
provide a free government wallet to the unbanked. �Remittances account for ~ 25-30% of
Honduras, Guatemala, and El Salvador’s GDP. According to the World Bank, remittance fees
run between 5-10% which disproportionally affects minority communities in the US. A properly
functioning CBDC could settle atomically and – if interoperable with other CBDCs – could
significantly reduce these intermediary fees.�Education must be a key component of any
CBDC rollout. Individuals that do not know how to use CBDCs or digital wallets could fall
behind and this may result in even greater economic wealth polarization. �
Smart contracts embedded in CBDCs could improve the Fed’s efficiency in implementing
monetary policy, for example, by speeding up or slowing down the economy by attaching a
coupon to the CBDC. �Macroeconomists at the Fed could consider adding new features to
programmable money. For example, the Fed could issue a special class of CBDC with an
“expiration date” that induces individuals to spend money quickly and grow the economy. Or
the Fed could create yet another class of CBDC that can’t be used until the wallet holder
turns a certain age, thus providing a financial safety net. All of these interesting and
potentially positive features should be considered with personal freedom, privacy and
government overreach in mind.��Additionally, the Fed will need to consider from a policy
perspective if a CBDC with an interest rate is M0 money. Is it a money market account? Is it a
bond? �
stability?
It’s unclear how a CBDC could affect financial stability given that a CBDC is still hypothetical.
Yet, we urge you to consider how a CBDC could affect the commercial banking industry, debt
and equity capital markets, global commodity trading, etc.��For instance, how what impact
would interest-bearing CBDCs have on the business of deposit-taking institutions such as
commercial banks? It is vital to research this before implementation of a CBDC, as the
substitution of commercial deposits could reduce credit availability for businesses and
individuals.�
There are many ways a CBDC could adversely affect the financial sector. For example, if
privacy protections are not put in place or if speed/latency isn’t fast enough or scalable,
potential CBDC users will stick to cash. Additionally, if cyber security isn’t adequate and
sufficient and the CBDC gets hacked, it will undermine consumer confidence in the CBDC, as
well as undermining the financial system itself. �There is a potential that if a CBDC is done
well, there will be limited need for digital M1 non-bank money like Venmo and Paypal. �
From a policy perspective, the Fed should be focused on opening up to innovation and
competition and eliminating existing silos, rather than protecting the current banking system.
There is a potential for a hybrid model of a CBDC in a transition period, whereby banks could
limit the amount of CBDC they take on balance sheet. �A proper sandbox environment will
also be critical for testing the CBDC with the financial sector prior to any broad
implementation, in order to assess the real-world impacts of a CBDC. The Fed should also
evaluate the potential of a wholesale CBDC, which could have less negative impact on the
current financial sector than a retail CBDC.�
Cash usage has already declined 20% and has been replaced by non-bank digital money
(Venmo, Zelle, Paypal, etc). Given that non-bank digital money is M1 while a CBDC is M0, a
CBDC should be designed as a digital bearer instrument. Thus, thinking through the chain of
custody is crucial. �A CBDC should have some of the characteristics that people like about
cash, including privacy. Finally, a CBDC should be designed with an off-line solution in mind.�
CBDC?
A logical place for cross-border and digital payments to evolve is China - �The most obvious
threat to the US dollar is the Chinese RMB and its digital equivalent, the e-CNY. Beijing has
made it clear that its medium-term plan is to promote a multipolar currency world. Ultimately,
China’s goal is for the RMB to be the global reserve currency. It is imperative for the US to
evolve to avoid losing global reserve currency status. �Other observations - �Costs for
cross-border digital payments are falling and will continue to do so. Commercial banks are
already working on advancing the speed and cost for FX services. Meanwhile. cyber,
operational and technology risk will continue to rise, and this needs to be addressed as the
international payments system evolves. Research and scenario analysis is necessary to
understand this picture more clearly. �
Other large economy nations have already made decisions to issue CBDCs. China is the first
large country to do so. The European Central Bank will likely be second. Rather than focus on
what other nations are doing, we should consider that any US CBDC should reflect American
values. �The Boston Fed has done outstanding work with Project Hamilton. Along with MIT,
they created core open-source technology for CBDCs, and we expect that the ecosystem of
developers, policymakers and other stakeholders will continue to improve upon it. We
commend the open-source approach and hope it becomes a de-facto industry standard. If
another country (like China) develops a rival CBDC standard and exports it to the many
countries where it exerts influence, it could undermine US national security. �Agreement upon
an interoperable network is critical to reducing systemic risk. International coordination among
the countries dedicated to responsibly adopting a CBDC is imperative. To assure
interoperability, a global network of like-minded countries should work to establish agreed
upon and adopted principles, protocols, and technology reviews. Research and analysis
should be led and coordinated by the US government, regulatory agencies, and the Fed to
ensure US dollar reserve status. �
Persistent research and analysis is always helpful to identify risks that are not yet known or
fully understood. Creating a matrix of known risks would be a good place to start adding new
risks as insights are gained.��Considerations of quantum computing need to be addressed in
addition to AML and KYC compliance issues. Furthermore, monetary policy such as
managing inflation were not raised in the paper. Ongoing technological advancements and
innovations should be constant considerations. �
Critically, we need to ensure that a CBDC does not facilitate illicit activity. The Bank Secrecy
Act currently requires that commercial banks take steps to guard against money laundering.
Policymakers will need to consider whether a similar anti-money-laundering regime would be
feasible for a Federal Reserve CBDC, but it may be challenging to design a CBDC that
respects individuals' privacy while appropriately minimizing the risk of money laundering. �At
one extreme, we could design a CBDC that would require CBDC holders to provide the
Federal Reserve detailed information about themselves and their transactions; this approach
would minimize money-laundering risks but would raise significant privacy concerns. At the
other extreme, we could design a CBDC that would allow parties to transact on a fully
anonymized basis; this approach would address privacy concerns but would raise significant
money-laundering risks.��Today, commercial banks largely handle retail KYC/AML concerns.
When one goes to an ATM, the bank (a) presumably knows who you are, (b) records that you
withdrew cash, and (c) limits the amount of cash you could withdraw. Once cash is
withdrawn, however, it becomes fully anonymous.��A CBDC could function similarly. Rather
than withdraw physical cash from an ATM, one would draw CBDC digital cash from the
commercial bank app. Similar to the ATM example, the commercial bank would perform all
KYC/AML functions. Once transferred, a user could then choose to “self-custody” the CBDC
digital cash in a personal wallet and spend it anonymously.��An international identity protocol to
allow access with defined rules protecting privacy could also be considered. �We recommend
implementing a permissioned-level of transparency (i.e. only for those allowed, for example -
Espresso Systems out of Harvard) and consideration for account-based versus token-based
privacy. To avoid the Chinese version of a CBDC, the issue of privacy needs to be further
studied. �According to a speech given by Governor Brainard:� �“The design of any CBDC would
need to both safeguard the privacy of households' payments transactions and prevent and
trace illicit activity to maintain the integrity of the financial system, which will require the digital
verification of identities. There are a variety of approaches to safeguarding the privacy of
payments transactions while also identifying and preventing illicit activity and verifying digital
identities. Addressing these critical objectives will require working across government
agencies to assign roles and responsibilities for preventing illicit transactions and clearly
establishing how consumer financial data would be protected.”�

If a CBDC pays interest, we must define it. Is it a bond? A money market account? If a CBDC
looks like a bond, or a savings account, or a money market account, who regulates it? Will an
interest-bearing CBDC be more attractive than deposit-taking institutions like commercial
banks? This is particularly important because the risk of commercial bank money substitution
is highest for an interest-bearing CBDC. This substitution could reduce credit availability for
businesses and individuals.
No, we believe that digital money should be treated equally with cash and cash-equivalents.
There must be parity and restrictions would unnecessarily burden CBDC holders.
Banks, fintech firms, custodial wallet providers, and others would be likely intermediaries to
provide KYC and AML functions. These entities should be regulated (licensed) at the federal
level versus state and be subject to current money transmitter laws.
Yes. One practical solution would be to use NFC (near-field communication) chip technology.
A physical CBDC “card” could connect to the phone app, etc. �Nevertheless, the issue of
double spend is extremely difficult to solve in an off-line situation. �Additionally, if a US CBDC
employs blockchain technology, there are certain issues to consider. We draw the distinction
between “offline” and “offchain.” Off-chain transactions enable quicker transactions, lower
fees, and greater privacy protections. Off-chain transactions can handle more volume and
therefore make it easier to scale networks. This is a very different issue than offline (like if the
power goes out due to a natural disaster, etc). �
sale? If so, how?
Yes. The easier you make it for people to pay, the more acceptance there will be. Prominently
displayed QR codes in retail environments plus users’ ability to pay through wallets that are
interoperable will make this easy.
Interoperability and privacy are key. An ideal standard would be US-based versus
international. We recommend utilizing components of the EU’s GDPR privacy standards,
specifically their compliant data migration policies, as a template. �US would be ANSI X9.
There is technology that exists to allow this.�
CBDC?
a.�Quantum computing a consideration. �b.�IOT is another consideration�c.�The evolution of

De-Fi, digital assets, and NFTs are a consideration �
benefits of a CBDC?
Design principles should include fully open-sourced technology. Inclusion remains an issue –
how will those without smartphones participate in the economy? Compliance, privacy, and
security must all be factored into the design.
_________________________________________________________________________
Bank of Botetourt
Industry
Country
State
Virginia
Email
maustin@bankofbotetourt.com
inclusion?
A CBDC will affect financial inclusion. The unbanked and underbanked will have better
access to digital financial services and faster payment systems at a lower cost. However,
barriers that have excluded those from utilizing traditional financial systems would need to be
removed. These barriers include Identification and address requirements; the cost of
services; and a distrust of financial institutions. Changing the behavior of the
underbanked/unbanked will be key to the acceptance and usage of CBDC. �If these barriers
can be removed, CBDC can have a net positive impact on financial inclusion.
stability?
A CBDC could have an adverse effect on the financial sector. Specially, there could be an
erosion of deposits on an individual bank’s balance sheet because a CBDC would be
reflected on the Fed’s balance sheet instead. As a result, banks may have increased funding
needs if traditional deposits are scarce. Increased funding needs would then correlate to
higher expense/cost of funds. Perhaps the Fed could track the bank from which the funds to
purchase a CBDC originated to help quantify the impact on individual banks.
Yes since there are some concerning factors with the CBDC such as privacy concerns, risk of
Fed increasing money supply overnight, track and trace people in real time and the ability to
“turn off” one’s dollar.
CBDC?
Future payments will need to be handled in a non-traditional way meaning no handheld cash.
Crypto Wallet, Visa/ Master card conversion to be able to handle dual style accounts. Convert
or select Crypto/USD just like you select credit or debit now.�•�Phone�•�Credit card�•�Crypto
checks�•�Digital Wallet�Basically, a two-currency system that allows for software (downloadable
programs) to adjust using the same hardware (swipe machines) to handle the business
transactions. Transactions on the Crypto side would not be covered under the credit card
security system so buyers would need to develop a new security standard.�
In addition to understanding and following anticipated federal regulatory guidance, it will be

paramount that financial institutions define what they want their CBDC programs to look like,
prior to implementation. �This framework should include:�•�Dedicated staff that’s fully educated
in CBDC banking and associated regulations�•� A defined risk tolerance associated with
customer activity.�•�Technical and human resources appropriate for the demographics of our
program�
Yes, only if it is widely trusted by the population, accessible globally and an option is available
for a physical currency.
sale? If so, how?
Yes, It would be the same cards you use today. Maybe have an app on your smartphone that
will allow you to switch the account you pull from to make the payment. �Credit card
options�•�Credit�•�Debit�•�Crypto��All would need to be real-time transactions to calculate the
exchange rate at time of purchase. �
CBDC?
benefits of a CBDC?
_________________________________________________________________________
Thales DIS (Digital Identity and Security)
Industry
Technology Company
Country
State
Texas
Email
alain.martin@thalesgroup.com
inclusion?
A CBDC could foster financial inclusion if it allows people to pay digitally without having to
have a bank account, without having to have an expensive device to transact and if the
solution is broadly available, including in remote geographical areas.��In this respect, the
CBDC end user device should not necessarily be a smart phone and cheaper devices should
be available. It is possible that these cheaper devices, such as smart cards, will not have
remote communication capability. It is also possible that remote areas will not offer reliable
communication means. A CBDC with offline payment support may therefore be more effective
in fostering financial inclusion.
stability?
CBDC?
A possible method could consist in mandating user identification at the time of enrollment but
not store any personally identifiable information in the user’s CBDC wallet or CBDC device.
Rather, a device id or wallet id would be stored and used in transactions.��The user id could be
bound to the device/wallet id by "CBDC identity custodians" such that only accredited entities
(e.g. police forces or customs services) could request, in compliance with rules, the user
identity tied to a device/wallet identity.��With this method, CBDC transactions would be
anonymous in that only device/wallet ids are traced but this anonymity could be lifted by
contacting the identity custodian.��Alternatively, a user could enroll without user identification,
in which case, the knowledge of the device/wallet id would not be sufficient to identify the
user. In such anonymous devices/wallets, limits would apply such that only a maximum
amount of digital currencies could be stored and only a maximum transaction amount could
be spent or received.
A CBDC with offline payment support will likely be more resilient that one that necessitates
online connectivity. In the case communication is lost or servers are down or the system
victim of a cyber attack, offline payments between devices would still be possible, albeit for a
limited time or a limited number of consecutive offline payments.��Offline payments could
provide the necessary resilience while the system is being restored.��In an offline CBDC
system, digital cash may be stored in devices and such a system could therefore serve as a
resilient, distributed, store of value offline. Thales DIS proposes that Secure Elements are
used in an offline CBDC system and such Secure Elements do not require power to maintain
the stored value in their non-volatile memory.
In an offline capable CBDC system that supports consecutive offline payments, the payee
that receives digital money from the payer can immediately use this money to pay another
user offline. This capability will likely require that offline payments be final and instantly
settled.��In this implementation, the security of offline payments is solely dependent on the
payment device. Thales strongly recommends that CBDC devices feature a Secure Element
to handle offline payments.��To mitigate risk, Thales also recommends that such Secure
Elements manage a number of limits, including:� - a maximum amount (a maximum balance)
that can be stored within the Secure Element,� - a maximum amount in any given offline
payment,� - a maximum number of consecutive offline payments.�
Offline payment capability may improve the CBDC system for the following reasons:�� - It
provides for a more resilient payment system with the possibility to transact when the network
or online system is down;� - It offers a greater reach from a geographical perspective:
payments could be possible in remote areas without good connectivity;� - It offers a greater
reach from a financial inclusion perspective. Financial inclusion calls for the support of a
diversity of CBDC enabled devices, not only smart phones. Supporting offline payments
allows cheaper, less connected devices, such as smart cards or passive wearables, to be
used;� - It enables the CBDC system to approach the convenience of cash and may be
perceived as more privacy preserving.��Thales has built a proposition to support offline
payments. A white paper, summarising this proposition can be found here:
https://www.thalesgroup.com/en/markets/digital-identity-and-security/banking-payment/digital
currency. Thales has begun prototyping the proposed solution in a smart card.
sale? If so, how?
To be as ubiquitous as cash, CBDCs must be usable in store, at the Point of Sale. A design
that can leverage the existing infrastructure of POS terminals will be cheaper to deploy. Also,
today’s payment experience at the POS is simple and convenient. For these reasons, CBDC
devices will benefit from supporting the communication capabilities of terminals. This is the
case for smart cards and mobile phones or wearables with NFC capability.
CBDC?
Quantum computing may impact design choices. Whether online payments on a blockchain
or offline payments between devices, public key cryptography is at the heart of today’s
implementations. The introduction of quantum safe cryptography should be envisaged as an
evolution of the system.
benefits of a CBDC?
_________________________________________________________________________
Robert M. Townsend
Industry
Academia
Country
State
Massachusetts
Email
inclusion?
Expanded access to a FRB safe asset would foster greater competition among
intermediaries. Specifically, this would facilitate entry of non-bank entities that have shown a
willingness to innovate in financial products and services. Studies have shown that the needs
of poor and middle-income households, those in rural areas, and small businesses are not
being met. Pilot studies in a collaboration between researchers and the Federal Reserve
should be part of the process of evaluation of CBDC potential (though this idea is not
mentioned in the paper circulated for comment).
A CBDC with an appropriate design of the payments processer would allow high frequency
data to be used to track the economy in real time. This would allow for a more informed
monetary policy. Currently, digital payment data must be purchased from private sector
entities. Further, monetary policy itself can be improved by better targeting of transfers and
liquidity injections.
stability?
There are several papers written simulating the impact on commercial banks. However,
implicit in this literature, and the question, is a somewhat defensive posture, with the financial
sector thought of as being commercial bank-based. In contrast, one should think of the
financial system more broadly, including non-bank intermediaries, using new technologies.
How can the U.S. take advantage of new technologies such as programmability and
privacy-preserving cryptography to increase welfare and productivity?
CBDC?
There are many initiatives for improved cross-border payments, which will continue to evolve,
especially in the absence of a U.S. CBDC. There is also a danger in the absence of U.S.
involvement of a much more fragmented international payments system. On the risk of
fragmentation generally, see the recent IMF Managing Director’s speech:
https://www.imf.org/en/news/articles/2022/05/10/sp051022-md-concluding-remarks-at-the-sn
b-high-level-conference.
The U.S. should take the lead and help with the design and governance, as per the recent
U.S. President’s executive order and the initiatives of international agencies.
To some extent this is a false tradeoff. Modern encryption can protect privacy within a CBDC
while dealing explicitly with KYC/AML/CFT concerns.
Ideally, entry should be open and inclusive, to promote competition in the uses of CBDC.
However, the existing regulatory structure needs to be revised to ensure implementation of
optimized market designs.
sale? If so, how?
If each of multiple payment devices are tokenized, with 1-1 convertibility to the original, and
then put on a centralized platform with CBDC, a coherent scheme for transferability can be
achieved. On the other hand, relying on technical bridges only to transfer across multiple
payment platforms will make coordination on governance, compliance, and the implied
economics much harder.
CBDC?
The flow should go the other way. What are the current gaps in payments and financial
systems that can be mitigated by new technologies?
benefits of a CBDC?
Yes, link current inefficiencies in the financial system to fundamental obstacles to trade and
poor market design, then design CBDC and its associated exchange and contracting platform
as the tool to alleviate. Look for an upcoming working paper from the IMF using exactly that
process in cross-border payments as an illustration of the process.
_________________________________________________________________________
Dr. M. Bliss
Industry
Other: Research
Country
State
New Jersey
Email
A potential benefit of a CBDC is reducing (not eliminating) the corporate pre-eminence that
often hampers small U.S. businesses. Established commerce and supply chains, along with
complex logistical infrastructures, are intricately connected. Those systems also tend to
mainly serve large corporations. When tools and preferences are given to the largest
businesses, it obstructs the fostering of a national economy that thrives and grows at its
fullest capacity. An "intermediated model" as described in the discussion paper would serve
to strengthen and perpetuate the existing large corporate systems. As illustrated, however, it
may not provide opportunities for smaller companies to enter the field and compete, which
prolongs the lack of an all-inclusive economy.��CBDC policy considerations should be geared
to address a potential threat to implementation: how merchants are expected to handle
refunds without harming their businesses. When would merchants be blocked by an
intermediary from using the system? Could they move to another intermediary? Are there
transactions or purchases that would freeze or stop the value transfer? The paper notes that
cryptocurrencies create a "significant energy footprint;" policies should consider whether
merchants could buy or sell CBDC credits (much like real estate air rights). Would the credits
come through the Federal Reserve or an intermediary? Could a merchant use multiple
intermediaries and buy more energy credits?��The CBDC discussion paper raises the issue of
a "large-scale shift" of money from commercial banks to nonbanks. Run risks and instabilities
could be reduced by programming tiered transaction or storage mechanisms into the
blockchain. As with any asset, risks of a CBDC include complete loss of value. The recent
crypto crash, for example, shows what could go wrong with virtual currency when stabilized
by a programmed algorithm. State-sponsored enemies or domestic terrorists could
manipulate algorithms. To prevent financial catastrophes based on manipulated algos, it
should perhaps be considered how stabilizing the CBDC in its aggregate could be pegged to
tangible assets such as federally owned land, commodities, oil, and minerals.
N/A
inclusion?
The CBDC discussion paper does not address which merchants and consumers would be
permitted to use the system. Is there a particular threshold that businesses must attain, such
as stellar credit scores, ample cash reserves, or risk insurance? Are there certain industries
that will be prohibited from using the system (a supply chain, for example, that includes slave
labor)? Could prohibited businesses petition for inclusion (such as by proving merchantability
through a probationary period or adding a "co-signer" who has the approved
characteristics)?��It could take many years and most likely several revisions before a CBDC
would be used by the majority of consumers. When a new technology finds its early adopters,
there are usually an equal number of skeptics and naysayers working to discredit it. It should
be expected that introducing the CBDC will give rise to some significant negativity and serve
to hinder the hoped-for financial inclusion.
CBDC transaction data could be analyzed to discover trends related to employment and
factors influencing price-stability.
stability?
More information on the transaction dynamics will be needed to determine the potential net
positive or negative effects. Based on the discussion paper, it appears there may be a
possibility of the CBDC becoming a somewhat un-influential dynamic in the sea of
cryptocurrencies and digital payment transfer systems already available and in use.
Supra.
Supra.
If the Federal Reserve was able to print an unlimited amount of cash, then it could probably
also program an unlimited amount of digital currencies. Preserving central bank money may,
however, require pre-programming a supply of digital currencies held in the CB's virtual
reserves before a major event occurs. If, for example, merchants announce they cannot
accept cash, households and consumers would need immediate access to virtual currencies
and learn how to use them quickly.
CBDC?
Absent a U.S. CBDC, new domestic and international systems will most likely continue to be
created to fulfill market demands. The vast payments systems could, however, eventually
dilute the value of all digital money and render the USD worthless (worst-case scenario).
Without the CBDC, the U.S. could appear foolish for not having a digital currency, which
would demonstrate a weakness to the rest of the world.
For the U.S. to remain a competitive "large-economy" nation, it would need to create its
CBDC to function as well - if not better – than those of the other nations adopting virtual
currencies.
The CBDC discussion paper does not address the risk of monopolies being formed by large
corporations. The original internet was created in the 1960s and funded by the U.S.
Department of Defense / Defense Advanced Research Projects Agency. The internet
infrastructure has since evolved and is now accessed through telecommunications
companies. The CBDC blockchain technology should be open sourced and managed by the
DoD or another qualified federal agency. Virtual currency transactions should not be
susceptible to outages and "bottle-necking" like the phone and internet companies' systems
often are during inclement weather conditions. Data from CBDC transactions should also not
be subject to collection by a technology corporation and sold to the highest bidder by an
invasive data broker. If the CBDC blockchain is to function as a "public" system, then
transactions should be available to the public in the same manner as a public record or court
document. CBDC blockchain activity would be best served by remaining accessible through a
centralized public database similar to the systems in which court records are maintained.
Nothing on the internet can remain truly private or anonymous. When using a credit card
offline, for example, the transaction information is often shared with or sold to marketing
companies. If intermediaries are providing digital wallets to hold CBDC, they should incur the
responsibility and duty of care to conduct customer due diligence under the Bank Secrecy
Act. When illicit financial activity appears to have occurred, law enforcement should not
encounter difficulties tracing transactions back to a user. Transactions on a publicly viewable
blockchain could perhaps serve as a deterrent to unlawful conduct. At the same time,
however, a public record of a transaction should not appear to be so intrusive that potential
users shy away from using the CBDC.
The CBDC should be designed to operate through a blockchain created, owned, and
maintained by the U.S. DoD or an established academic research institution such as MIT.
Maintaining a blockchain reliant on a corporation, however, could promote greater inequality
and increase the risks of corruption. Corporate ownership or operational management of the
CBCD blockchain would not solve those issues that cryptocurrencies were intended to solve,
such as decentralized or democratized finance.
Yes. Certain transactions may assist the Federal Reserve in meeting its maximum
employment and monetary policy goals. The Federal Reserve could, for example, review how
and where the CBDC is spent, which may assist officials with implementing monetary policy.
In the same manner that credit card transactions have a merchant category code, the CBDC
payment system could be programmed to produce codes for monetary policy.��If, for example,
CBDC is used to pay employees, transaction data could be analyzed to determine whether
the volume matches the number of jobs reported for unemployment statistics. The transaction
financial value could also be analyzed to determine price-stability factors. CBDC could also
have limited spending power such as being used only to pay taxes or purchase gas and
goods tied to the consumer price index.
Yes. CBDC should pay interest when left in a digital wallet or account. As with most assets,
savers need an incentive to hold a balance. The CBDC could offer creative ways in which
savers may earn interest that are not based on the "traditional" saving methods, (i.e., leaving
money alone in an account to earn 1%). A way to encourage maintaining a CBDC balance
may promote doing something positive for U.S. society such as investing into a small
business fund or social impact bond.
There should not be a "limit" per se, but to reduce risks, there could be a value "cap" placed
on wallets. If a wallet is approaching its limit, it may signify it's time to transfer the CBDC
value to a bond or other asset in the blockchain to hold the value and earn interest.
A licensed financial institution, trust, money transfer agent, or fiduciary with a standard duty of
care could serve as an intermediary. While the discussion paper notes that deposit insurance
is not necessary, the Federal Reserve should offer some type of an insurance policy to
mitigate the risk of loss, theft, or calamity outside of an intermediary's control.
For lack of a better word, an "amphibious" or a dual-purpose CBDC could offer greater
currency exchange mechanisms and value preservation. When switching between an online
CBDC to a physical version, an exchange rate could be offered. The Federal Reserve could
use the transfer rate to guide its monetary policies by monitoring the exchange rate and
transactions. The central bank could, for example, offer better exchange rates to encourage
CBDC online to offline conversion or higher exchange rates to discourage conversion when
necessary.��A dual-purpose CBDC could include a digital wallet that acts as a financial "staging
area" or user interface similar to an online checking account. The staging area could offer the
"unbanked" population a way to transact "regular" (day-to-day) banking activities. Users, for
example, could draw from their current digital wallet CBDC balances to create money orders
or checks to print on demand for use offline. The CBDC could be exchanged into other
currencies or transferred to an offline bank debit card (virtual or physical). Digital interfacing
could also offer check cashing services, such as by taking a picture of a physical check and
uploading it to the staging area. Payday loans could be accessed with a few taps on a mobile
device for a quick cash pick-up at a physical location. The information gained regarding how
much value moves into the CBDC wallet would be available and could be used to implement
controls that help prevent overextended borrowing. Policy should determine whether
borrowing or "taking out a payday loan" via CBDC comes from the intermediary or the central
bank.
sale? If so, how?
To stay competitive with all of the other digital payment systems, the CBDC needs to be easy
to use. With a dual-purpose amphibious wallet, for example, users could have the option to
transfer value from a digital balance onto a physical refillable debit/credit card so that it could
be used with merchants that don't accept CBDC. It should also be an immediate transfer,
such as when moving money from one account to another when logging in to a bank account
online or through an app.
Supra.
CBDC?
It depends on how the CBDC blockchain is created and controlled. It should be open source,
accessible to the public, and maintained by the U.S. DoD or another federal agency. There
should not be a reliance on a corporate entity that can control the price and parameters of the
technology facilitating U.S. virtual currency transactions. Microsoft Windows, for example,
updates its system whenever Microsoft decides it's time to upgrade even if the system is
operating just fine. There's no way to effectively stop the process. When the Microsoft
upgrades alter a user's system, however, it can carry a nuisance factor; the user did not ask
for or need the updates but must comply with Microsoft's dictates. If the user loses software
or finds unwanted "apps" on the upgraded system, for example, it requires removing the
unwanted apps or taking time away from important activities to reinstall missing software.
Critical technology such as the CBDC blockchain should not be modeled on Microsoft
Windows. It should also not rely on a single corporate entity's updates or cyber protection
structure that changes based on its profit seeking motives.
benefits of a CBDC?
The most appropriate design principles would entail creating virtual currencies displaying the
Statue of Liberty, American bald eagle, and Eye of Providence shown on the U.S. $1 bill.
_________________________________________________________________________
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inclusion?
1. As digital currencies in both the private and public spheres are adopted over time, the
continued absence of a Federal Reserve CBDC would indirectly blunt financial inclusion. The
dollar is the global store of value, and equitable digital access will ensure that all groups may
benefit. Similarly, the transparency that a CBDC offers will directly combat corrupt elements
that would otherwise crowd out access for marginalized groups. �2. However, ownership of a
smartphone or other hardware, sufficient data availability, and reliable connectivity are just
some of the prerequisites to meaningful participation in a CBDC environment. Unfortunately,
these are out of reach for segments of the US population that stand to benefit the most from
the efficiencies of a CBDC (lower income, rural, elderly, etc.). �3. Our patented digital
payments technology, Payala, addresses the issue of inclusivity by utilizing an inexpensive
smartcard as the ticket to entry to an e-money ecosystem, including for CBDCs. Please see
our answers to questions 13 and 18 below for a more detailed treatment of how Payala
solves for operational resilience, offline transactability, cybersecurity, and inclusion in a CBDC
or other e-money context.
stability?
1. Net Positive. It would facilitate instant stability mechanisms such as stimulus payments,
social safety nets and enormously simplify tax collection, both of which are essential for
stability��2. A CBDC would enable the Federal Reserve to monitor flows in near real time,
enabling micro interventions at the first signs of instability inside the real economy, and the
ability to geolocate problems, enables smaller more targeted interventions which have a lower
macroeconomic impact and overall financial stability impact than very broad stimulus
measures��3. By allowing instant capital movement it would enormously increase the efficiency
of capital allocation��4. But operational resilience and cybersecurity are crucial to ensure the
positives outweigh the negatives
1. Integration of the CBDC as a form of ‘cash’ in addition to physical cash is simply another
tool and would not have an effect on core bank functions other than the safekeeping and
transfer functions which are already partially taken by non bank financial service providers��2.
A CBDC platform with easy and open integrations would allow other service providers to
innovate on the platform reducing rents in the financial system which are currently
monopolised by large banks��3. By forcing banks to concentrate on competitive lending and
other bank portfolio services, it would increase competition which in turn should result in more
efficient capital allocation
1. Yes, it’s essential that an absolute last resort system exists for resiliency��2. Please see our
answers to questions 13 and 18 below for a detailed explanation on how our Payala digital
payments platform addresses the issue of operational resiliency, with exceptional
cybersecurity and true offline cash-like transactability.
CBDC?
1. Cryptocurrencies might take over this task, fostering money laundering opportunities,
shifting security responsibilities on to end users and creating a digital divide by being access
to wealthier individuals and corporations due to the nature of their transaction fees��2. In
addition, the lack of governing oversight that enables money laundering directly undermines
the stability that the dollar brings to the global economy.
CBDC provides a material competitive advantage to a state that implements a well thought
through and executed one, especially if it is open to outsiders, as ease of use is a contributor
to acceptance and trust.
1. Innovations like our digital payments technology, Payala, which is are specifically designed
to manage the risks of unreliable infrastructure/connectivity, cybersecurity, and inclusivity,
which present key challenges to the functionality and integrity of a CBDC ecosystem. �2.
Please see our answers to questions 13 and 18 below for a detailed explanation on how our
Payala digital payments platform addresses the issue of operational resiliency, with
exceptional cybersecurity and true offline cash-like transactability.
1. Ultimately any technical measures are subordinate to policy and legal safeguards. It’s
impossible to meet all of the policy goals of a CBDC via purely technological means��2. A
suitable regulatory framework would have to include checks and balances to prevent
overreach as well as adequate transparency and control. These aren’t technology questions,
but cut to the core of the role of money in society and as such should be debated openly and
honestly with stakeholders and the public
1. Operational resilience (particularly offline capabilities) and resistance to cyberattack are

critical for the integrity of a CBDC. Our solution, Payala, is a patented, cryptographically
secure digital wallet service on an NFC (contactless) card and a cryptographically assured
backend ledger which allows instant payments, both remotely and locally when on-line, and
locally when off-line (i.e., when the mobile phone or Wi-Fi network is down, or no network is
present).��2. The smartcard provides a far more challenging prospect for hackers than a digital
payments system that resides on smartphones, particularly when many smartphones still in
use are outdated and easy to exploit. � �3. Even with exceptional cybersecurity, like Payala,
here are some unavoidable risks such as cryptographic class breaks due to unexpected
breakthroughs in mathematics e.g. number theory or a working quantum computer��4. In the
event of all out attack involving EMP generating weapons or EMP optimised nuclear weapons
it is possible that all devices in wide area might be destroyed. Therefore it is imperative that
there still be physical legal tender still kept in reserve.��5. While it is possible to build in a great
deal of redundancy, it is possible that there might be supply chain problems or hard breaks
which make it impossible to produce devices or microelectronic components for a prolonged
period if they cannot be made inside the United States. While it can be assumed that there is
some base level of technology will survive any attack, what that level would be is currently
open to debate as to the functioning of the United States Government would be under such
conditions.
Yes
This is a wider discussion around how much value should anyone be allowed to have with no
scrutiny or supervision
1. Banks, Credit Unions, Other Financial institutions could brand their own wallets and allow
other value added functions �2. Everyone should be able to get a wallet at cost from the CB or
FI of last resort
1. Yes, this is essential for inclusivity and operational resilience of the CBDC��2. Our Payala
digital payments system features a patented and robust offline transactability that we believe
is unparalleled in the industry. We have shown that it is possible to implement a ledger with
the property that it can be made massively redundant with partial snapshots on hardened
devices (e.g. smartcards with a very limited attack surface) and built in such a way that a
central location has the ability to order transactions in relation to each other using single use
keys to sign transactions. With appropriate cryptography, it’s possible for wallet devices to
check the validity of balances and integrity of ledger instances, and therefore make it possible
to transact offline, as at all times devices can validate balances AND be able to correctly
order events relative to each other. When transactions take place offline, the wallets and
devices used to conduct the transactions all keep receipts which have the transaction details
along with the cryptographic information needed to correctly order the transaction relative to
other transactions. When devices come online again it’s possible to then upload information
to a central location and discard any redundant information. �*Please do not publicly disclose
the link below*�A full commercial write up of this mechanism as implemented in the Payala
technology platform can be found here:
[https://drive.google.com/file/d/14dsfdAvjW-eCljRSgOXmhDjNN-cOdJpq/view?usp=sharing](h
ttps://drive.google.com/file/d/14dsfdAvjW-eCljRSgOXmhDjNN-cOdJpq/view?usp=sharing)
sale? If so, how?
1. Using common existing commodity hardware standards like NFC (ISO 18092) and open
reference implementations of whatever software is required to implement the chosen solution
should allow hardware vendors to incorporate necessary hardware into all manner of
devices��2. There would need to be a list of requirements to meet a minimum security
requirement as set out by the Fed.
1. If a CBDC is treated as digital cash, it can exist alongside payment technologies fairly
easily��2. Cash is a CB function and in this regard the CBDC would function in the same way,
except that it would make liquidity immediately available while connectivity was available
CBDC?
benefits of a CBDC?
_________________________________________________________________________
Professor Gideon Samid, Case Western Reserve University
Industry
Academia
Country
State
Ohio
Email
Gideon.Samid@Case.Edu
CBDC being a cyber entity, it may be imposed upon any set of terms and conditions,
cryptographically expressed, and cryptographically secured. This notion known as "Tethered
Money" (see our book "Tethered Money" published by Elsevier) is expected to revolunize
government payment for social causes, and for innovation projects. Tailoring money to its
intended use -- with cryptographic assurance -- will greatly affect the credit market, charitable
giving, and high-risk projects. The idea being that today's armies of accountants and legions
of lawyers who chase misuse of funds, will be no longer be needed because paid money will
be limited to serve its purpose and no more.�One important aspect of tethering money is the
power of the Federal Reserve to time limit the validity of its use. When a CBDC coin expires,
it must be exchanged against a new valid coin. This flashes out its holder -- unlike physical
cash that survives forever and is the pillar for the criminal element in society.�Another point for
consideration is the idea that CBDC amounts to a solution to write money as a string of bits
that has both an identity and a value. This is a groundbreaking idea that should be used to
create a new cyber financial language to be used to express money written in computer
databases, and in general be used by any financial instrument.�A most important aspect of
CBDC is the unique opportunity to eventually change the national tax base from taxing
income to taxing wealth. Since all CBDC money will be listed as a central bank liability,
regardless of who holds them at any particular moment, then it would be possible to levy
taxes on these coins by either randomly, or uniformly cut a value from them in favor of the
federal government.
We propose to view the challenge of CBDC as comprised of two distinct parts: payment, and
liquidity, where payment refers to the mechanism, the protocol, the dynamics of money in
society, and liquidity refers to the essential nature of the new form of money. Payment is akin
to the railways, and liquidity is akin to the train running on the railways. As we have done for
other central banks, we propose to start with the payment -- build the railway -- and when
done, to build the new form of money to ride on it. The payment defines the transactional
configuration, it is naturally practiced using digital claim checks for nominal dollars. These
claim checks don’t impact liquidity. Each claim check is purchased with liquid dollars that are
kept liquid ready to respond to an instant claim of redemption. These claim checks circulate in
society and eventually are redeemed for the same dollar amount for which they were
purchased. As far as the payment mechanism is concerned these digital claim checks move
through the payment protocols the same way that the CBDC entity will move about. The
experience gained with the digital claim checks will serve us to introduce the CBDC with
minimum friction.
inclusion?
CBDC achieves an embodiment in cyber space of the notion of physical cash to the extent
that a string of bits encompasses both value and identity. As such CBDC can be safely tact in
its owner's phone -- stored, transacted, accounted for, with no need for any registered
account with any financial institution -- cash-like. For example, a new not-for-profit entity
PayUA was just established by a US senatorial candidate, to use digital money technology to
push cash to Ukrainian refugees’ cell phones (denominated in the host country currency), no
account needed, money flows between phones cross national borders. Since the central bank
will control both the issuance of CBDC and its redemption, there will exist the means to
ensure proper use of the CBDC, and achieve liquidity balance, despite an arbitrary level of
anonymity for the in between traders.
The Federal Reserve will enjoy newly gained tools to affect monetary policy by issuing CBDC
associated cryptographically with any desired use limitation. This is the ground-breaking idea
of releasing money to the public, and limiting the use of that money to serve any goal desired
by the Federal Reserve. The essence and the means to achieve this capability are
documented in the book "Tethered Money – Managing digital currency transactions"
published by Elsevier Academic Press, authored by the undersigned, professor Gideon
Samid.
stability?
CBDC on one hand creates a payment privacy ecology which allows for experimentation and
innovation to flourish and creates prosperity, and on the other hand it allows for CBDC coins
to be channeled to flow in ways deemed by the Federal Reserve to be helpful for its canvass
of objectives. Money as a string of bits is money that is subject to rich cryptographic
guidance. We have demonstrated such guidance with BitMint's platform, successfully
implemented in big city banks.
CBDC will affect dramatically the financial sector since CBDC coins operate on a platform
defined by the Federal Reserve. First, limiting the fungibility of money will fundamentally cut
down fraud and money laundering. The fact the all outstanding CBDC coins are listed (even if
their current owner is not known) means that eventually wealth-based taxation will replace
today's income-based taxation, creating a more just taxation ecology.�Stable coins rely on the
mechanism used to achieve their stability. CBDC is per definition stable.
The main adverse impact of CBDC on the financial sector is the replacement cost of the
current system with the new one, including training and gaining experience with CBDC
payment. No special tools needed.
Cash, whether physical or account-based, will be replaced with cash-like CBDC which will
serve all the objectives served by cash today.
CBDC?
It will be catastrophic. We worked for years with China, Germany and others. They all eye the
US market, to offer anonymous cash-like digital coins and effective cross border payment. If
the US stays in the 20th century we will be devoured with foreign payment systems that
cannot be stopped at our national border. The US must offer its citizens the benefits of this
new groundbreaking technology to fend off foreign interest.
See our reply to question 9.
Sure. The paper relies on the prevailing cryptographic tools which are all vulnerable to the
fast-approaching quantum computers. At a close point in time in the future even wire transfer,
not only blockchain will be compromised. There is clear consensus in the cryptographic
community as to this vulnerability and still it is widely ignored. We developed our solutions on
quantum-resistant technology, which attracted the attention of the Chinese PBOC, who chose
to try this IP in a real-world retail CBDC pilot.
We point out a near perfect solution to this balance. It is modeled on the 4th amendment to
the US constitution: ordinary privacy to citizens with inescapable exposure before a court
order. We do so by applying KYC to the first trader of CBDC coins and to the redeemer
thereto, while allowing all in-between traders to remain anonymous through advanced
quantum-resistant cryptography. By announcing on a public ledger that a given CBDC coin
will not be redeemed unless certain terms are met, the FedResrve will effectively stop that
coin from circulation. Its anonymous holder will have a choice either to give it up (since no
one will accept it as payment any longer), or to come forth, identify himself/herself and explain
how the money was paid to him/her.
The most important resiliency factor is off-line trading. One must account for Internet
jamming, and break down due to mistakes, accidents, terrorism etc. Payment continuity is a
must and CBDC must be associated with offline payment on an indefinite basis. We have
designed a robust solution to this challenge -- a new trust vector. Instead of trusting the
money or the payer, we propose to trust the wallet -- a hard wallet. The cryptographic risk of
the prevailing ciphers is very worrisome on account of the looming quantum computers, and
therefore we build our solution, and every solution should be, demonstrably
quantum-resistant.
Yes. Again, because it can be implemented with insuring payment continuity despite Internet
difficulties and because it is the natural progression from metal lumps to metal coins to paper
money, now to cyber money.
CBDC is cash-like and should not pay interest. However commercial institutions will be able
to apply the very same technology to mint digital claim checks for CBDC, and these digital
claim checks may bear interest.
No, and the way we see it, being cash-like, with the identity of the current owner of a CBDC
left unknown, it will be impossible to enforce any such limitation.
Banks and financial institutions should serve as active intermediaries and use the very same
technology to issue digital claim-checks backed by CBDC, these claim-checks will enjoy
much greater flexibility as to shaping them with a variety of limitations. This operation is
recursive, the first digital claim-checks are based by CBDC, and second degree digital
claim-checks may be backed by first degree digital claim-checks, etc.
Definitely. Payment continuity is a must. The Internet will jam or break down every so often
and payment cannot be stopped. Off line payment is best achieved via introducing a new
basis of trust: not the money itself, not the payor, rather the hard wallet that holds the money.
A new nano technology IP allows for construction of such hard wallets (US Patent
11,062,279) which pay one to the other for as long as the Internet is compromised.
sale? If so, how?
CBDC should be used to take advantage of the full range of capabilities unique to it. In
particular CBDC payment is instantly finalized removing the tiresome settlement efforts today.
Since acceptance will be cash-like based on recognition of the money not the payor, the
payment event will be instantaneous and final. This will be the case whether the CBDC itself
is passed around at the point of sale, or alternatively, a digital claim check thereto is being
passed.
We designed and described an InterMint -- a protocol to achieve seamless exchange

between national CBDCs based on unified publicly known dynamic exchange rates. Little new
technology is involved. Details appear in chapter 20 in the Handbook for Digital Currency
published by Elsevier Academic press, 2015.
CBDC?
We envision two important areas of fundamental future innovation: (i) better risk
management, credit policy, and investment strategies to ensure that talent and money come
together to meet societal challenges, and (ii) more elaborate device-to-device payment,
creating a payment ecology in the Internet of Things. We have raised our CBDC design to
become a new cyber financial language applicable to everything financial.
benefits of a CBDC?
The most important under-recognized design principle as we see it, is the idea that CBDC
should be built to last, namely, should be designed to withstand any foreseeable future
development. More: CBDC should be designed to withstand assault by attackers smarter
than its designers. This principle of adverse-innovation resiliency should be taken seriously. It
is therefore that we highly recommend to build CBDC in a form that is the simplest
mathematical way to combine value and identity, and to base its security on perfect (physical)
randomness, not on algorithmic (fake) randomness.
_________________________________________________________________________
ExtoLabs LLC
Industry
Country
State
California
Email
business@extolab.com
In general the paper should address the issue of modern monetary theory and fractional
banking as a source of liquidity in the domestic and international economies, and the impact
that the US-CBDC would have on this. �It should also contrast the policy proposal with other
proposals which Congress may seek to explore such as fully tokenized frameworks (eCash
concept). We do not believe that the design of the eCash concept will sufficiently secure
tokenized “cash like” instruments. �The paper should explain the ways in which other
countries are introducing CBDCs and how the US approach would be different. Based on
what we have seen in other countries, the Central Bank should offer the CBDC via an
intermediary bank; a two tiered approach is highly preferred. �Given zero transactional fees, it
is possible this could begin to dominate transactional volumes, thus creating a risk to the
overall banking system, again, unless offered via an intermediary bank and done in a
guaranteed open loop system where different service layers could be offered. �
Faster payments (FedNow) may ameliorate some of the pain points in the existing payment
and banking systems, and reduce the need for a US CBDC at a wholesale level. However
retail CBDCs reaching the widest range of the population including the unbanked and
underbanked requires near zero transaction fees. �To achieve this, fraud, onboarding/recovery
and dispute resolution costs need to be eliminated as promised by retail CBDC systems and
alternative data monetization strategies will be required to replace transaction fee models
thus invoking consumer, merchant data rights issues that need to be balanced with
compliance requirements.. �Further more such a system needs to be an open-loop payment
system that provides reasonable and non-discriminatory access to all financial institutions
and intermediaries. In summary although we do have robust digital payments infrastructure in
the US there are inefficiencies causing friction for merchants. The current interchange fees of
Visa/MC present friction in payments for merchants. Mobile money solutions are walled
gardened and can lead to data monopolies by big tech. �
inclusion?
Yes, CBDCs could accelerate inclusion or exclusion, depending on the design. Design
should take into account many of the aspects highlighted by international bodies including the
IFC, UNCDF, Asian Development Bank, OECD and others in the formulations found in the
Monetary Authority of Singapore's August - November 2021 “Global CBDC
Challenge”.� https://tribex.co/wp-content/uploads/2021/06/Global_CBDC_Challenge_Problem_
Statements.pdf �In particular, design should neither assume data connectivity nor availability
of a smartphone. There should be form factors that allow for widest possible use in retail and
interpersonal transactions. �ExtoLabs was successful in demonstrating as one of the Finalists
in the MAS Global CBDC Challenge our innovative edge cryptographic solution that
successfully secures offgrid transactions with a mixture of account and tokenized attributes
using low cost and secure hardware wallets and expiring currencies. �Reaching the
underbanked unbanked in the US may require money agents similar to what has developed
in emerging markets with mobile money agents acting as cash-in/cash-out points. To do so,
efficient and trustworthy means of onboarding and KYC by third party agents is required.
CBDCs can uniquely reduce costs and get small merchant adoption for these communities as
well as provide added security and get around costs such as overdraft fees, all of which are
friction points for the underbanked. �Our solution, ExtoPay utilizes edge cryptography and
signed transactions enabled on low cost devices that can last months to years. On device
biometric or PIN based authentication, hardware enclave, and low power modes enabled by
innovative patent pending technologies. We are then taking this solution to key markets,
such as India as they expand into a pilot phase for a CBDC linked to the banking system and
the unique id system running there. �
The programmability of CBDCs with proper privacy frameworks could allow for
unprecedented near real time visibility of impacts of monetary policy with consumers and
businesses. For instance by operating nodes of DLTs of even intermediaries, where only
transaction data is visible but no identity data the Federal Reserve could have a near real
time view of consumer and business spending behavior. Level 3 data collected from a
merchant point of sale system could provide fine granularity on types of purchases and
pricing. All of this can be in near real time, at the aggregate level but based on demographics
and regions. The privacy aspects of such visibility can be managed by keeping all personal
identifiers separate and only accessible to the regulated financial institutions. Strong
consumer opt in for even sharing such anonymous aggregate data can also be put in place.
�The Federal Reserve may not be able to sufficiently influence the liquidity available in market
unless it makes CBDCs available in a two-tiered structure, and allows banks to use the
issued CBDCs as a source of reserve currency. Quantitative Easing mechanisms may not be
as effective, although that should be explored in future papers. �It is important to have
intermediary banks acting between commercial banks. We recommend in all cases, for cross
border, and for domestic, that there is an intermediary bank. The intermediary bank then
provides guarantees of privacy and increases the liquidity available.�
stability?
First, given the key role that the US Dollar plays as the global reserve currency and its role in
global commodity pricing and transactions, the CBDC design has significance. As CBDCs
gain in popularity globally, there is a potential for missing out on a new “reserve currency”
long term. �CBDCs, if issued via intermediaries, would potentially disrupt the current Central
Bank currency over time. It would be important to have sufficient throttling in place to avoid
massive shifts of currency. �
The largest risk would be if CBDCs are issued directly to consumers. This could shift deposits
out of banks and impact credit facilities banks provide to the market. This is the main reason
to pursue a two tier system where Banks are still holding the CBDC deposits on behalf of
consumers and businesses. �The risk of CBDCs in crowding out the USD in global markets
should be anticipated. This should be by design but the transition to CBDC should be
carefully managed with appropriate trading stops and regulated futures. �
The most powerful tool would be to adopt the two tier distribution model where financial
intermediaries are still in the loop. This addresses risks without impacting the design of CBDC
systems. It would however require an open-loop payment layer for wallets issued by such
intermediaries to be able to transact with each other. This can be achieved via an inter ledger
layer which connects the private DLT ledgers of each financial intermediary. Such an
approach can also overcome privacy concerns and the Federal Reserve will not have access
to KYC data of consumers or businesses held separately by regulated financial intermediaries
based on current compliance and privacy rules.
Yes, public access to a digital CBDC or physical note will ensure that the public always has a
baseline alternative to commercial offerings. Private operators may offer similar services with
many value adds that consumers find appealing, but should never be in a position to levy
unlimited tolls on commerce.
CBDC?
In the absence of a US CBDC, we anticipate that networks of protocol based “currencies” with
automatic pricing and hedging will evolve, and without sufficient oversight and transparency
will open up new avenues for arbitrage and exploitation of currency risk. �Domestic payments
are likely to further fragment into different stable coins and/or move to the FedNow system
with a high degree of consumer confusion over what is being transacted and by whom. �
The US should maintain a leadership position. CBDCs issued by competitive economies may
seek to denominate debts and payment flows in those alternatives and thus diminish the role
of the US Dollar as the reserve currency. �
Operational risks deserve greater attention as securing the “printing” (issuance) and
“destruction” (retirement) of the CBDC token or units will be important to get right. When
considering central ledgers versus DLTs, the additional security and resilience possible by
DLTs should be evaluated not just scalability. Supply chain and operational security will be of
paramount importance.
At the level of transactions, the identity of the person in the transaction should be
proportionally tied to the size of the transaction. Moreover, strongly enforced and time limited
opt-in rules and consumer data ownership rights should be proposed as a counter to the
tendency for private actors to seek all data from all transactions at all times. Identity data
should be kept separate from transaction data. Edge based cryptography and Zero
Knowledge Proofs can bring significant privacy protection from counter parties collecting data
without consumers opt-in.
A CBDC design should adopt edge-based security as is familiar in cryptocurrency systems,

regardless of whether a DLT is used to record transactions on the backend. This
methodology encapsulates transaction parameters in digitally signed messages that are
immutable, idempotent and unforgeable. Such messages can then be safely transmitted over
insecure, unreliable and asynchronous communication channels. If any portion of the system
is unreachable, messages may be saved for replay at a later time, subject to expirations
encoded in the transactions. Every transaction eventually recorded on the ledger can be
unequivocally attributed to the possessor of a certain private key. Ideally, private keys are
generated within secure hardware enclaves which they never leave to ensure that only a
single copy exists. Where duplicates are desired e.g., to allow for loss or sharing, alternative
cryptographic methods should be sought.�When a customer hands a banknote to a merchant,
both can readily agree when the transfer has completed. Such agreement cannot be assured
when a digital message is sent over an unreliable channel. E.g., if the sender fails to receive
an acknowledgement, it could be that the original message was lost, or the acknowledgment
was lost. This problem is known as the “Two Generals Problem” and is known to be
unsolvable. Consequently, no CBDC payment system can guarantee real time finality. This
presents a challenge for in-person payments where each party would like to walk away with
certainty that a payment has either been made or has failed.�Conventional card payment
systems rely on tamper-resistant Point of Sale devices as an authority which both merchant
and customer can trust. If it shows the transaction is approved or failed, it can be relied upon
to ensure that the backend eventually records that same result, even if connectivity is lost
during a transaction. If these mechanisms fail, one party or the other may notice a
discrepancy on their monthly statement and raise a dispute with the payment service
provider.�ExtoPay operates in similar fashion, but equipping end-users with a tamper resistant
device that can “finalize” transactions locally over peer-to-peer connections, with
asynchronous settlement on the backend, when connectivity is available. This local
“finalization” remains subject to settlement risk, but only for the case where a hardware
device has been compromised, much like the case of accepting a banknote that later proves
to be counterfeit. In the case where WAN connectivity is available, this risk can be
immediately removed, greatly diminishing the potential proceeds from an attack on the
hardware.�
Yes, a CBDC should be legal tender.
No. This would make it a competitor to banks and could potentially encourage consumers and
businesses to keep their balances as CBDC as opposed to keeping them in a bank account.
This can adversely affect assets of banks and credit they make available to the economy.
Assuming a two tier system where the amounts held are still considered to be on the books of
a bank then no. But if its a direct issuance by the Federal Reserve to consumers then yes
there should be limits in order to avoid impacting the banking sector’s balance sheets.
Banks so that they CBDCs held by their customers show on their balance sheets but
facilitated by payment service providers and fintech, as long as the open-loop system is
maintained and consumer privacy is addressed and no data monopolies are formed. �Service
providers that abide by certain protocol requirements and new compliance regulations should
be allowed to have a key role in offering channels and payment mechanisms. �
Yes. CBDCs should have offline capabilities, at least for last mile transactions. Offline
capabilities can be modeled after conventional paper checks, but where signatures are
unforgeable digital signatures. If the private key required to sign checks is known only to a
tamper-resistant hardware device, and the tamper resistant hardware is provided an accurate
starting balance, it can be relied upon not to overdraw available funds. To guard against
hardware compromise, checks can be settled on the backend ledger before allowing the
recipient to spend. To limit the proceeds of any hardware compromise, offline spending
ability can be bounded by a maximum amount and an expiration date. These parameters can
be conveyed to potential counter-parties in a “Spending Authorization” signed by the Payment
Service Provider. In that sense, the Spending Authorization is like a Certified Check, with the
recipient and amount left blank, but subject to an upper limit. Fraudulent accounts can then
be disabled by not renewing Spending Authorizations. Counterparties can be further
protected by providing a block list of fraudulent accounts whose Spending Authorization may
still be valid.�In order to be more appealing than cash, a CBDC should protect the owner
against loss. However, the private key that controls the account cannot be duplicated outside
the device without introducing the risk of double spending. Thus, an independent recovery
key should be associated with the account that is able to authorize a special transaction:
disable the account and designate a recovery account to which any funds that remain after a
Time Lock expires can be transferred. The disable operation can block issuance of any new
Spending Authorizations while still allowing any outstanding, non-expired transactions to
settle. If the owner in fact remains in possession of their device and attempts to refresh the
Spending Authorization before the Time Lock expires, they will discover their account has
been disabled, and can abort the recovery, by presenting a transaction signed by both the
original account key and the recovery key. Hence, an attacker who acquires the recovery key
cannot take over an account as long as the device owner makes regular use of their
device.�We believe that the ExoLab protocols and approach should be part of a new emerging
standard. �
sale? If so, how?
Yes, assuming a direct to consumer CBDC, rather than a two tiered system, then for sure the
acceptance networks and ability to push transactions from device to device and to bank
accounts upstream will be important and frankly a challenge given the Federal Reserve's
ability to onboard both consumers and merchants at scale. Point of sale transactions are the
main contact people have with the use of currency on a daily basis. Disruptive point of sale
solutions are needed so that the current costs of interchange are not imposed on CBDCs.
Such merchant point of sale systems which can be a smart phone or a hardware wallet are as
critical as the consumer wallets if not more so as this is where some of the most important
data of value to the Federal Reserve’s monetary policy can be gathered (with
consumer/merchant privacy issues addressed).
DLTs can interface with banking and other payment APIs. Proper secure interfaces need to
be supported by DLTs or other ledgers used for CBDC issuance. �FedNow or other universal
API to bank accounts should be considered. UPI in India has achieved great success in
brining efficiency to payment rails while still keeping the financial sector engaged and stable.
CBDC?
Programmability of CBDCs is one of the most important aspects of how both the Federal
Reserve but also other actors in the ecosystem can benefit from CBDCs. Scalability and
programmability are still moving targets and ideally permissioned and private distributed
ledgers can be optimized to handle the scale required. There are many benefits to DLTs not
as open networks but in the private/permissioned context that can result in openness and
resilience of CBDCs.
benefits of a CBDC?
For example, and speaking for some members of the team (James Dailey and Orang
Dialameh): An additional design principle could be around a co-benefit to help bring climate
risk under control. For example, the design could require purchase of carbon offsets for each
minted CBDC, thus creating a massive market demand for such offset projects globally and
especially in the US. Initial design could be 0.5% of all issued currency must be backed by a
carbon offset credit and ramp up if such funds are insufficient to incentivize market shifts. �
_________________________________________________________________________
Better Identity Coalition
Industry
Trade Organization
Country
State
Email
info@betteridentity.org
inclusion?
stability?
CBDC?
sale? If so, how?
CBDC?
benefits of a CBDC?
We were pleased to see the Federal Reserve note that any CBDC should be “identity
verified.” �Identity is far and away the most commonly exploited attack vector in cyberspace;
the vast majority of breaches each year leverage compromised credentials to get into
systems, and FinCEN last month flagged a sharp uptick in identity-related financial crimes,
noting “In 2021, financial institutions reported to FinCEN a substantial year-on-year increase
in potential identity verification, impersonation, and compromise-related suspicious activity.”
This followed remarks from FinCEN’s Director in 2019, stating “The abuse of personally
identifiable information and other building blocks of identity is a key enabler behind much of
the fraud and cybercrime affecting our nation today.” �Strong identity solutions are needed to
help protect consumers’ money and data, prevent financial crimes, protect privacy, and guard
against identity theft. �Against this backdrop, we note that it will not be feasible to create an
identity-verified digital currency without also ensuring the United States has adequate digital
identity infrastructure. Unfortunately, there is a gap between the kinds of identity verification
solutions available to support physical transactions – based on nationally recognized,
authoritative government-issued credentials such as driver’s licenses, birth certificates, and
passports – and the solutions available in the digital domain. �While industry innovation has
helped to fill this gap, the Coalition believes that government must also play a role. The
Better Identity Coalition has endorsed H.R. 4258, the Improving Digital Identity Act of 2021,
as the best way for the United States to close the gap between physical and digital
credentials. This legislation would ensure that the government enhances the security,
reliability, privacy and convenience of digital identity solutions that support and protect
transactions between individuals, government entities, and businesses, and that enable
American to more easily assert and protect their identity online. �As efforts to create a CBDC
advance, we urge the Federal Reserve to continue its focus on the importance of identity
verification, as well as highlight the importance of legislation such as the Improving Digital
Identity Act as a way of ensuring the country has adequate digital identity infrastructure to
support the requirements of a CBDC. �
_________________________________________________________________________
Vastogen, Inc.
Industry
Technology Company
Country
State
Texas
Email
dimitra@vastogen.com
The Federal Reserve’s initiative to open a dialog regarding CBDC, and to reach out to the
public for feedback, are encouraging steps forward. However, this dialog should expand its
scope beyond CBDC, and include blockchain-powered currencies and assets, as a
diversified, robust strategy to maintain and expand the global influence of the United States,
and ensure our National Security and dominant global financial status. �Specifically, the dialog
should: �Consider the potential of a public / private partnership with USDC or other stable
coins; �Address in detail the CBDCs issued or developed by other governments, as a matter of
National Security; �Ensure that privacy considerations as well as impact of government
monopoly imposed on the financial system are thoroughly addressed; �Leverage the
extraordinary level of innovation and experience of the private sector, independent
developers, Bitcoin miners, etc.; �Include discussions around cryptocurrency regulations;
regulations unfavorable to crypto will severely limit the ability of our nation to rely on a
diversified portfolio of digital currency solutions. �By the Federal Reserve’s own admission:
“Today, the dollar is widely used across the globe because of the depth and liquidity of U.S.
financial markets, the size and openness of the U.S. economy, and international trust in U.S.
institutions and rule of law.” So, the future solution beyond the dollar should be the one that
further enhances our financial system and the openness of our economy. Such a solution can
only arise from a diversified approach, reflecting the very openness and inclusiveness of our
system, and not from blindly embracing government monopoly. �
The decentralized nature of blockchain-based solutions such as Bitcoin will increase the
competitiveness and stability of the US financial system by: �1. Providing assurances that the
government will not interfere in private transactions �2. Ensuring basic privacy rights��3. Being
invulnerable to attack from a single node. � �Historically, it seems like the choice has largely
been between security/privacy or convenience/fungibility.�� CBDCs preserve the
convenience/fungibility while almost entirely removing the security/privacy benefit. � Bitcoin
manages to provide both.
inclusion?
stability?
CBDC?
sale? If so, how?
CBDC?
benefits of a CBDC?
_________________________________________________________________________
Industry
Other: Civil Society
Country
State
Massachusetts
Email
lia@fightforthefuture.org
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inclusion?
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stability?
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CBDC?
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To:�The Board of Governors,�The Federal Reserve System,�United States.��We write in response

to the call for public comments to Money and Payments: The U.S. Dollar in the Age of Digital
Transformation to contribute a civil society perspective amid evaluation of a potential United
States Central Bank Digital Currency (CBDC), sometimes referred to as a “digital cash”. This
letter answers question 12: “How could a CBDC provide privacy to consumers without
providing complete anonymity and facilitating illicit financial activity?”��Any CBDC or
government-backed form of digital cash must have anonymity equivalent to or exceeding
paper cash — or as close to such anonymity as technology makes possible. Anonymity
should be a paramount consideration in pursuit of a more just and safe financial system.
Although physical cash is subject to counterfeiting and use in crime, we have always
absorbed certain costs as a society in exchange for the enormous benefits that physical cash
brings. We should similarly be willing to absorb proportional costs in exchange for the benefits
that government-backed digital cash could bring.��The financial privacy of everyday people
must come first. Strong encryption is crucial in ensuring safety in the digital world, and must
be exploited to the greatest extent possible in the design of any digital cash developed by the
US government. Privacy must be, to the greatest extent possible, protected by
technology—not merely by statutory privacy protections which will not give people the
confidence that their privacy is protected that they both expect and have a right to. Placing
surveillance backdoors in every American’s wallet in pursuit of incremental progress on
reducing crime will do more harm than good and undermine human rights.��It is also important
that, like cash, CBDCs be designed to be universally accessible and exchangeable for goods
and services without transaction fees. To the extent possible, the government should aim to
issue anonymous digital cash that users can transfer directly to each other without fees,
tracking, centralized ledgers recording every transaction, or requirement for a smartphone,
tech savvy, or an internet connection.��Money should be private and permissionless. Just as
with physical cash, there should be no middleman tracking every use of CBDCs or blocking
transactions it does not like. Overbroad application of securities and anti-money laundering
rules in ways that threaten to expand government surveillance or censorship of the financial
transactions of everyday people, NGOs, and small businesses broadly threatens privacy and
equity.��Financial regulators should consult with technologists and human rights experts to
determine appropriate architectures, technologies, and policies to address fraud, abuse, and
money laundering where possible and without infringing on human rights or privacy. New
technologies may make it possible for the largest actors to be held to account while protecting
the privacy of ordinary people transacting at levels below the current $10,000 cash reporting
requirement. But a transition to public digital cash should not become a reach for a totalizing
solution to every possible crime that is achieved by throwing privacy overboard. As with other
illegal transaction vehicles (paper cash, art, diamonds), the authorities already have broad
investigatory powers at their disposal to investigate illicit transactions, and those powers can
be brought to bear on illicit digital transactions as well without baking surveillance into the
very architecture of our new money��Creating a new form of money is a big step. If it is to be
done, it must be done right. CBDCs should be a public good that is available to all and that, to
the greatest extent possible, replicates the advantages of physical cash—especially privacy,
anonymity, permissionlessness, and accessibility for all.��Signed,��ACLU�Fight for the
Future�S.T.O.P. - The Surveillance Technology Oversight Project�Muslims for Just Futures �San
Francisco Public Defender�Restore The Fourth� RootsAction.org� Constitutional Alliance�Erotic
Service Providers Legal Education and Research Project (ESPLERP) �Yale Privacy
Lab�Organization for Identity and Cultural Development (OICD)�Advocacy for Principled Action
in Government�
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sale? If so, how?
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CBDC?
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benefits of a CBDC?
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_________________________________________________________________________
SHAZAM, Inc.
Industry
Country
State
Iowa
Email
sgreen@shazam.net
inclusion?
Some people do not wish to maintain a custodial account relationship, so there is no

advantage to an account-based CBDC for these individuals. However, a token-based,
cash-like CBDC could provide the benefits of risk-free money that can also be used for
efficient electronic transactions. Unlike an account, with a token-based solution, users may
opt to hold their tokens in self-custody as they do today with paper cash or coin.
A CBDC that is designed to be cash-like, that is not account-based, and does not pay
interest, should not add any new dynamics to monetary policy. With controlled circulation, it
has no more impact than physical forms of cash (paper bills and coins). It may provide some
new benefits from improved accounting for cash in circulation over paper and coin by
providing for more real-time monitoring of flow and velocity.
stability?
Private industry stablecoin solutions may become another point of centralization in deposits
and the monopolization of payments. Token payments are unlike traditional payments, where
multiple networks may be affiliated with an account or debit card network. Unlike funds on a
debit card, which may be accessible through multiple networks, liquidity is locked into and
committed to a particular token. Network effect and scale will be prominent factors that could
be used to drive competition from payments if the use of stablecoins becomes prominent in
payments. A general-purpose token could be issued by the FRB as an alternative to private
industry stablecoins. While it would be a direct CBDC, it would still be intermediated by
banks, who would distribute it to the public like they do paper cash and coin. Similarly, the
tokens will be a public good and a level playing field will exist for derivative services, including
distribution, custody, and payments.
CBDC?
A token-based CBDC may be distributed through banks. Once in circulation, like physical
cash and coin, the tokens may be used with some degree of anonymity. The token format
helps provide cash-like qualities, such as anonymity, the option for self-custody, and privacy.
Reasonable controls can be enforced through technical solutions such as smart contracts or
by rules that require some transactions to be processed by banks or service providers
offering custodial wallets. For example, policy may limit the amount that may be stored in a
wallet without requiring identity verification of the user. Transaction policies may be used to
limit anonymous use to smaller, face-to-face transactions while large or remote transactions
may require user identification and screening. �Transaction information may be obfuscated to
provide a reasonable degree of privacy. Under certain circumstances, by a court order for
example, transaction data could be de-anonymized to assist authorities in preventing and
prosecuting illicit activity.
If the CBDC is cash-like, in the form of a token, and it is a direct CBDC, then it should be legal
tender like physical cash.
No. Paying interest on a CBDC may negatively impact deposits (Designing Central Bank
Digital Currencies, IMF, January, 2020).
If the CBDC is a general-purpose token, if it is “cash-like,” and if it does not pay interest, then
a person should be able to possess an unlimited quantity like physical cash money.
Banks should continue in their traditional role distributing cash to the public, providing custody
and value-added services such as payment processing.
sale? If so, how?
CBDC?
benefits of a CBDC?
A direct CBDC that is a general-purpose token, and meant to be cash-like, may be the optimal design.
It provides many of the benefits sought by stakeholders without having some of the detrimental
impacts associated with other forms. A narrowly scoped CBDC, meant to deliver improvements over
the use of cash and coin, provides the most benefits with minimal detrimental impact to the financial
system or the public. To assist with financial inclusion, it can provide safe, electronic transactions
and store of value for people without bank accounts. Everyone else that holds and uses physical cash
can also benefit from improved usability of a digital form of cash. It would be complementary to paper
cash and coins. To provide a stable base for today’s decentralized finance (deFI) and meet future
payment innovation needs, a general-purpose token can provide a systemically safer alternative to
stablecoins. Being “cash-like” may help a CBDC avoid creating unanticipated, negative impacts to
the system. Individuals would most likely view a “cash-like” CBDC token as an alternative to paper
cash and coin not commercial bank deposits. Other models, where individuals have a CBDC account
and earn interest may compete with deposits (Designing Central Bank Digital Currencies, IMF,
January, 2020).
_________________________________________________________________________
FirstBank
Industry
Country
State
Colorado
Email
kelly.kaminskas@efirstbank.com
FirstBank supports the points raised in the American Bankers Association’s (ABA) response
to the Federal Reserve Board’s (Federal Reserve or Fed) Money and Payments: The U.S.
Dollar in the Age of Digital Transformation discussion paper (paper). We do not plan to use
our response to restate similar opinions but will reinforce certain points or add individual
experience to provide context. �Most notably, we do not see a compelling case for a Central
Bank Digital Currency (CBDC) in the United States today. Potential benefits are uncertain
while the downside risks are real. A CBDC would not be superior to alternatives that exist
today. �The paper proposes that a U.S. CBDC would offer digital money free from credit and
liquidity risk and indicates mechanisms in place to reduce these risks are imperfect. The
Federal Reserve plays a key role in ensuring the effectiveness of these mechanisms and they
are working. Financial institutions are subject to stringent regulatory oversight and
examination and not once has a deposit under the FDIC insurance thresholds been lost. This
would indicate mechanisms are sufficient to mitigate risk appropriately, are proven, and
resilient. �The paper also proposes that CBDC might generate new capabilities to meet the
evolving speed and efficiency requirements of the digital economy. The financial sector has
been innovating to meet the needs of our digital world and consumer adoption is already
strong. Since joining the Zelle P2P network, we have seen double digit growth in P2P
payments every single year since 2018. We are in process of connecting to The Clearing
House’s Real Time Payments network and are working to connect to the FedNow network as
well. The private sector and the Federal Reserve have already risen to meet speed and
efficiency expectations in payments.��In very recent history, we saw financial institutions
support trillions of dollars in stimulus payments for businesses, consumers and families.
Banks managed to set up loan programs and distribute trillions of dollars in the matter of
days. This included setting up loan application platforms, designing automated systems for
disbursement, adjusting to changing requirements on a dime, opening thousands of new
accounts, standing up specialized call centers, and educating thousands of consumers and
small business owners. FirstBank is proud to have lead the state of Colorado in the number of
PPP loans distributed to customers, originating more than 20,000 loans and providing $1.4
billion in economic relief for our communities. The paper indicates CBDC may improve the
efficiency of payments associated with similar stimulus programs, but it fails to account for the
back and front office ecosystem required to support them. It also assumes all intended
recipients will already hold or will choose to hold accounts prior to the issuance of such
stimulus. All payments have the need for balancing, managing rejections, exceptions, risk
scoring or other issues which would just not have been possible in such a short time with one
entity acting alone. Having a distributed financial system ensures the burden of similar
programs is shared by thousands of banking institutions. It was notable that the biggest
bottleneck and frustration in the PPP loan process was the inability of the SBA’s systems to
scale and handle the significant volume of activity associated with this program. Banks were
able to be nimble, setting up loan platforms overnight.�In terms of policy considerations, there
are several significant economic and financial stability impacting concerns raised in the paper.
However the paper does not speak to some of the basic challenges and complexities with
setting up, maintaining and innovating within a new payment rail. As the Fed is acutely aware
with its construction of FedNow, there is a magnitude of operational, technological, financial
and procedural considerations. There will be major oversight and regulatory implications as
well. Consider ACH or card payment rails where there are established and mature payment
processing, operational requirements, dispute mechanisms, and consumer protections that
have been constructed over decades to where they have become reliable, resilient and
trusted by consumers and retailers. All of these same elements will have to be considered if a
new rail is built for CBDC.�
Many of the benefits of a CBDC could better be achieved by bank issued, regulated
stablecoins and we would point the Fed to the ABA comments on this subject.�Additionally, the
introduction of FedNow represents a significant change to existing payment rails, offering real
time settlement capabilities. If tokenized payments, smart contracts or blockchain technology
is required, the Federal Reserve could look to migrate its current payment rails towards these
technologies versus redrawing the current two-tier banking system.�Lastly, the private sector is
solving nearly all of the outlined benefits of a U.S. CBDC. More innovation happens within the
free market than in the government system which has significant hurdles it must cross before
it can introduce new products or services. The market can absorb ‘quick to fail’ ideas and
throw together proof of concept ideas that may or may not be successful. Government entities
do not have the same luxury of failure. Consider the non-evolution of the wire system over
many decades versus recent innovation in all other payment channels.�
inclusion?
One of the most repeated reasons for pursuing a retail model U.S. CBDC is to support
financial inclusion. These proposals have focused solely on the question of access to a
deposit account, which is a grossly oversimplified understanding of what it means to be
financially inclusive. �FirstBank has been active in financial inclusion for decades, setting up
specialty banking centers to serve Asian, Latinx and Black/African American customers.
These centers focus not just on deposit accounts, but on customer service in preferred
languages, lending needs and financial advice. We are also proud to have stood up an
innovative grant program to support home-ownership among Black and African American first
time home buyers in our community. Financial institutions know their communities and their
unique needs and are able to tailor products and services – not just accounts, to meet those
needs. We serve customers not just digitally but with physical branches, another banking
need that CBDC cannot meet. The private sector is innovating in this space more than ever
and is fully equipped, committed, and better able to meet the needs of the under and
underbanked than what a CBDC offers. �In the 2019 FDIC study, 94.6% of households are
banked – the most on record since the survey began in 2009. The study indicates banking or
being underbanked is a factor of socioeconomic circumstances and does not point to a lack of
products within banking ecosystem. The number one reason cited for not having a bank
account is not having enough funds to meet minimum balance requirements. Given
thousands of no minimum balance account options across the nation, including one at
FirstBank, the solution is not “Fed wallets” but continued evaluation of broader based
solutions to develop and support stronger socioeconomic health for all, particularly for people
of color.�It is notable the third most cited reason for being unbanked is avoiding banks
provides more privacy. Given its digital nature, even with privacy as a driving tenet, this is
another challenge that wouldn’t be solved and in fact made worse with the development of a
U.S. CBDC. We would encourage the Federal Reserve to study this factor very closely, not
just for financial inclusion but for general consumer trust and likelihood of adoption. It is highly
improbable there would ever be 100% adoption of any financial product or service. It bears
more study to determine exactly what consumer adoption would be and given these
concerns, if a CBDC will not be adopted by all, does it still provide the supposed benefits or
resolve concerns of the underbanked. �
We would refer the Fed to the ABA’s response, under the heading 'A CBDC is likely to
balloon the Fed’s balance sheet and impede the transmission of Monetary Policy'.��There was
an enormous amount of stimulus placed into the U.S. economy over the past two years. This
stimulus was multiplied many times through fractional banking, by placing deposits within the
banking system. During this time of stress, those funds were inserted back into the economy
in the form of loans and investments. Last year, while navigating the pandemic both at home
and work, our teams originated over 5,800 mortgage loans and more than 1,600 commercial
real estate loans for a total of $8 billion. This effort and leveraging of customer deposits
ensured the pandemic remained a health crisis and did not morph into an economic crisis.
Dollars were still flowing into the economy to support consumers buying homes, developing
properties and all of the activity that supports a healthy and vibrant economy. Local
knowledge is important to know where the biggest needs and potential impacts can be made.
These decisions are best done by bankers within the communities they serve versus the
Federal Reserve in Washington D.C.�� The nature and business of banking creates an
incentive for bankers to put money to work. Carefully and intentionally designed, the banking
system is critical to the implementation of an effective monetary policy. The two are so
intertwined, this factor warrants a significant amount of modeling, study and serious
consideration by the Federal Reserve before determine whether or not a CBDC would help or
harm its ability to carry out its mandates.�
stability?
The Federal Reserve “promotes the stability of the financial system and seeks to minimize
and contain systemic risks.” The creation of a U.S. CBDC actually creates new systemic risk
in several ways, many of which are outlined in the Fed’s paper. �At present, one of the most
acute risks to a nation is the risk of a cyber-attack that focuses on key infrastructure. With the
creation of a U.S. CBDC, a central, concentrated repository of consumer funds is created.
Today these funds are dispersed over the more than 9,000 banks and credit unions across
the United States. A centralized source of consumer funds creates a single point of failure
and incredibly high value target for nation state cyberattacks. We agree with the Fed’s
comment that securing CBDC would be particularly challenging and essentially impossible in
the intermediated model proposed, as the network would have thousands of entry points not
under the direct control of the Fed. �During times of economic uncertainty or stress, CBDC will
siphon funds from the banking industry. As an example, during the first two weeks of March
2020 as things began shutting down in the United States, FirstBank saw a 14% increase in
cash withdrawal activity at branches. During the week of March 15th, withdrawal activity
spiked, increasing by 53% over the prior year’s average. At the same time, we fielded dozens
of requests from customers asking to withdraw significant amounts, ranging up through six
figure amounts. Similarly, as Russia invaded Ukraine earlier this year, we saw cash
withdrawal activity spike by 26%. Coming into the bank to withdraw cash involves a certain
level of friction which allows bank management to provide counsel, education, and help. With
a digital public money option, no friction would exist to stop money from flowing from private
banks to the Fed. This ease of “flying to safety” could turn moments of uncertainty spiraling
into significant deposit outflows from banks, impacting their ability to lend and invest through
challenging times.�
We support the ABA response on how a CBDC would adversely affect the financial sector
and would emphasize the following points:�–�A CBDC undermines the important role banks
play in financial intermediation and would impact consumers and small businesses in the form
of reduced credit availability and increased cost�–�Attempts to limit deposit outflows by capping
account size are not sufficient to mitigate the adverse impact, creates an uneven impact to
community banks like ours, and will create logistical challenges that will be very difficult to
manage�In an attempt to quantify the potential impact a CBDC could have on bank deposits,
the following is an outline of our consumer transaction deposits at risk at varying CBDC limit
amounts. �–� If CBDC “accounts” were limited to less than $1,000, just under 60% of consumer
transaction accounts could be at risk for a total of $455 Million in deposits. �–�At limits of less
than $5,000 the number of accounts at risk increases to 77% and deposits at risk jump to
$952 Million.�–�At limits of less than $10,000, 85% of accounts are at risk for a total of $1.329
Billion.�
We are not aware of any tools sufficient to mitigate the adverse impact a U.S. CBDC would
have on the financial sector.
The Fed’s paper indicates a CBDC would be in addition to, not a substitute for central bank
money in circulation today. Cash is still a consumer option and there is not a need for a digital
substitute. A decline in usage of cash will remain the consumer’s choice. Consumers are
choosing to make digital payments, using private versus central bank money and are opting
out of cash transactions. There are sufficient digital options for payments today, flowing
through the system in a safe and sound manner, without recreating digital public money.
CBDC?
There is considerable evolution in the cross-border and digital payment landscape happening
today through both public and private sector innovation. The development of person to person
payments, same day ACH, and creation of the Real Time Payment and FedNow networks
are just a handful of examples. Card networks offer ubiquity across borders today and can be
used to make payments that are seamless from the consumer point of view. �There are
significant assumptions built into the perceived potential of CBDC to improve cross-border
payments, some of which the Fed outlines in its paper. First, an improved process assumes
other countries will either hold U.S. CBDC themselves, in order to achieve the efficiencies
with settlement CBDC could provide; or, it assumes that all CBDCs are interoperable. As the
paper outlines, interoperability would require significant international coordination to create
standards and infrastructure and would still require some sort of foreign exchange or
conversion in order to be utilized outside the United States.��Finally, the use of stablecoins or
other digital assets represents a significant development in cross border payment capabilities,
as evidenced by recent donations to Ukrainian citizens. Unless these same citizens
individually held U.S. CBDC, or U.S. CBDC was interoperable with their country’s CBDC
(assumes the country has one), this type of activity or support would not be feasible. This also
assumes individuals can trust their country’s governance of their CBDC; this will not be
possible for persecuted persons or those fleeing situations of genocide, for example. U.S.
Dollar tethered stablecoins provide significant cross border payment capabilities today, and if
brought into a safe and sound banking system, can provide benefits beyond what a U.S.
CBDC may offer.�
We do not feel a U.S. CBDC is required to support the Dollar’s international role and support
the ABA’s response to this question. As quoted, “The dollar’s status as the world’s most
widely used currency for payments... fundamentally stems from the overall size of the U.S.
global economic presence, our open financial markets, their deep financial liquidity,
widespread international trust in U.S. public and private institutions, and the U.S. commitment
to the rule of law. …Other countries’ use of non-dollar CBDCs will not automatically duplicate
any of these key factors.” �The strength and position of the Dollar’s international role is further
proven by its dominance in the digital asset market that already exists today. U.S. Dollar
tethered stablecoins constitute roughly 98% of all stablecoin volume, according to
CoinGecko. The fact that the DeFi market has flocked to U.S. Dollar denominated digital
assets to support trades and activity points to the U.S. dominance in even non-traditional
financial markets.�
There is an inherent tension between privacy and preserving national security or preventing
financial crimes, which has not been resolved today and not likely to be solved by the creation
of a U.S. CBDC. This tension would likely increase and tilt in one way or another, with the
creation of digital dollars. Today, not even central bank money, or cash, is completely
anonymous if you factor in FINCEN reporting requirements for certain cash transactions.
As stated earlier in the response, a centralized source of consumer funds held at the Fed,
creates a single point of failure and incredibly high value target for nation state cyberattacks.
We agree with the Fed’s comment that securing CBDC would be particularly challenging in
the intermediated model proposed. �In order for there to be operational resiliency, the Fed
could look to its current systems and those of the greater payments ecosystem. Even with
countless data centers and redundancy in all forms and functions, not even the Fed’s network
or card networks are ever completely failproof as evidenced by outages over the last few
years.�
The determination whether or not to pay interest should come after the Fed has determined a
viable reason or use case for a consumer CBDC. It is a layer of uncertainty on an
undetermined amount of risk to financial system stability. It would exacerbate the movement
of money into CBDC during times of economic stress and make the Fed a super advantaged
competitor to banks. There are other implications and questions to answer such as where do
these interest payments come from and what would that mean to the overall model and
financial system. This item in itself bears significant study, but should come after the Fed
determines exactly what problem a CBDC is working to solve.
Quantity limits are not sufficient to mitigate the risk that the creation of a U.S. CBDC presents
to the financial system.
We feel very strongly that the baseline for acting as an intermediary for CBDC must require
oversight and supervision at least equal to the oversight of chartered financial institutions. An
institution that is linked to central bank currency must be subject to comprehensive
examination, particularly for adherence with anti-money laundering compliance, cyber
security review and operational soundness. Especially in times of stress, it is critical for the
Fed to be able to work with and trust institutions, relying on their resiliency and well
capitalized structures. When 9/11 grounded flights transporting stacks of paper checks and
cash letters, the Fed floated money to financial institutions, knowing their capital back stops
would prevent any major issues to these payment advances. �The money transmitter
patchwork was not meant for the global nature of the payment systems that have evolved
today. Requirements are different across state lines and oversight, attention and knowledge
varies greatly. A well organized, safe and sound payment system requires the consistent and
time-tested oversight framework that exists today.��The Federal Reserve should very carefully
consider the addition of any non-financial institutions in a CBDC ecosystem. Incentives for
non-bank intermediaries to participate in this space should be closely examined. Banks have
a natural incentive to gather deposits and serve a customer’s financial needs. Why would a
non-bank intermediary want to provide KYC and other anti-money laundering services for
those using CBDC? A logical assumption is the access to powerful consumer data. There is
arguably no information more valuable to a large tech company than the information
contained within a consumer’s financial transactions. �
sale? If so, how?
CBDC?
benefits of a CBDC?
_________________________________________________________________________
Harvard Kennedy School
Industry
Academia
Country
State
Massachusetts
Email
timothy_massad@hks.harvard.edu
It is often suggested that a CBDC can be a means to expand financial inclusion, particularly
by creating individual retail accounts at the Federal Reserve. Professor Howell Jackson of
Harvard Law School and I believe that the Treasury Department could, relatively quickly,
create digital accounts to provide payment services that would be especially valuable to
unbanked and underbanked individuals. These accounts might not possess all the
technological advances of a full-blown CBDC, but they would be much easier to establish and
could be implemented now under existing statutory authority. Treasury Accounts could
immediately improve access to financial services for the millions of Americans who have
limited access to banking services today and also greatly facilitate the distribution of federal
benefit programs to all Americans. � �Treasury Accounts are not an alternative to CBDCs but
rather a faster, easier way to achieve some of the primary objectives of those who favor
creating a CBDC. It is likely to be years before we have a CBDC, if we decide to create one.
The financial inclusion need, however, is urgent and should be addressed today. Moreover,
implementing Treasury Accounts could generate useful insights and information that might
later be incorporated into any CBDC that the nation eventually decides to adopt. � �We have
explored in greater detail our Treasury Accounts proposal in a recent paper published by
Brookings which can be found at this link:
https://www.brookings.edu/research/the-treasury-option-how-the-us-can-achieve-the-financial
-inclusion-benefits-of-a-cbdc-now/� �
inclusion?
It is often suggested that a CBDC can be a means to expand financial inclusion, particularly
by creating individual retail accounts at the Federal Reserve. Professor Howell Jackson and I
believe that the Treasury Department could, relatively quickly, create digital accounts to
provide payment services that would be especially valuable to unbanked and underbanked
individuals. These accounts might not possess all the technological advances of a full-blown
CBDC, but they would be much easier to establish and could be implemented now under
existing statutory authority. Treasury Accounts could immediately improve access to financial
services for the millions of Americans who have limited access to banking services today and
also greatly facilitate the distribution of federal benefit programs to all Americans. � �Treasury
Accounts are not an alternative to CBDCs but rather a faster, easier way to achieve some of
the primary objectives of those who favor creating a CBDC. It is likely to be years before we
have a CBDC, if we decide to create one. The financial inclusion need, however, is urgent
and should be addressed today. Moreover, implementing Treasury Accounts could generate
useful insights and information that might later be incorporated into any CBDC that the nation
eventually decides to adopt. � �We have explored in greater detail our Treasury Accounts
proposal in a recent paper published by Brookings which can be found at this link:
-inclusion-benefits-of-a-cbdc-now/� �
stability?
CBDC?
sale? If so, how?
CBDC?
benefits of a CBDC?
_________________________________________________________________________
Andreas Veneris (U-Toronto)
Industry
Academia
Country
Canada
State
Email
veneris@eecg.toronto.edu
It is with pleasure to provide commentary to your research/analysis paper titled “Money and
Payments: The U.S. Dollar in the Age of Digital Transformation” (the “FedPaper”) in January
2022. �I am a full-professor and a Connaught Scholar at the University of Toronto (Dept. of
Electrical and Computer Engineering, cross-appointed with Dept. of Computer Science). I
obtained my PhD from the University of Illinois, Urbana-Champaign in 1998. I have been
working in the area Central Bank Digital Currencies (CBDCs) since 2016. In 2020-21 I was
the lead co-author for an invited report by the Bank of Canada for a candidate techno-legal
and economic architecture for the Canadian Central Bank Digital Loonie (CBDL)[1]. In
2021-22 I was honored to be acknowledged for my comments on the report by the Hoover
Institution, edited by Darrell Duffie & Elizabeth Economy and titled “Digital Currencies: The
US, China, And The World At A Crossroads'' [2] . I have been working in blockchain
technology since 2011. In closing of this brief introduction, it is a wish that you find the
comments below both constructive and helpful to the quest of the Federal Reserve System
for an e-USD.��Let me first set a definition of a retail or general purpose CBDC and outline the
norms that an e-USD should adhere to based on majority consensus by prior literature on
same. Respectfully, the definition below is neither “absolute” nor an “opinion” but by necessity
so to set an axiomatic foundation/framework that places the questions/answers herein within
a focused context.��Commonly CBDCs have been described as an “alternative to fiat cash” or
“e-money with cash characteristics.” Therefore, if this is indeed the case, CBDCs seem to
necessitate the following physical-cash characteristics: (i) they are a liability on the Central
Bank’s (CB’s) balance sheet, (where for the case of the Fed each e-USD is equivalent to one
US dollar); (ii) they are available to every registered US residents, businesses, non-profits,
tourists to the US, etc. (iii) they transfer quasi-anonymously among verified e-wallets that
require KYC; (iv) they transfer in real-time with minimum cost-recovery fees; (v) they allow
offline transactions; (vi) they generate seigniorage income for the Fed at creation; and (vii)
they comply with AML/CFT regulations. �More on property (iii): CBDCs (and their respective
transactions & associated data-flows) should have the same strong anonymity characteristics
as fiat cash which is virtually anonymous. Later, I make the argument that there is a trade-off
to this anonymity as one tries to balance the consumer/merchant interest against AML/CFT
law. This trade off also spills into an effort to advance the public interest in terms of an
environment of payment modernization that fosters “fair play” competition, innovation in this
new digital economy, and social welfare. �Clause (iv) is necessary because transaction
processing for CB money itself is a commodity, not a valued-added service. Historically, cash
has been a public’s “common government resource,” (i.e. a “public good”) and therefore its
processing should be provided to the public at (or close to) zero-cost. This is actually the case
with the Fedwire system today that charges miniscule fees to the participating institutions.
However, those nominal system-use costs they do not resonate to the public that continues to
pay excessive fees for e-payments. At the same time, today the public also gives out its
personal data to the various service providers without getting compensated for it (more on
this later), notwithstanding that existing payment systems cannot scale to serve the citizens to
compete in this new IoT/5G+ “smart (micro-payment) economies”. Finally, claim (v) is
necessary for public inclusion & social welfare to the un/under-banked, but to also provide
accessibility to areas with no network coverage. �Under this axiomatic foundation, a CBDC
*should not* offer interest, just as physical cash today (i.e., paper money inside one’s wallet)
does not provide interest either. Of course, I recognize that whether an e-USD will bear
interest or not is a policy decision. However, as I address the questions herein, I make the
underlying assumption (that stems from the definition above) that an e-USD does not offer
interest. This also allows one to focus as the introduction of interest-bearing CBDCs
complicates matters/policies exponentially. Later in this document I make the argument that
CBDC interest can be “emulated” with “safe helicopter e-money.” Lastly, there is a good
argument to be made that the introduction of an interest-bearing e-USD will encounter fierce
opposition (and probably rightfully so) by the private banking sector and other payment
service providers (PSMs). This opposition can risk its introduction and diminish its benefits to
social welfare. �I continue Question#1 in the space provided for Question #4 (apologies for
this)�
A CBDC has a narrow scope, a holistic view and a tight definition, and it would be hard to
imagine that its impact & architecture can be replicated by simply “patching” legacy
components with a few new ones. The development and deployment of a CBDCs is not a
complex technological problem. As a point of reference, it took Ethereum (a Turing-complete
decentralized smart-money engine) just two years to build it. At the time, it was a first mover
and there was little prior knowledge on how to establish a new network. To date it has proven
to be remarkably resilient towards cyberattacks. Of course, a CB is unlikely to be built a
permissionless (blockchain) system as its CBDC, but at the same time, one should not expect
a CBDC implementation to take much longer. �Instead, the main obstacles today seem to be
the (lack of) political will and regulatory conservatism (or “regulatory obsolescence” for lack of
better terms). History shows that a “design by committee” will introduce frictions and delays
that may regretfully risk a CBDCs social benefits and ambiguate its original goals. �For
instance, in the case of the Danske Bank’s MobilePay a “design by committee” approach was
originally followed but this forced the bank to discontinue this partnership and complete it
“stand-alone”. Although this is a case of a private bank, the example already shows the
difficulties when many parties with conflicting interests are trying to design an innovative
payment system together. In contrast, a recent success story by a CB is Brazil’s PIX payment
system that was implemented solely by the Central Bank of Brazil and took less than two
years to bring it to life. In this process, the Central Bank of Brazil mandated via regulation the
participation of the private sector so to increase its network effects. Following its release, it
took just over a year to capture more than 67% of the adult population (see: “Central banks,
the monetary system and public payment infrastructures: lessons from Brazil’s Pix,” BIS
Bulletin #52, March 2022). In contrast, here in Canada, it took more than 6 years to bring to
life the new, designed-by-committee, Lynx High-Value Payment System. The reader is also
encouraged to browse the discussion of Sections 7.1-7.4 and 9 in [1] that further argues
about the points raised in this paragraph. �Following the above thinking, it would respectfully
seem a mistake if the FedNow system is advertised as an “interim” USD-CBDC alternative,
as recent rumors seem to indicate. There also a good argument to be made that there may
be severe domestic and international risks for the US if a proper e-USD is not introduced in a
timely & proper fashion. First, the FedNow system is a payment rail system, and it is not a
CBDC. Of course, historically, wholesale payment systems have been used to also
support/settle retail transactions but strictly speaking, FedNow was never designed to
replicate the functionality of a CBDC. Further, it cannot support micro-transactions that serve
an IoT economy, it does not introduce provisions to protect user’s data (that will be left to
private parties to harvest them as it regretfully happens today impoverishing the foundations
of healthy competition against oligopolies), it cannot create novel data-trading economies
unless a private layer-2 system is built on-top -- which loops back to the private sector to
elevate the dollar into “programmable smart money”, a risky expedition when it comes to
standardization/compatibility with foreign “true CBDC” systems, and to data protection
metrics.�
inclusion?
There is extensive literature where most CBs agree that the introduction of CBDCs can have
a major impact on financial inclusion to core national activities, social welfare, and
innovation/entrepreneurship --- if they are implemented properly. Their offline functionality will
also allow them to reach people who don’t have access to traditional banking means, or those
in remote communities. For the US it has been reported that there is as much as 15% of the
population that it is unbanked and another 15% that is under-banked. As a result of this,
these people usually also lack access to credit which limits their ability to improve their
financial well-being, which in turn promotes the health of an economy. Although a CBDC
system does not offer credit, a healthy ecosystem around it should be able to help this
population improve their opportunities to eventually have access to it. For instance, an e-USD
should lower costs for citizens who have no bank accounts, and today they have to resolve to
very expensive means/fees to cash their paychecks and/or stimulus-checks. As another
example, an e-USD should provide new and convenient means for this population to access
the new digital economy and hopefully help them innovate in cost-effective ways.��In closing,
clearly existing payment systems lack the flexibility to adapt to the digitization of the economy
and they often imperil social welfare for those who don’t have alternate means. They remain
slow, clunky, and expensive; often one receives a digital service, or even physical goods,
faster than the merchant receives the payment. They also do not allow for B2B, B2C and C2C
innovation as the oligopolies driving them have little appetite to allow new entrants in fear of
cannibalizing their existing cash-cow revenue streams. An objective observer will comment
that this no different to the introduction of cell phones in the US during the 1990s where
legacy landline revenue streams delayed the modernization of the infrastructure to this of a
mass-scale wireless transmission. As such, wireless phone adoption lagged when compared
to Europe and Asia, or even under-developed economies (e.g., Africa). Further, the
emergence of Decentralized Finance (DeFi) has already demonstrated a capacity to disrupt
the financial sector where digital fractional tokenization makes expensive assets today to
become approachable “to all”. Hence, a properly designed e-USD has a major potential to
impact financial inclusion and social welfare, and it is worth every second of the political will
one needs to exercise for it to bring it into reality.�
This is the second (continuation) answering Question #1:��Clause (iv) is necessary because
transaction processing for CB money itself is a commodity, not a valued-added service.
Historically, cash has been a public’s “common government resource,” (i.e. a “public good”)
and therefore its processing should be provided to the public at (or close to) zero-cost. This is
actually the case with the Fedwire system today that charges miniscule fees to the
participating institutions. However, those nominal system-use costs they do not resonate to
the public that continues to pay excessive fees for e-payments. At the same time, today the
public also gives out its personal data to the various service providers without getting
compensated for it (more on this later), notwithstanding that existing payment systems cannot
scale to serve the citizens to compete in this new IoT/5G+ “smart (micro-payment)
economies”. Finally, claim (v) is necessary for public inclusion & social welfare to the
un/under-banked, but to also provide accessibility to areas with no network coverage. �Under
this axiomatic foundation, a CBDC *should not* offer interest, just as physical cash today (i.e.,
paper money inside one’s wallet) does not provide interest either. Of course, I recognize that
whether an e-USD will bear interest or not is a policy decision. However, as I address the
questions herein, I make the underlying assumption (that stems from the definition above)
that an e-USD does not offer interest. This also allows one to focus as the introduction of
interest-bearing CBDCs complicates matters/policies exponentially. Later in this document I
make the argument that CBDC interest can be “emulated” with “safe helicopter e-money.”
Lastly, there is a good argument to be made that the introduction of an interest-bearing
e-USD will encounter fierce opposition (and probably rightfully so) by the private banking
sector and other payment service providers (PSMs). This opposition can risk its introduction
and diminish its benefits to social welfare. �Now on the particulars behind question #1: the
FedPaper is rather comprehensive on the benefits, policy considerations and risks behind the
e-USD. However, I take the following exceptions that need clarification and more well-defined
guidance by the Fed: �a) In my view, unless I missed something, the FedPaper’s definition of
“intermediated CBDC” (Page 13) reads a bit confusingly. Namely, it seems to dilute the
original definition (by the IMF and others) into the much narrower view of what is actually
defined as a ``synthetic CBDC’’. In more detail, an “intermediated CBDC” (or a hybrid, or a
two-tiered one, with all those terms being equivalent) as set by the IMF and most other
literature, is one where the user holds a direct claim to the CB, and it is only its distribution
and transaction processing that are handled by private actors. Additionally, this literature sets
a ``synthetic CBDC’’ as one where the direct claim of the user is to the private entity that
holds their account, and not to the CB. Essentially a “synthetic CBDC’’ resembles existing
cryptocurrency stablecoins where the user has claims for the asset to the said private sector
entity and not on the CB. It is also not a secret that this model is not favored by most G20
CBs when they consider the architecture behind their CBDC. �In closing, although the Federal
Reserve Act does not currently authorize direct Federal Reserve accounts for individuals,
amendments to the Act will be necessary to introduce the digital dollar anyways, and this
hurdle can be changed. Even without major amendments, one could introduce a Narrow Bank
fully controlled (and owned) by the Fed in a similar way as we propose in the CBDL report for
the Bank of Canada [1]. In future releases, the Fed may want to expand on those points.��b)
What is starkly missing from the FedPaper is a thorough analysis of the ownership,
harvesting and protection of (citizen’s, SMEs’, etc.) data and of the respective data flows. A
CBDC is a system-critical technology that hundreds of millions of people will be using daily,
generating an enormous amount of payments data annotated with sensitive public information
not available today in existing payments systems. Citizens have a right to privacy but to also
monetatize their data, businesses have a right to secrecy – how are these privacy/secrecy
rights protected, what thresholds are introduced and why/how are they protected while they
respect AML/CFT laws? �As the March 9, 2022 Digital Asset Executive Order by US President
Biden also implies, it is the role of the government to mitigate those risks associated with the
introduction of such a system. Protection of this data on a national scale should promote
financial inclusion and “fair play” by the private sector, but also safeguard socioeconomic
sovereignty for the United States internationally in this new IoT/5G+ “borderless” digital era.
�Question #1 continues at Question #11 ...
stability?
A recent recurring theme is that CBDCs hold a high risk to financial stability. We recognize
that any new form of e-payment can be perceived as competition to existing payment
channels by the incumbents, unless private FIs start running this system from the very first
day. As argued earlier, this latter practice raises a plethora of concerns that bring the success
of an e-USD into grave risks. In fact, any argument that asserts that a CBDC e-USD system
changes the “competitive banking landscape” dramatically would implicitly need to assume
that commoditized payments allow for “bank rents". In our highly competitive banking world,
that is unlikely. The processing of payments by FIs today is arguably only a small portion of
their payments value chain. The most critical (and lucrative) service that commercial banks
provide is liquidity to the market through credit arrangements (e.g., credit cards, overdraft
arrangements on chequing accounts, and lines of credits, etc.). Evidently, merchants and
customers benefit from this value-added service because credit enables purchases even if
they do not have the necessary funds at the time of the payment. Merchants who refuse
credits cards in favour of the e-USD, for instance, would most likely lose customers. Further,
e-USD wallets can be capped to small amounts (e.g., $10,000) no different to what happens
today where we should not expect one to hold more than a handful of paper bills in his wallet
or at her home. Functionally, when the cap is exceeded, the funds could also flow into a link
account at the user’s commercial bank.��Instead, the introduction of an e-USD and its
underlying appropriate bare-bone payment rail ecosystem with appropriate APIs, for the
private sector to be able to use and build-upon, promises to grow the economy into this “new
digital age” and promote healthy competition. �In fact, the FedPaper admits that in recent
years mobile payments innovation made the digital economy faster and more convenient, and
it is indeed the shift away from CB money that may cause financial instability (Page 3).
Hence, as novel private fintech payment initiatives by Apple, Google, Paypal, Coinbase, etc.
did not disrupt the existing banking system with their emergence, so why an e-USD could
provide such negative network effects? �In closing, I encourage the reader to review the recent
work in [3] where the author makes an educated point on why a CBDC/e-USD promotes a
spectrum of innovation, fair competition and it is expected to pose no tangible risk(s) to the
existing banking industry.��[3] D. Duffie, “Payment system disruption: Digital currencies and
bank-railed payment innovation,” in Technology and Finance, CEPR/IESE Banking Initiative
(to appear)�
Please see answer to Question #5. When it comes to stablecoins, a CBDC is a direct liability
of a CB to the citizen. Clearly, this is divergent to role and mechanics of a stablecoin.
Additionally, there is a myriad of other differences to their operation, technical
implementation, regulation, and cross-border use, etc. There is little to argue against the fact
that the emergence of stablecoins (and the associated DeFi) created an excitement for
fintech last seen during the 1990s adoption of the internet. However, it is directionally wrong,
and most likely wrong by orders of magnitude, to contemplate that a stablecoin can replace
the benefits of a CBDC as their scope, motives, regulatory frameworks and public guarantees
are fundamentally/radically different.
The most obvious tool, as also observed by the introduction of the e-CNY by the PBC, or the
Bahamian Sand Dollar, is to limit the amount of e-cash an online and offline wallet can hold
and/or transact.
One of the historic core premises of a CB is to provide fiat currency to the public but also
ensure rails where/how this currency can transfer to promote economic growth with social
benefits. Evidently, the concept and usage of money has evolved during history, and today
the use of physical cash declines at the dawn of the digital world. In a nutshell, what we
experience is another (and most likely “a quite dramatic”) turning point that puzzles the very
essence and use of “cash”. Therefore, the need remains imperative for CBs to continue to
provide the public with “safe” CB money but also ensure that all their benefits & safeguards
are available to their citizens in a fair manner by the associated payment rails for this
modernized form of money.
CBDC?
When it comes to domestic payments, in the absence of an e-USD one should expect
innovation to be driven by private banks and other private fintech payment providers while
cash-usage will continue to decline. Although those incumbents usually innovate fast, if
history acts as guidance, it is realistic to assume that payments will remain expensive while
the associated data will remain siloed – sometimes by foreign entities, which is a rather scary
proposition for a dominant global power such as the US is. Admittedly, this can place the US
national sovereignty at risk. One should also expect that the leading players will continue to
inhibit entrance/innovation to new entrants, while the standardization of this programmable
money will remain a challenge (for instance, today an Apple Pay wallet does not work on a
Google Android smartphone). �When it comes to cross-border payments, once should expect
existing/forthcoming “dominating” CBDC systems to make inroads in both global
standardization and payment rail-services to under-developed or emerging economics
(predominantly in SAE, Africa and LatAm). The lack of an e-USD will also foster more
adoption of cryptocurrencies as a cross-border payment medium, including stablecoins that
are no longer fully-pegged to the USD but to other currencies (i.e., EUR, RMB, SDR). Long
term this is expected to impact the US economy (and its global political influence) negatively,
with a good probability to affect the role of the US dollar as a currency reserve but also this of
SWIFT as a political US weapon. Further, one should not expect that private US corporations
will create the same inroads in capturing a payment audience in foreign countries (e.g., the
Facebook/WhatsApp recent struggles in Brazil and India). We refer the reader to [2] for a
more extensive talk on this topic.�
With the emergence of globalization and cross-border digitization, the past few decades
created a more tightly connected world. Therefore, as the follow-up from recent
``weaponization of SWIFT’’ during the Ukraine invasion clearly indicated (where Russia
started to build new channels for cross-border payments with China, Saudi Arabia etc), the
world is intertwined more than at any other time in history indicating that nothing can be taken
as politically granted. No difference to the cold war, decisions by other large economies
should influence the US in issuing its own e-USD so to maintain its global influence and
currency reserve status.
This is the third and last part answering Question #1, again apologies for this:��This does not
necessarily mean that the Fed also becomes the “central repository” of all this data, but it may
be the case in this new digital economy for a CB to become the “safeguarding agent” of
people’s data but also the gateway (i.e., payment rail) that people can trust to monetize their
data via third-party private intermediaries. Case in point here are the lessons learned in the
past two decades by this new “private free economy” of digital leisure and material
abundance, where every device and human entity are subsumed in a centralized IoT/web
network. Notably, in the United States but also in many other jurisdictions (e.g., China, see
[2]), this economy is oligopolistically directed by just a handful of private corporations. This
threatens to damage the social fabric as it has been historically shaped, and it presents novel
challenges to the citizen and nation’s sovereignty. �In particular, services in this new digital
economy are rarely “free,” as is often advertised, but the public pays with their time and data,
and by severely compromising their privacy. In other words, in our modern world the time to
generate this data, but also the data itself, is a new form of “money.” As such, there’s a fair
argument to be made that this “free economy” banishes what we historically has been the
very essence of “CB citizen money” -- traditionally, this money requires time (e.g., work) by
the public to gain it (e.g., salary, revenue, etc) but also endows its owners with reciprocal
control of their own time/data. Hence, much emphasis should be given by the Fed in the
creation of an e-USD associated by an ecosystem with functionalities that allow people,
SMEs, etc to “own” their own data but also provides new safe avenues to them to monetize it
in “fair ways”. After all, it is not a coincidence that the introduction of e-CNY in China was in
large part a counter-act to contain modern payment systems (Alibaba and Tencent) that
dominated the markets by developing an exclusive view on citizen’s (and even government’s)
payments data flows, to the detriment of national policies [2]. Just like in other historic
monopolies and/or oligopolies, it is the role of the government to protect the citizens and it is
therefore desirable for the next FedPaper iteration to give more clarity on how the e-USD
safeguards social welfare, competition, and data protection/ownership. �c) Finally, I kindly
recommend that in future publications that you consider including rigorous guidance on the
“programmability” of the e-USD. In this manner, the reader will be able to attain a holistic view
of the ecosystem. �In its current incarnation, the suggested narrative by the FedPaper does
not make a convincing case that it is functionally superior to the already “emerging/evolving
world” of a fast(er) retail payment networks based on traditional payment standards. As it
stands, the key innovation behind an e-USD today seems to be the issuance of a Central
Bank-backed private-institutional-driven fiat-denominated USD-stablecoin on an
institutionally-only-accessed network. Unless it has broader functionality that transcends a
walled off system, it is difficult to see why such new money is needed or what is the major
innovation. Instead, there is a remarkable opportunity to establish a CBDC network as a novel
“common resource” for next-generation value transfers via CBDCs (i.e., their denominated
assets) as the backbone component of this new system. When this is viewed in cross-border
commerce, it adds to the prospects of the USD global dominance.��[1] A. Veneris, A. Park, F.
Long and P. Puri, “ Central Bank Digital Loonie: Canadian Cash for a New Global Economy”,
February 2021�[2]
https://www.hoover.org/research/digital-currencies-us-china-and-world-crossroads�
User privacy has been of paramount importance as a recent survey by the ECB reported
following a 4-month poll of the EU citizens (see: “ Eurosystem report on the public
consultation on a digital euro, ECB, April 2021). Thankfully, cryptographic “privacy enhancing”
primitives, more notably homomorphic cryptography along with mixers/tumblers, allows a
CBDC to maintain the desired balance between the obligations to its citizens for their data
privacy/ownership/fair-monetization, but also the mandate for their regulatory compliance with
AML/CFT/KYC law. The reader is invited to browse the work in [4] that provides a
comprehensive set of considerations, interplays, and trade-offs between user privacy and
AML/CFT for CBDCs. For the sake of brevity, this discussion will not be repeated here but in
summary it heeds regulation-by-design as a core CBDC methodological foundation, with
Privacy-Enhancing Technologies as the relevant use case, where privacy and regulatory
compliance do not need to form a zero-sum game. Finally, the introduction of an e-USD and
its underlying user protection also provides the US a unique opportunity to cement its historic
role in human/societal freedom & rights at a global level.��[4] N.Pocher and A.Veneris, “Privacy
and Transparency in CBDCs: A Regulation-by-Design AML/CFT Scheme,'' in IEEE
Transactions on Network and Service Management, 2021�
Yes, an e-USD is legal tender by definition (Question #1).
This is a multi-faceted question with an overwhelming set of complex implications to the

design, functionality, economics, and social impact of a CBDC. I also respectfully submit that
this question goes far beyond the scope of a questionnaire about a CBDC as it touches said
monetary and fiscal policies. However, most CBs feel reluctant to design a CBDC that offers
interest [3], as also rationalized in the commentary of Question #1. Especially in an
environment like the US, an interest bearing CBDC will encounter significant resistance, and
probably rightfully so, by the private banks and other FIs. However, at any given time the Fed
can always decide to deposit e-USDs to the citizen’s wallets (i.e., even proportionally to the
historic balances of the said wallets). Although an oversimplification, this type of elastic
“helicopter e-money” can emulate & stimulate similar monetary policy effects to this of a
recurring interest, without the political and public shortcomings of the latter.
Yes, as noted in various placed earlier.
It depends on the AML/CFT process, whether it is a traditional centralized Web 2.0 one, or it
is Web 3.0 decentralized one where users hold their keys, and their identity/reputation is
sourced/validated by multiple parties. Or it can just be a mix of both. The latter 3.0 case does
not really need intermediaries, but it does need validators and reputation metrics. In all cases,
a selected number of entities (DMV, SSA, IRS, major FIs and telcos) with a long-standing
experience in KYC/AML/CFT duties should only be involved in this process.
The work of [1] contains an extensive commentary on an offline-CBDC hardware

implementation. The report of [2] contains detailed references to the offline characteristics &
existing background literature behind the offline e-CNY which is already in circulation. A
CBDC should have offline capabilities as one should not expect to have network coverage all
around the US and further, offline CBDCs promote financial inclusion, as noted earlier. All in
all, offline CBDCs pose a trade-off between security and cost of the implementation [2]. No
matter the final decision where to draw the line when deciding those trade-offs, the “arm of
law” seems also always necessary as a last resort to prevent fraud – no different to what
happens with physical cash today.
sale? If so, how?
Yes, and this is another reason that the Fed must handle the design of the e-USD
stand-alone, so to also ensure uniform/universal standardization of the system with proper
APIs to external parties (private/public sectors), as noted earlier. We refer the reader to [1]
that contains more details in this process and draws analogies to India’s Aadhar/UPI system
that has successfully served more than 700M citizens by opening their APIs to third parties.
The Brazilian PIX also followed a similar approach that so far proved quite successful if we
are to judge by adoption. As we also noted earlier, historically the private sector has proved
quite articulate to design easy-to-use solutions but at the same time it has not proved efficient
to promote standardization. In fact, when it comes to digitization “closed/proprietary siloed
systems” (e.g., Apple, semiconductor design industry) remain often the norm.
CBDC?
Once should expect that advances in quantum computation will pose major challenges to
anything encrypted electronically by “Newtonian mechanics” and this certainly includes a
CBDC. To that end, the FED should be proactive by considering quantum-resistant
cryptographic protocols, which is a field that the US has supreme technology expertise and
advantage at an international scale.
benefits of a CBDC?
Please see the three bullets in Question #1 on data protection/monetization/ownership and

CBDC programmability. These are important aspects of a CBDCs design that are starkly
missing in the current configuration of FedPaper’s thinking. Another one not noted above is
the *timing* for the e-USD. The e-CNY is already a reality (projected to penetrate markets
outside of China and contrary to the official government rhetoric [2]). Just three days before
the FedPaper’s May 20, 2022 deadline to submit those comments , ECB’s Fabio Panetta
announced that the e-EUR should be expected by 2026 at the latest. Respectfully, the
evolution of digital & fintech technology offers domestic and international US monetary policy
two choices: (1) disregard, attempt to regulate with “analog” laws, and contain it to maintain
the status quo, or (2) understand its intricacies and adapt existing practices. At least publicly,
the Fed seems to lag in technical/economic/regulatory R&D for the e-USD. Looking back at
market charts of the complacent 1990s music industry in the past 22 years when P2P
streaming was first introduced (and the traditional music industry started to sue “ghosts on the
internet” so to protect their dominance instead of finding ways to use this new technology to
grow their business) it indeed confirms that mishandling digital innovation backfires. Only
those who adapt to the digital opportunity with swift & robust decisions lead those new
opportunities [5].�[5] International Federation of the Phonographic Industry. Global Music
Report, http://www.ifpi.org/downloads/GMR2017.pdf, 2017.�
_________________________________________________________________________
Spencer M. Ross, Ph.D.
Industry
Academia
Country
State
Massachusetts
Email
Spencer_Ross@uml.edu
While adoption of digital payments in the US has been significant, as consumer cash
transactions have decreased from 31% of all payments in 2017 to 20% of all payments in
2021 (2022 Findings from the Diary of Consumer Payment Choice, Federal Reserve Board of
San Francisco), the share of cash by age group has actually rebounded among 25-34 year
olds and 45-64 year olds. For multiple reasons, consumers may or may not adopt a new form
of cash such as a CBDC. From the same “Diary of Consumer Payment Choice,”
person-to-person payments reflect an increase in mobile apps–largely due to the COVID
pandemic–however cash use still remains at nearly 50% of market share of payment use.
While mobile use has moved from 11% share of in-person payments in 2019 to 29% in 2021,
cash still reflects a plurality of market share of payments. The byproduct of this implies a
consumer demand for cash for the foreseeable future. As a result, we raise the question of
consumer-CBDC adoption/penetration, particularly as it relates to digital payment literacy.
Research by Prete (2022) suggests market access to a payment technology such as CBDC
may yield substantive consumer risk if digital literacy skills do not align with financial literacy
skills.��As well, any CBDC should be established with a neutrality mandate, making the CBDC
completely neutral for consumers, regardless of the political parties in power at federal and
state levels. Such a mandate should not overstep Article 1, Section 8, Clause 5 of the U.S.
Constitution, but insofar as the widespread consumer and commercial use of currency,
neutrality needs to ensure that its functionality and access is not at the behest of whomever is
in political power. �Regardless, the normative interest in CBDC— especially as a flight to
safety from other currency assets such as cryptocurrencies— may necessitate its
development. In contrast with cryptocurrencies, however, a CBCD serves a different function
as a store of value, medium of exchange, and unit of account. Therefore, CBDC should be an
M0 e-money complement to cash, not an alternative cryptocurrency.
Given the issues outlined in the Federal Reserve white paper, it does not seem as though the
benefits could be achieved differently. The US dollar not only is competing with other
countries– of whom many are proposing, if not implementing CBDCs– it is also “competing”
with other cryptocurrencies, such as stablecoins as both stores of value and mediums of
exchange. Nonetheless, cryptocurrencies serve a different purpose, as their value is not
determined by a central bank, but instead by Proof of Work.��Prasad (2021) writes that a digital
currency has three key features: it is immutable, it is valid, and it is verified. It is difficult to
think these features in a CBDC would be achieved in a way that has otherwise not been
considered. While most of American consumers already use digitalized forms of money,
these alternate forms of money do not necessarily provide the same benefits (such as
transaction speed and payment clearing) as would a CBDC. �As well, a CBDC would coincide
with generational shifts toward digitalized money and P2P payments– perhaps indicating a
long-term transitioning away from physical cash. This would maintain the stability of a fiat
currency in digital form. As there is mutual international escalation over CBDC proposals,
pilots, and rollouts (e.g., e-CNY, e-krona, e-euro), a CBDC is necessary for the US dollar to
remain globally competitive and innovative in the fintech space.�
inclusion?
Financial inclusion would be net neutral, but this largely depends on the infrastructure used to
access and transact in CBDC. For example, informal transactions in the shadow economy
(e.g., panhandling, street performing, kid’s lemonade stand) may face difficulty if they do not
have access to technologies that can use or accept a CBDC as a medium of exchange. While
this may bring some revenues back into the traditional economy and increase tax base, this
may decrease identification that Torgler, Schneider, and Schaltegger (2010) finds improves
tax morale. �A CBDC could also reduce cash burdens in areas where retail banking is more
difficult to access, however this would also depend on reliable, high-speed network
infrastructure for digital currency to be effective. Work that I have co-authored (Journal of
Consumer Affairs, forthcoming) on platformed money ecosystems suggests that the structure
of– and access to– a CBDC is extremely relevant to unbanked and underbanked individuals
who largely pay for goods and services using cash. If we begin with the premise (as I am) that
a CBDC should function as a blockchain-based version of digital M0 cash, then access to it is
important for equity and inclusion.
stability?
At this moment, we are currently seeing the collapse of the Terra blockchain and Terracoin,
which rely on permissionless community consensus. A CBDC operating like fiat currency,
should instead use permission-based blockchain (Zhang and Huang 2021), relying on the full
faith and credit of the United States government as its mediator of value. A permission-based
blockchain would also allow for increased scalability and system interoperability, while
retaining monetary policy authority over the money supply.
Yes, not the least in the near-term, as a plurality of consumers still use cash as a primary
medium of transacting. A colleague and I are currently working on a research paper in the
Swedish context that involves consumer interest in preserving access to cash. Our pending
findings suggest multiple reasons for the interest in preserving access to cash– even from
those consumers who use cashless payments on a regular basis. Given such currency is
from the central bank (whose monetary policy is mandated by the U.S. government and,
therefore taxpayers), there is a stake at hand for a medium of exchange that is backed by a
government’s faith and credit, is secure, and is universally accepted as a store of value.��As
well, another paper I am working on looks at the negative impact of a cashless economy on
alternative market economies (shadow markets) such as buskers, homeless folks, and
street-based charities. The results of this work finds that the personal gains found in altruistic
behaviors generally increases the likelihood consumers will give cash donations, rather than
digital ones. Eliminating cash would disadvantage these types of entities in the near-term.
CBDC?
A token-based CBDC that allows the Fed to supply financial institutions (FIs) with the CBDC
and allow FIs to then distribute to consumers would be helpful– especially if financial
institutions could otherwise offer digital wallets that implement know your customer (KYC)
standards of security (FIs already require social security numbers to open an account). �The
IRS currently has reporting requirements for cash (> $10,000.00) as a means of helping to
detect illicit financial activity. FIs may wish to offer lower-tier digital wallets that embed
currency controls (e.g. $3,000.00 cap, as per the Bank Secrecy Act) as to not facilitate illicit
financial activity, and higher-tier digital wallets that additionally add KYC standards as a
means of reporting these activities as they would currently at traditional financial institutions.
Since a CBDC could function as digitalized M0 cash however, reporting would be exempt
from commercial transactions with counterparties with a tax-ID (KYC), such as retailers or
charities. This would allow the use of CBDC in a large transaction such as buying a car, but
without needing the IRS reporting requirement, as the dealership would have a tax-ID.��Crime,
fraud, and corruption do not cease merely because the medium changes; rather, they evolve
to take different forms instead. Certainly, cash itself is not immune. However, as a CBDC
should function similar to M0 cash, any digital system has a level of inherent risk that
balances consumer privacy and anonymity with the benefits of the CBDC offering.
"Manageable anonymity" (similar to e-CNY) would be one way to balance those risks and
benefits.
In particular, if the CBDC is backed by the US government, it should be treated same as M0

cash, with the same transactional considerations as cash.
If CBDC is token-based, it should be treated like cash and there should be no limits for a
single end user. However, as with cash, there can still be currency controls designed to deter
money laundering and tax evasion. This may also require modernizing the Bank Secrecy Act.
A CBDC should integrate with traditional financial systems such as commercial and retail
banks, much the way cash is already disseminated into markets. This affords consumers the
same protections under regulatory structures such as IRS, FDIC, CFPB, and SEC (with
respect to currency exchange markets). Fed monetary policy (along with Congressional fiscal
policy) would determine the CBDC supply as a new form of M0. Token-based CBDC would
allow FIs to continue to play a significant role in developing and innovating payment
structures, as well as be able to pay interest and compete. An accounts-based CBDC may
otherwise disrupt competition in the financial system and inhibit fintech growth. Some
colleagues and I are currently conducting a systematic review of current scholarly research
on cryptocurrencies to develop a research agenda toward consumer financial protections.
In the interest of financial inclusion– and with technological foresight that may eventually
render cash moot– CBDC should have offline capabilities. I leave the technological element
of that to others.
sale? If so, how?
CBDC?
It is possible that CBDCs could be programmed to comply with specific policies. However if a
CBDC is to function similar to M0 cash, it may be paternalistic to embed such policies in the
tokens, as they may unfairly politicize the CBDC itself as a medium of exchange. If CBDC as
a medium of exchange is apolitical, it would be more inclusive if policy compliance is omitted
from CBDC design.
benefits of a CBDC?
_________________________________________________________________________
NTT DATA CORPORATION
Industry
Technology Company
Country
Japan
State
Email
Yoshiharu.Akahane@nttdata.com
With the shift to a digital economy, there are concerns about risks to the stability of financial
functions based on democratic governance and the failure of AML due to the anonymity of
crypto assets.��To avoid these problems and realize sound innovation, it is necessary to design
and issue CBDCs with both the old and new aspects of benefits that cannot be provided by
central banks alone by incorporating private sector innovation while retaining the functions
that the conventional financial systems offer, such as credit creation, financial stability, and
AML/CFT.��For this purpose, it is necessary to inexpensively realize a financial-grade secure
identity mechanism and secure value transfer among individuals and corporations by
improving the public trust framework. As the leading organization for the Root of Trust, we
believe that the central bank should promote such development.��CBDCs should not be
discussed as a single issue. Based on the discussion, we should discuss how to design a
reliable infrastructure in the future digital society and consider how to realize CBDCs as a
secure means of value transfer.��By developing a Trust framework by all stakeholders, not only
by private sectors and a group of people who prioritizes anonymity but also by public sectors
and all other stakeholders, we can actively and safely promote open innovation in a digital
society.��CBDCs should be implemented not simply as a means of payment but also as a
symbol of such innovations. They should be implemented as mechanisms for secure and
flexible value transfer between platforms to be interoperable even in cross-border situations.��If
CDBCs is expected to compete with existing payment instruments, they will only accelerate
the fragmentation of the payments market. Then it won't be easy to find the significant
benefits of implementing CBDCs.
Another alternative is stable coins that the central bank does not issue. However, stable coins
face many challenges, such as money laundering, cyber risk, consumer and investor
protection, and the impact on stable financial systems. The major developed countries seek
to impose stricter regulations on stable coins to address these challenges.��Also, the payment
function alone cannot generate profit easily. Therefore, when the private sector issues stable
coins, it will seek revenue sources in other areas, such as data usage and advertising, which
could lead to fragmentation and monopolization of the payment system.��For this reason, we
believe that the potential benefits would be best realized if the foundation for stable coins
were non-competitive and central banks provided stable coins, or CBDCs, as public goods.
We think this will promote safe and secure innovation.
inclusion?
stability?
CBDC?
We have our electronic cash technology. This technology is implemented using cryptographic
signature technology, tamper-resistant devices, etc., and enables the safe distribution of
valuable digital tokens among local devices.��It enables instant peer-to-peer (P2P) payments
using the most appropriate means of communication for both in-person and online payments.
It also can implement functions for consumer protections and AML/KYC. At the same time, it
minimizes server-side processing and costs for central banks and intermediaries. Also, since
the processing load is outsourced to the device, there is no performance ceiling for the server
to become a bottleneck.��A token is digitally signed by both parties each time, then transferred
to carry out these processes safely. Through these processes, the chain of signatures forms
a closed loop. In this loop, the token is circulated from the issuing agency to individual users
through the intermediary agency and then back to the issuing agency like ordinary cash and
banknote.��Each transfer can detect tampering by verifying the chain of signatures from
issuance to receipt. In addition, verification by the intermediary agency through which the
token is ultimately circulated can check if the token has been safely distributed. If any
abnormality is detected at that point, it is possible to identify the culprit based on
privacy-protected money flow information obtained by verification. This information also
contributes to improving the accuracy of AML/CFT actions.��In order to ensure the security of
this system, the central bank and intermediaries operate certificate authorities that issue and
distribute certificates for use by institutions and individual users, thereby positioning
themselves as Trust Anchors of the digital society.�By standardizing and adopting these
protocols, countries can streamline cross-border processing and AML/CFT.
Electronic cash can be distributed securely with complete protection of consumer privacy
through a chain of digital signatures each time it is transferred. In addition, since only Trust
Anchors have consumers' personal information and issue and distribute certificates used by
consumers, we can ensure traceability of financial irregularities. For e-cash, the government
adopts a "token-type" CBDC that central banks or intermediaries will not manage. In the case
of token-type CBDCs, there is a general concern that counterfeiting and copying of tokens,
facilitating money laundering, etc., may occur. To prevent such financial irregularities, we will
use a system of digital signatures, in which central banks and intermediaries become Trust
Anchors.��The initial issuing entity (central bank) signs on the public key information of
receiving entity, using its private key, then add the receiver's public key information and
signing information to the token. Each receiving party can check whether the token is forged
or duplicated by verifying the signature chain information contained in the target token from
the root in each token distribution process.��At this point, since the signature chain includes
only the public key information of each party, the consumer cannot read privacy information
such as "Who bought what, when, where, and where" from the token.��On the other hand,
there is an opinion that central banks and intermediaries should not identify individuals for any
reason; it is necessary to establish governance in a different aspect from technology. �These
Trust Anchors should be able to identify individuals only on an exceptional basis and only
after appropriate legal processes (ex. orders from courts, etc.) for particular purposes, such
as identifying perpetrators of financial misconduct.��And central banks and intermediaries can
achieve AML/CFT by analyzing signature chain information as information about the flow of
money when tokens are finally returned.
In order to enhance operational and cyber resilience, it is adequate first to establish a system
to conduct regular inspections in accordance with federal standards such as NIST. However,
the social application of CBDCs may involve risks that existing standards cannot address.
Therefore, reviewing the standards themselves is necessary and considering creating new
standards with relevant organizations.��From an architectural perspective, it is essential to limit
the impact of each part of the ecosystem, so increasing decentralization is an effective
approach. A centralized architecture based on a traditional database is a system managed by
a single organization. It can be completely shut down in the event of a failure, cyberattack, or
operational error.��Blockchain-based distributed ledger architectures, as opposed to centralized
architectures, allow for greater decentralization through the management of multiple
organizations. Still, each user accesses value through a node, so if one of the nodes' fails, it
affects all users connected to that node.��Increased decentralization results in an autonomous
decentralized architecture where each device owned by a consumer manages value
independently. If one device fails, the impact is minimal because it does not spread to other
devices.��Improving decentralization can create an ecosystem resilient to natural disasters and
cyberattacks. However, since the maintenance of the overall sound operation of the system is
based on security technologies such as encryption and tamper resistance, it is impossible to
avoid the risk of soundness being violated by the discovery of compromise or vulnerability.
Establishing a mechanism to perform continuous technical risk analysis and system updates
is essential to minimize such risk.��In addition, considering that all citizens use CBDCs, it is
necessary to consider measures to cover all users based on the difference in literacy. For
example, it is possible to devise a UI and provide education.
Whether to have offline capabilities depends on how CBDC is positioned against existing
cash. For example, when CBDC is required to have a function equivalent to cash, it is
necessary to enable settlement even in a state where communication is interrupted due to a
natural disaster.��In order to realize the offline function, it is required to have (1) a mechanism
for safely managing value on the device side, (2) a mechanism for detecting illegal acts such
as double use, and (3) an AML/CFT mechanism capable of responding on the device
side.��Regarding (1), if a smartphone is used as a device, we can use a secure element (SE)
built in a SIM card or a terminal. The SE is resistant to attacks that steal secret information by
observing and analyzing power consumption, radiated electromagnetic waves, etc.
(side-channel attacks). It is possible to protect the value cryptographically based on the secret
key stored in the SE.��As for (2), we can detect double-spending by matching the history of
cryptographically verifiable value transfer. It is necessary to prevent the parties to a
transaction from being identified by historical data to protect personal information. In addition,
by verifying the transaction history, it is possible to confirm later the correctness of the
transactions conducted during the disaster.��Finally, for (3), we can combine KYC with the
public key cryptography infrastructure (PKI). By verifying the public key certificate issued by
the certificate authority based on KYC information at the time of the transaction, it is possible
to prevent value transfer to terrorists and anti-social forces in advance. However, depending
on conducting the certificate revocation check, it is not possible to completely take the
certificate offline. Therefore, it is necessary to consider the optimal method while balancing
with reliability.
sale? If so, how?
We answer yes to the question.�There are several patterns of challenges in countries where
digital payments are widespread. One is the risk that information on money flows, which used
to be concentrated in central banks and commercial banks, will flow to mega-platforms if
major Big Tech firms dominate digital payments. The second risk is that if there are too many
providers of digital payments, so many system developments will result in unnecessary costs,
and overall optimization will not be achieved. Thirdly, for digital payments to always have the
same level of availability as cash, it is necessary to ensure sufficient capabilities against
emergencies and security incidents. However, there is a risk that such capabilities will depend
on the capabilities of private business operators.��For this reason, it is desirable for the
promotion of digital payments that CBDC plays a role as a safe and inexpensive means of
payment for consumers.��As for the method is recommended to use mobile wallets and apps,
considering the increasing rate of smartphone ownership in Japan and other countries.��As
mentioned in answer to # 11, the electronic cash technology can store tokens issued on
tamper-resistant equipment to be used in various points of sales such as mobile wallets, cash
registers, e-commerce sites, and PCs.��Also, since electronic cash technology is a "token type
CBDC" without ledger management, we can minimize server-side processing. By reducing
the initial cost, we can set the settlement fee charged to the user each time at a lower price.��
(It should be noted that e-cash technology does not necessarily exclude other forms of digital
payments but can promote innovation in the private sector as a fundamental platform.)
In the case of a ledger-managed CBDC system, to make CBDC transferable in real-time, it is

necessary to connect with various external payment platform systems and to perform
synchronization between the balance operation of the ledger of the CBDC system and the
payment in the payment platform atomically. Exclusive access control is required when
processing requests related to the same account from multiple payment platforms. For these
reasons, how to tackle the performance constraints is a challenge. If it is impossible to realize
the real-time processing, settlement risk increases.��Our e-cash technology allows valuable
tokens to be transferred and distributed across payment platforms, so the above performance
issues and payment risks do not arise. This secure value transfer technology between
devices is a more secure and programmable update of the nature of cash and can be applied
to the implementation of CBDC.��If you are interested, please let us know so that we can give
you a presentation.
CBDC?
benefits of a CBDC?
_________________________________________________________________________
Industry
Technology Company
Country
State
Washington
Email
inclusion?
stability?
CBDC?
There are two types of privacy considerations in a CBDC system: (1) transactional privacy
and (2) identity privacy. As the name suggests, the former speaks to the fiscal details of a
transaction while the latter is that of the participants’ identity. As a strawman, creating a
platform with greater transparency around both transaction details and participant identity
may enable compliance with AML/CFT regulations i.e., it avoids money being used for illicit
activities. However, users are conscious about the data generated in their daily payment
activities. Firms could harness this data and exploit individuals. At the same time, complete
anonymity is not a prerequisite for privacy.�Architects and developers must be mindful of both
financial crime prevention compliance (ex. AML/CFT) and transaction and identity privacy. A
CBDC should not enable mass surveillance or exclusion of individuals prejudiced on
protected status (including not limited to race, ethnicity, age, disability, gender, gender
identity, etc.)�A two-tiered CBDC architecture where a payment service provider (PSP)
provides CBDC services such as account management, digital wallets, identity management,
and thereby preserves identity privacy, may be considered. In transactions where a small
value is involved, pseudonymized wallets may be considered. Innovative solutions like
“anonymity vouchers”, which allow users to anonymously transfer a limited amount of CBDCs
over a stipulated time may offer an alternative to a binary choice. In order to improve safety,
and prevent sybil attacks, auditability, or traceability (with say decryption) on demand are
necessary. �
Distribution and replication of data across different geographically spread nodes is an

essential paradigm for improving resilience of a system. Distributed ledger technologies (DLT)
often utilize this to provide security guarantees (Byzantine Fault Tolerance) that is resilient to
significant portion (<33%) of the network being compromised. However, these guarantees
often come with a performance tradeoff. If the performance (speed & efficiency) of settlement
of CBDCs don’t meet or exceed customer expectations, CBDCs will not see broad enough
adoption and will fail their purpose.�In general, all system architects need to make a judicious
choice on the C-I-A triad: Confidentiality refers to not leaking information to those who don’t
have access. Integrity refers to correctness in storing and processing information. Availability
refers to promptness in responses.
In our view, “offline ”capabilities are essential for CBDC to foster adoption and inclusion. It
should be able to work in the case of network disruption events (e.g., natural disasters,
cyberattacks, etc.), and should also be designed to foster adoption in under-served and
remote areas, promoting adoption and inclusivity to communities who, in some ways, may
current live beyond the limits of the current banking system.�However, there are numerous
challenges towards building a CBDC with offline capabilities, many of which result in the
creation of what is ostensibly a parallel platform. This is primarily because real-time
settlements would become very difficult in an offline environment. Without connectivity,
validating transactions could only occur once the user is back online. This places tremendous
design considerations into both hardware and security design.�To illustrate this point, one
potential method is to ask users to sign transactions offline and submit them later. Normally,
this is not possible as transactions rely on the transport-layer security for freshness (to avoid
replaying transactions). But one possible way would be to verify the signature of transactions
as part of the transaction API; this requires the payer to generate a unique nonce (randomly
created or using a secure counter) to allow the service to check that a transaction is not a
replay.�In any case, if a transaction was signed offline, there is a chance that it will fail to
execute when it is submitted to the system (for instance, if the balance of the payer is too low
when the transaction is submitted to the system). The system can return a verifiable receipt
that proves that the transaction failed to execute; this receipt can represent a debt obligation
from the original payer. �
sale? If so, how?
CBDC?
benefits of a CBDC?
There are numerous additional design principles which relate to a CBDC, all of which have
their unique set of tradeoffs. The working paper has described many of these principles,
either implicitly or explicitly. While it is difficult to provide all these design principles within this
response, many of the design elements are dependent upon the trade-offs which arise from
policy decisions from Congress. These policy decisions will guide the role of the Federal
Reserve, the role of the banking sector, and the role of the private sector. Other key CBDC
features, including privacy and anonymity, and centralized versus distributed control, have
their own set of trade-offs.�These design principles ultimately lead to solution principles,
including system management, account management, and identity management, all of which
affect the core ledger technology. Numerous ledger structures are possible for a CBDC, and
any CBDC architecture will need to meet a range of requirements – including resiliency,
availability, security, speed, throughput, and scalability. Ledger design could include elements
of distributed approaches. Within this paradigm, accounts and token design come into play.
There are various interpretations for accounts and tokens which come into play, which relates
to the data structure – i.e. whether units of value are moved between different owners
(“token”), or whether account balances are increased or decreased (“account”). �Within the
core ledger technology, come a host of other considerations. Privacy is of critical importance
of a CBDC, and is key to the eventual platform’s trust and adoption. However, privacy should
not be confused with anonymity. Transactions would need to be tracked in a secure, private
manner, adhering to regulation while also providing users the ability to trust the network.
Balancing privacy would need to address legal concerns, such as anti-money laundering,
countering the financing of terrorism, and other possible sanctions. Programmability is also
another critical design choice, which might be deployed in different parts of a CBDC
ecosystem (e.g. in the core ledger vs external applications). It may be preferable for this
functionality to sit outside the core architecture, to minimize security risks and complexity of
the ledger. Programmability will be needed to design CBDC with future flexibility and
extensibility in mind. Finally, as a general principle, the core ledger infrastructure of a CBDC
should be kept as simple as possible, with more complex functions provided as overlay
services. This simplicity may help enable higher performance, greater security, and greater
extensibility. Adoption of standardized protocols and messaging standards will be key to
enabling interoperability, promoting financial inclusion and market competition, as well as to
better manage security and regulatory risks.�
_________________________________________________________________________
Chris Ward
Industry
Country
State
Email
inclusion?
This might be related to subjecting the end-user to quantity limits. The monetary policy
influenced by quantity limits could achieve maximum employment. The supply of cash could
never make this happen.
stability?
This might be related to national security. Probably most important is that central bank
money is planned to be the most secure form of money. Central bank money may simply
have a sense of order that cash never could. That's ultimately what the general public would
need access to.
CBDC?
This sounds controversial, but this is the most intriguing question, It also sounds
counterintuitive so it should happen. This could enhance management of the financial system
and encourage expansion of artificial intelligence.
sale? If so, how?
CBDC?
benefits of a CBDC?
_________________________________________________________________________
Jason Beck
Industry
Individual
Country
State
North Carolina
Email
There are two major issues with CBDCs. First of all, in the case of a natural disaster, power
grid failure, act of war, or other national crisis, relying strictly on digital or electronic payments
would cripple individual's ability to purchase goods or support themselves financially. There is
value in paper cash in that it can be exchanged with no barrier between the buyer and seller.
�Secondly, a CBDC or cashless society creates a surveillance society where every purchase
is potentially tracked and therefore no longer anonymous. This can be used by the
government or third parties to monitor individual's spending habits, political affiliations,
religious affiliations, leisure activities, and other spending. It creates the potential for a
Chinese-style social credit score system that undermines our freedoms and liberties and even
violates potential fourth amendment rights. �Any system promising privacy could be hacked,
and if impenetrable would require the user to reveal enormous amounts of personal data
(biometrics, pins, social security numbers etc) leading to other concerns, some of which run
counter to our core values.
I see very few benefits, but yes, certainly they could be better achieved in a better way. The
goal to bring the dollar into the 21st century and keep the dollar as the world's reserve
currency would be better achieved simply by sound monetary policy that adds value to the
dollar.
inclusion?
CBDC would be a net negative for inclusion, ultimately hurting the poor, elderly, and those
distrustful of digital means of payment or government involvement in our lives. The CBDC
does nothing that the private sector doesn't already do through personal banking/checking
accounts. Many of the unbanked are unbanked because they simply do not want to be. Any
public policy that forces the CBDC upon the homeless, unbanked, impoverished, or skeptical
would be unethical. Further, those on the extreme fringe of our society live off of spare
change and loose bills handed over by generous givers. Forcing these members of society to
try to use a smart phone app, chip card, or some other means of digital payment make life
less convenient, not more.
Maximum employment comes through less regulation, a business-healthy environment, and

the free market, not monetary policy.
stability?
It would be a net negative for stability. Even fiat cash is tied to a tangible product. The CBDC
would allow the fed to create even more money on a whim and devalue or add value to the
currency without any actual market forces. It's likely the CBDC would lead to higher inflation
and less trust in our currency, not more.
The CBDC would destroy the private financial sector. Private banks, bailed out only a decade
ago, would likely be negatively affected by those who retired their credit and debit cards, as
well as bank/savings accounts in favor of a CBDC system. It would effect the financial sector
differently than stable/crypto coins because cash is king, and at the end of the day, cash is
backed by the government of the United States. A CBDC would undermine that philosophy. I
believe it would force MORE people to turn to other nonbank money, not fewer.
I do not believe a CBDC is a viable option. However, if it were implemented, it would need to
be pegged to physical cash and hold the same value at all times. I fail to see the benefits of a
CBDC.
Cash use (both physical cash and the current electronic payment system) will not decline
without a CBDC. However, the CBDC undermines cash entirely. At the end of the day, if a
CBDC is approved by congress, legislation should be written to A.) require all businesses to
take physical cash. B.) Require the Fed Reserve to continue printing physical cash in the
same quantities as present day.
CBDC?
It doesn't matter, honestly. If the US Dollar is still the reserve currency (and it will be as long
as our nation maintains sound fiscal policy, is economically vibrant, and remains the leader of
the free world), our trade partners and other overseas agencies will continue to honor or
adapt to our means of digital payment.
We are the leader of the free world. Our decisions should influence other nations. We don't do
things because other countries try them. We do things because they are constitutional and
benefit our citizens.
All of the risks can be managed by simply moving on from the idea of a CBDC. The
risk/reward isn't in digital currency's favor. We are trying to solve a problem that doesn't exist.
There is no way to do this. �Either the CBDC provides total anonymity (which is technologically
impossible) and is prone to illicit activity and theft or the CBDC offers no privacy and can be
monitored/hacked/controlled by both the government and bad actors. There is no middle
ground available, and both options are negatives. Any system that requires the user give
biometric data or be forced to carry a semiconductor on them at all times is unethical and
would eventually end up in fourth-amendment violations. �Even if the CBDC is implemented,
physical cash should ALWAYS be an option, participating in the CBDC should be voluntary,
and there should not be coercion through making the CBDC worth more than physical cash or
incentives to join the CBDC system.
It's unavoidable that CBDC accounts would be hacked, fraud would be committed, citizens
would lose access to their money at times, and disruptions in infrastructure could provide
citizens with no means of payment for vital goods.
No
No. If it is enacted it should be treated like a traditional currency.
Yes, if that promotes the use of traditional cash.
This is a complex issue that would be resolved by simply avoiding the CBDC altogether.
I can't see how this is possible using our current technology, and any "offline" possibilities I
can think of seem to bring about ethical concerns.
sale? If so, how?
There are already current payment options that work well, thanks to private sector innovation.
The easiest method, however, continues to be "hand someone a dollar, and they hand you a
Coca-Cola"
This would create a nightmare entanglement of private payment platforms and

government-run bank accounts. Again, solving a problem that doesn't exist.
CBDC?
I think regulators/legislators must think long and hard about potential violations of privacy,
liberty, freedom of movement, and bodily autonomy that would be introduced by emerging
digital technologies. Any CBDC should include regulation that secures our rights to the above
and mandates the continued availability/use of physical cash.
benefits of a CBDC?
I'm not convinced of any legitimate benefits of CBDC.
_________________________________________________________________________
Standard Chartered Bank
Industry
Country
State
Email
yinteng.choy@sc.com
The Federal Reserve has already provided a comprehensive overview of the benefits, policy
considerations and risks of a CBDC in this paper, of which we would consider banking
disintermediation to potentially be one of the most critical changes to the financial system,
with subsequent knock-on effects for bank funding costs, and credit creation and availability
for households and businesses. The Federal Reserve has identified an intermediated model
as a potential core design principle for a U.S. CBDC, and we are supportive of this.
Nonetheless, the private sector’s role in a CBDC ecosystem must be clearly understood, with
the creation of a level playing field, including whether/what new and alternative revenue
models will be permissible for regulated institutions. �As the paper notes, without a CBDC,
households and businesses might increasingly use nonbank money such as stablecoins as a
substitute for bank deposits. Due to the network effects of innovative payment offerings, new
private players could quickly dominate the monetary system, leading to competition concerns,
risks to consumers and the public interest, and the stability of the financial system. While
CBDCs should not crowd out private innovation or supplant new forms of digital money,
CBDCs could responsibly anchor emerging digital commerce ecosystems, provide a
regulated platform on which programmable and composable financial products can be
established, mitigate concentration risks in payment systems and encourage competition and
innovation between banks and new entrants, while remaining a neutral public good.
It is possible that some of the potential benefits of a CBDC, such as efficiency gains,
enhanced resilience, greater financial inclusion and consumer confidence in digital systems
may be realised through improvements to existing payment systems. However, other
forward-looking enhancements may be more difficult to realise in the context of existing
infrastructures, such as programmability (in commercial applications and potentially,
fiscal/monetary policy applications) or real-time data flows to supervisors. �Nonetheless, as a
general observation, the issuance of a CBDC, improvements to existing payment systems,
and the development of new forms of digital money do not have to be mutually exclusive. A
CBDC could be a component of improved payment systems and/or interact with existing or
new forms of payments infrastructure. �Any type of future payment innovation will need clear
regulatory treatment and frameworks. Interoperability (e.g., between payment systems and
new forms of money, including but not limited to CBDCs) will also be critical going forward,
particularly to enable smooth transitions between formats and infrastructures.
inclusion?
Yes. It is not however a panacea. It is important to identify the root cause of financial
exclusion in the U.S. and appreciate the limits of a CBDC to address broader societal and
economic obstacles. For instance, a CBDC may not be as impactful should financial
exclusion stem from different policy issues such as digital illiteracy, a lack of documentation
or inability to qualify for bank/intermediary services.��The introduction of a CBDC may increase
inclusion in digital-only retail environments, which could result in greater inclusivity challenges
where digital illiteracy is prevalent. To address this risk, the U.S. CBDC could be distributed to
those that lack basic digital skills through a simplified technical platform that would not need
access to the internet or a smartphone. A “low-tech” CBDC would pose some technical
implementation issues around the capture of transactions on a real-time basis, which may
require limits on the frequency and amounts transacted on an off-line basis.��A “low-threshold”
CBDC could provide a different solution to financial inclusion, e.g. users could be permitted to
open a CBDC wallet for low value transactions by providing a mobile number only. The
creation of a CBDC financial footprint may in turn enable access to other financial products.
Any interaction between a CBDC and existing monetary policy tools will need to be carefully
scrutinized and understood. Some CBDC designs could enable the implementation of
monetary and fiscal policy, for instance by targeting interventions to specific sectors
depending on the needs of a particular economic sector at a specific point in time, and allow
near real-time and more precise monitoring of supply, utilization and consumer pricing data
for the Federal Reserve. The potential impact of a CBDC on monetary policy will need to be
factored into key questions around design and distribution, including remuneration rates, ease
of use, holding limits and potential intermediary services such as deposit services.
stability?
The effects of a CBDC on financial stability will depend in part on the design of the CBDC and
the role of commercial banks in the CBDC ecosystem. We are supportive of a public-private
model that leverages existing roles and responsibilities, including commercial bank
intermediation between the central bank and consumers. �A CBDC could potentially change
the financial sector’s market structure as it could create an alternative to commercial bank
money and banks rely on deposits to fund credit creation for businesses and consumers.
These risks could be mitigated by the design choice of the CBDC, as well as by ensuring a
careful and gradual transition period. This would allow the CBDC issuance to be monitored
and adjustments to be made to the policy environment as needed, based on data analysis
relating to a bank’s funding model, shifts and impacts on deposits, the overall size of a CBDC
issuance and its liquidity and other market indicators such as lending rates and costs. �In
addition, the Fed could also consider initially limiting the use of a CBDC to specific purposes
only thereby managing any potential disruptions to the financial services ecosystem.
However, the effectiveness and use of limitations will be dependent on the chosen use cases
for a CBDC. Examples could include: designate the use of the CBDC for specific transactions
only, place transaction limits on certain types of transactions, enforce limits on holdings to
discourage the use of CBDCs as savings or implement different limits for individuals and
businesses. Careful management would need to be undertaken to ensure that limits across
different accounts belonging to the same beneficiary are able to be identified and enforced.
Yes. It is possible that a CBDC could adversely affect the financial sector, the extent of such
impact is difficult to predict. It is subject to variables such as technological design
considerations, the regulation of CBDCs in relation to the regulation of other new forms of
digital money as well as market dynamics such as adoption rates and consumer preferences.
Consumer education on the difference in risk profiles, liability and redemption rights between
CBDCs and other forms of non-bank money will be critical. In times of market stress, the
availability of a CBDC could cause a run from commercial bank deposits to the comparative
safety of a CBDC, which could have an acute impact on the financial sector.��While some risks
may be similar between a CBDC and stablecoins/non-bank money, for instance the potential
impact on bank deposits and credit creation, there are other risks that are significantly
different. Stablecoins represent an iteration of the existing monetary system, and to be
trusted, they must engender the same confidence in users as well-established commercial
bank money. Stablecoin backing models are yet to be clearly regulated in most jurisdictions,
along with core operations such as issuer authorisation, reserve management and
redemption rights. As a privately issued form of money, stablecoins and its regulation must
also address legal claims, capital requirements, liquidity requirements and what support
would be expected from the central bank during a stress event as a backstop to compensate
depositors in the event of failure. The variety of stablecoins’ backing models, e.g. by central
bank reserves, high quality liquid assets or commercial bank deposits may also cause
broader impacts to banks’ balance sheets, liquidity positions or sources/costs of funding.
Different types of stablecoin may be treated differently from a regulatory perspective. Many
jurisdictions are currently considering how to implement stablecoin regulation and considering
how stablecoins, non-bank money and CBDCs may or may not co-exist alongside traditional
forms of money.��In contrast, as the Federal Reserve has noted, a CBDC would not require
deposit insurance, or backing by an underlying asset pool to maintain its value, providing it is
a safe digital currency with no associated credit or liquidity risk.
As previously mentioned in Q5, a gradual and carefully managed transition with close
monitoring that allows for data-based calibration of policy may be a mitigant to any potential
adverse impacts of CBDC on the financial sector.��Other possible mitigants include holding
limits and remuneration models, though each will require more research and analysis. For
instance, a cap on holdings and non-interest-bearing features of the U.S. CBDC would
present practical implementation issues, such as a potentially unfair distribution of accrued
interests to CBDC holders and the handling of involuntary breaches of limits by holders.��A
clear understanding of the benefits expected to be achieved and their tracked progress for the
researched and chosen use cases would also be important.
Yes, as direct consumer access to central bank money is one possible mechanism for
anchoring confidence in payment systems and money in a digital world. It is difficult to predict
what consumer models, preferences and behaviours will emerge as the economy becomes
more digital. We therefore share the view expressed by central bank authorities globally that
CBDCs can and should coexist alongside other forms of money, much as banknotes and
deposit accounts coexist today. CBDCs can help ensure the availability of reliable exit and
recourse options for holders of private forms of digital money, as well as promote
interoperability and substitutability across existing and future payments systems both
domestically and internationally. �A CBDC that coexists with other forms of money and
leverages the experience and structures of the commercial banking system, while enabling
payment innovation, could ensure that consumers are safely protected in a well-regulated and
established financial framework, able to choose from a wide range of secure and innovative
financial services products while reducing the risk of activity becoming concentrated in any
single service provider or network.
CBDC?
This sector remains in the early stages of development and it is difficult to identify the future
evolution of payments as technological capabilities and understanding grows. In the absence
of a CBDC, larger private players may dominate the payments space, potentially creating
concentration risks and data siloes that are further reinforced by network effects. CBDC could
offer smaller entrants a secure platform to equally participate and innovate in payment or
financial services, which could potentially boost consumer choice and provide new products.�
�Regarding cross-border payments, there are a number of ongoing cross-border payment
initiatives, though not all rely on CBDCs. At this early stage of evolution, it is not yet clear
whether a CBDC will be a pre-requisite to participation in future cross-border payment
frameworks.
The future scope and extent of use of CBDCs in global commerce and trade is not yet clear,
with research literature on the cross-border spillover effects of CBDC still developing rapidly.
The U.S. should seek to understand the rationale, use cases, design and issuance models of
other large economies, and when quantified, whether these would also apply to the U.S.�The
cooperation and information sharing among central banks on their CBDC research and
progress with one another will be helpful in this regard, particularly in investigating the
possibility of harmonized standards for technology, inter-operability and shared policy
goals.��Another aspect to be considered is that it is possible that in the absence of a local
CBDC, a foreign CBDC issued by another major market central bank could be favored over
local currencies, particularly in jurisdictions with volatile currencies or fragile banking
infrastructure, which could exacerbate risks and concerns relating to cross-border capital
flows and FX rates. The decision to issue a CBDC will also need to take into account the
balance between cross-border interoperability and access and other policy objectives such as
control over CBDC use and financial crime controls. The issuance of a CBDC could anchor
public trust in a jurisdiction’s central bank money, in an increasingly digital global economy
with rapidly evolving consumer needs, and the falling use of cash alongside new forms of
non-bank digital money. �As mentioned earlier the existence of a national CBDC may also be
a precondition for participation in future international cooperative payment initiatives or
networks that could enhance cross-border payments.
As mentioned earlier, we are supportive of a gradual and carefully managed transition to a

CBDC, to minimize any abrupt systemic shocks and to ensure time for needed adjustments.
This could entail the imposition of initial limits on CBDC use, and such limits may mitigate
macro financial stability risks, but also test operational resilience and system performance.
Other than limits, calibrated incentive structures (e.g., via regulatory requirements around
liquidity at a wholesale level, or negative remuneration for consumers above thresholds)
could be used to control incentives for use. Sharing of findings from CBDC experimentation
and industry consultation across jurisdictions will also be important factors to identify and
figure out how to tackle risks as they arise.
A holistic approach should be adopted so that, for example, data privacy and protection
requirements are aligned with cross-sectoral rules for the use, processing, and management
of data. Data rights in a CBDC system will need to be made clear, including the degree to
which the central bank or intermediaries may have access or ownership over them.��Privacy
does not mean anonymity and many controls to combat financial crime are designed to aid
traceability and counterparty identification to establish the purpose of a payment. To execute
these controls, the relevant information only needs to be available to select parties including
private firms performing identification services. A well-designed CBDC ecosystem may in fact
help to increase the privacy of transactions while enhancing traceability and identification of
counterparties and the purpose of a payment. Service providers and regulators will need to
continue to work together to strike a balance between privacy of the individual and the
integrity of payments and banking ecosystems.
The network effects of private bigtech entrants into the payments space may amplify
concentration risk and the creation of data siloes for exclusive use of such private firms. A
CBDC might reduce such digital or payment system monopoly by private players, helping to
increase the diversity and resiliency of the domestic payments landscape.��In building a CBDC
ecosystem, all participants should be regulated to meet similar robust standards equal to
existing industry operational or cyber resilience standards, such as the CPMI-IOSCO’s
guidance on cyber resilience for financial market infrastructures, or the U.S. National Institute
of Standards and Technology cyber resilience framework. Other considerations may include
compliance with national security standards or regulation for critical national infrastructure.
�Any technology used in a CBDC must be proven to be “enterprise grade” for the use case
being considered and potential issues such as scalability need to be considered.�
Yes, CBDC should be legal tender, particularly if intended to be used as a means of payment
in the U.S.. It will also be important for CBDCs (including non-U.S. CBDCs) to be treated from
a regulatory standpoint as a digital form of fiat rather than as a cryptoasset. �The legal
characterization will inform complex considerations around what rights will be associated with
it, questions of title and whether it constitutes property, amongst other things. In turn, this will
have an impact on issues such as how transfers will occur, how lost or stolen CBDCs would
be traced or treated and what liabilities may arise in this context (in this respect, CBDC may
be closer to bank deposits than physical cash but this is not necessarily a foregone
conclusion and will depend on how the instrument and the rights associated with it are
structured), and whether security can be effectively created over the CBDC.��It may also be
important to consider whether there are material impacts of a U.S. CBDC being accepted as
legal tender in jurisdictions beyond the U.S., as the U.S. Dollar is currently used in other
jurisdictions globally today.
Remuneration rates will likely be one of the most critical tools to manage the risk of bank
disintermediation and prevent financial instability, even in a low interest rate environment by
flipping to negative rates. The Federal Reserve should be able to utilize interest rates
(including negative interest rates) to control the use of a CBDC (e.g., as a means of payment
or a means of investment) in a way that might mitigate the replacement of current forms of
money. The impact of remuneration rates on the commercial sector should be clearly
understood and carefully calibrated. For instance, the implementation of a negative interest
rate policy may cause consumers to exchange the CBDC for central bank non-digital liabilities
such as banknotes. Any attempt to limit such flow may result in the U.S. CBDC being traded
at a discount over its nominal value. Conversely, an uncapped and interest-bearing CBDC
may contribute to further strengthening the haven demand for the U.S. currency. Sustained
demand from countries suffering from currency substitution may result in significant capital
flows which could accentuate the risk of contagion. A tiered remuneration system could
minimize run risk in times of stress.��The utilization of interest rates on a CBDC should also be
considered alongside other features, such as holding limits and offline storage.��We also note
that the rate of interest policy may need to differ between the retail or wholesale application of
a CBDC.
As mentioned earlier, holding limits may be a valuable tool in the context of a managed
transition to a CBDC. The effectiveness of quantity or holding limits will be contingent upon
the ability of the CBDC ecosystem to identify and limit CBDC wallet amounts to each
individual, digital national identity or corporate. For instance, an ability to aggregate CBDC
holdings across different corporate entities, trusts or individuals, could diminish the
effectiveness of holding limits.��A cap imposed on individual holdings, a possibility
contemplated by the paper, would constrain the use of the CBDC and, consequently, may
diminish its effectiveness and usefulness as a means of payment. Technical challenges of
implementing holding limits must be accounted for, such as involuntary breaches of the limit
on a recipient account when a payment to it is made, though this could be mitigated by
sending the excess CBDC to a linked commercial bank account.
We are supportive of an inclusive level playing field, supported by strong regulation,

particularly in a conduct, capital and financial crime context. Competition must also be
regulated within the CBDC ecosystem, such that incumbents and new players are regulated
equally. Depending on the nature and functionality of the CBDC and the precise role
envisaged for ecosystem participants, regulatory requirements for intermediaries may vary
depending on the activity undertaken, the level of risk presented and the principle of “same
risks, same regulation” should be upheld. Banking risks should not surface in a non-banking
sector. Where currently unregulated entities are permitted to become intermediaries, the
central bank must consider the process by which such entities might become intermediaries
with potential access to a central bank’s balance sheet, and how such entities will be
supervised and regulated to meet the high standards expected within the financial services
industry. �Regardless of the CBDC ecosystem structure, one of the most important
considerations will be the liability framework amongst the various participants, identifying
liabilities or risks in respect of the CBDC and any overlay services provided, for instance in
the event of fraud, failed transactions or privacy violations. The allocation of liabilities must be
clearly articulated.
Yes. Offline capabilities will be a critical feature of a CBDC in the event of any disruptions to
the network, to accommodate circumstances where the network cannot be reached, or to
mitigate social barriers to financial inclusion such as a lack of internet access or electricity.
Other jurisdictions have explored offline options such as smart cards where settlement on to
cards takes place in real time, with tokens moving between cards and without the need for a
back-end settlement system, or information transmission through protocols available on the
2G and 3G networks, and QR code-based payments. However, this may still require mobile
network functionality such as Bluetooth, camera-enabled mobile phones or NFC point-of-sale
devices. �Offline functionality could also be enabled to a limited degree, for instance, in certain
payment circumstances, or within certain monetary limits or tiered wallets. However, practical
challenges include the enforcement of holding limits, addressing potential double spending,
risk of fraud via fake tokens, and recovery of lost CBDC storage. �
sale? If so, how?
Yes, a retail CBDC’s success will depend on its adoption rates, and ease of use and wide
acceptance will be critical to its adoption. Beyond that, regulated intermediaries will play a
critical role in offering attractive value-added overlay services. CBDC users could also be
offered, where possible, the choice of a variety of payment devices, such as prepaid CBDC
devices, cards with offline capabilities or smartphone wallets that are standalone or integrated
with payment (bank or non-bank) apps.
Interoperability and convertibility between a CBDC and other forms of money and platforms
will be critical to the adoption rates and success of a CBDC. �Common technical standards will
need to be set out and enforced within the CBDC ecosystem, to ensure a robust operating
environment that safeguards data and privacy while supporting an open ecosystem for future
development of innovative services, and where incumbents and new entrants can equally
compete. Common standards should be established around any future services or
functionalities that could be developed and offered by intermediaries, such as programmable
payments.
CBDC?
Interoperability will be a key policy choice that needs to be fostered, including across existing
financial market infrastructures, other cross-border CBDC systems and future new forms of
money. Without such interoperability, a CBDC may lose its relevance and attractiveness to
consumers. Private payment infrastructures may not support interoperability across one
another, and a CBDC ecosystem might play a role in bridging such a gap. New technologies
should be explored with a view to understanding how they might be applied to increase the
overall benefits and value proposition for a CBDC e.g. future-proofing, analytics, AI or
technologies that could be deployed to enhance operational resilience or security with a view
to designing the next critical payment infrastructure of the future. Advancements such as a
federated CBDC architecture or sharding may offer a better balance between performance
speed and security, or future functionalities like the tiering of interest and fiscal policies.
benefits of a CBDC?
The paper’s identified preferences of “privacy protected, intermediated, transferable,

identity-verified” are principles for a CBDC that we are supportive of. However, additional
design principles will be influenced by the primary use case for a CBDC, such as availability
(e.g., 24/7 payments), inclusivity (e.g., digital literacy, compatible hardware), or
competitiveness. �A key design principle that must be considered is security – a CBDC must
maintain the highest standards of cyber security against cyber-attacks, as well as clearly
identifying responsible parties and methods of recourse in the event of a fraudulent attack.
However, a strong secure system may require a tradeoff with system transaction processing
speed or ease of use when multiple verifications are required. Centralised security features
may also be more difficult to implement with offline capabilities. �A CBDC’s infrastructure
should also be flexible and scalable, to accommodate any future technical or policy changes
as the CBDC system matures, transaction volumes increase and new findings are made.
However, such flexibility in computational loads will need to be balanced with the cost of
computationally demanding privacy methods or any other features that add to processing
demands on the system. �The paper already notes the difficulty in balancing consumer privacy
rights and the transparency necessary to deter criminal activity, which is a core tradeoff.
_________________________________________________________________________
Industry
Individual
Country
State
Hawaii
Email
No benefits to the general public if monetary regulation by the Federal reserve. Federal
reserve has become too political it no longer has the confidence of the American people. The
risk far outweighs the benefits for the general public, as the federal government and the
federal reserve helped moved us into this rising inflationary period that is causing the general
public to be in such economic pain that only benefits the rich.
the individual account holder (general public) have a 2 step authentication process with
passcode for monies to be withdrawn or expired or frozen. Security that allows for privacy
and full control over ones own digital monies that does not get filtered through the federal
reserve before being withdrawn or deposited into an individuals bank account. The
government already has enough control over personal finances and has already corrupted
the federal reserve system.
inclusion?
It could have been positive. But the federal reserve compromised itself by becoming to
entangled with federal politics and the stock market. The has enhanced insider trading and
lobbying for personal gains in congress and the house of representatives. The federal
reserve is clearly not working in the best interest of the people. How can there be any
integrity when this information of CBDC regarding public feedback has bare minimum
coverage for education or understanding for the people.
First, its position of appointment. Additionally, how can it effectively implement monetary
policy when they are in direct contact with congress and members of the house of
representative being able to have insider trading knowledge, lobby for personal gain, and
exposure to elite pressure for financial gains. The federal reserve has been unable to work
independently of the Federal government and its direction. If this was not the case the federal
reserve would have closed off trillions of dollars of tax payers money from leaving the country
without proper accounting and subject to fraudulent and excessive inappropriate use of funds.
Example- Rush through a 40 billion dollar package to Ukraine while we cannot get unanimous
votes to fund feeding our starving babies here in the US. Not to mention the subpar care and
sub standard of living for our elderly & veterans. These are just the ongoing issues. lets
address how the middle class is shrinking, needing to jobs to get by, but yet are the ones that
pay the most in taxes. Trust needs to be fixed first before we can do better in the future
monetarily.
stability?
Under the current policies for the last 30 years, no matter if you are republican or democrat it
cannot help. The money (fiat or digital) is not the problem, it is the people running the show
that is the problem. Federal reserve, the federal government, along with the elite have
sucked everything out of US for pure profit, corruption, and greed. You are the entities that
have negatively affected the financial stability of this economy. Weaponizing the greenback
and pumping the economy with liquidity and stealing everything from tomorrow.
With its corruption- see response to above #1,2,3,4, and 5 question. The difference is the
blockchain technology and the ability stable coins have to decentralize. CBDC is the exact
opposite and centralizes all monetary transactions that can be used as a source of monetary
purchase control over people and invade their privacy. We should be focusing on education
to citizen on how the backend transaction technology will work for digital currency. the
problem with disinformation is that the federal reserve and the federal government does not
tell the whole truth. The truth is, not many people know about this CBDC 120 day open public
response page you have here. Why was there not so much propaganda on this as there is
on everything and everywhere else the US government wants to spend all of the taxpayers
hard earned money? How can people make decision when they do not know or understand
the information being presented? Is this what the free world looks like or does that word free
only apply to some?
Lets first state the obvious, the blunt tools currently available to the federal reserve is not
working! We are in a world recession with many factors, one of them being the USD. The
US financial decline started in January of 2022 because we did not get financial grip on GDP
in 2021. This is because of GREED, everyone wanted to make up for the lost time monetary
time in 2020 and the federal reserve let it happen! If the federal reserve is a private sector
then they need to be a private sector that is not swayed by politics. This reserve would need
to open to the competitiveness of the world where the CBDC would be pegged to either oil,
gold, or exports funds. We may need to come to grips that the US dollar may not be in the
first position, stop the GREED!
yes, once the federal reserve is back to being a private sector provider all pensions and
retirements funds should have the option to be put into a CBDC that is pegged to gold. That
can be drawn on from the age of 65. We should start somewhere to untangle the complete
disaster of greed and fraud that has occurred in this country. This fallacy has allowed for the
biggest transfer of wealth to occur rapidly in the last 3 years.
CBDC?
We cant. If we are really a part of the free world and land of opportunity, then we need to
stop this corruption of looking for the cheapest labor for the most maximum profit at any long
term cost to the American people. This is the reason why everyone became "off shore"
workers and we started importing all of our goods. We need a change of culture, we need to
start producing our own, taking care of our own first, and practicing what we preach from a
humanitarian level. This current culture of supremacy and blaming everything on everyone
else is not working for the American people, it is only perpetuating a new breed of self
centered entitlement and distrust.
If we want to effectively be in the world market we will need to regardless.
1)Separate the federal reserve from federal government.�2) do not allow anyone is congress,
the house of representatives, or anyone in public office to be able to trade on the stock
market.�3) Make shorter terms for how long someone can stay in government. They MUST be
voted in by the people and not appointed or represented by unions or private interest.
The only way is blockchain technology, but that is still in the works and education would be
key for the people.
Individual passkeys, external wallets?
Yes
Yes, because it is the peoples money.
Single end user with multiple authentications if external wallets are not an option which they
should.
Crypto banks with high levels of cyber security/servers, with people that can provide training
and education to individuals. End user should have full control and understand either how to
use it or appoint a chosen custodian.
Yes, personal external digital wallet.
sale? If so, how?
Smaller general bank accounts that is uploading funds securely. Similar to how we currently
use a checking and savings account.
Ofcourse, Intellectual property and all. I dont think that information should be just given out,
this is something you hire people for and not just the cheapest people who don't care so
criminals can skim off the top.
CBDC?
It can be very similar to Bitcoin.
benefits of a CBDC?
Yes, the principle of working for the people!
_________________________________________________________________________
Alliance For Just Money
Industry
Other: Civil Society Organization
Country
State
Illinois
Email
reform@monetaryalliance.org
A potential benefit, not considered in this paper, is that CBDC can provide a pathway toward
ending bank creation of money altogether. Compelling reasons for ending bank creation of
money have been given recently by Omarova in “The People’s Ledger”
(https://scholarship.law.vanderbilt.edu/vlr/vol74/iss5/1/) and previously by many others (see
THE LOST SCIENCE OF MONEY, by Stephen Zarlenga, 2002). In that way money creation
through the Fed can become available to serve the needs of society as a whole. Banks can
continue to meet borrowing needs by lending pre-existing CBDC instead of creating it
themselves out of credit. Money created by a public central bank can be directed to meeting
public needs. �Indeed, we believe the only logical, viable, stable, Constitutional, economically
sound and just way for CBDC to be introduced is part and parcel with sovereign money
reform, as laid out in the 2011-12 National Emergency Employment Defense Act
(https://www.congress.gov/bill/112th-congress/house-bill/2990), which the Alliance For Just
Money (monetaryalliance.org) has updated for 2022 as the American Monetary Reform Act
(AMRA, available upon request, reform@monetaryalliance.org). �Another potential benefit of
the shift from bank created money to central bank created money is that it could begin to
address the extreme maldistribution of wealth that currently threatens democracy and social
stability. New money created by banks goes to those who already have money; it
concentrates wealth. Spending of newly created money on public needs through CBDC
provided to the government with no corresponding debt has the potential to counteract wealth
concentration by distributing the country’s resources more evenly, and more justly.
Yes. Digital currency could be issued by the Treasury Department instead of by the Fed. New
money could then be spent into circulation, as the Greenbacks were, rather than being lent
into circulation. That could bring the expansion of public debt to a close. It would have to be
done with guardrails against government spending exceeding the capacity of the economy to
use it for expanded production of goods and services. The above-mentioned legislation lays
out how this transition to wholly public money can be achieved in a graceful and timely
manner and be effectively maintained and modulated over time by an independent monetary
authority in the Treasury.
inclusion?
It could have a positive effect, but it depends upon how it is done. Automatic opening of Fed
Accounts for everyone, plus access through the post office could certainly improve financial
inclusion.
Monetary policy, via the setting of interest rates and open market QE, has never been very
effective in achieving these ends. �A. A CBDC which can be channeled into government
spending in the public interest could certainly do a better job of keeping people employed.
There is certainly much to be done that can be done by human power. �B. Having the central
bank (or monetary authority in the Treasury) actually control the money supply would do
much to control booms and busts that are known to be accentuated by bank creation of
money. Price stability is shaken by booms and busts, although it is also affected by other
things. Central bank control of the money supply could potentially eliminate or at least
attenuate the boom/bust oscillations, but it would depend on the ability of the government
bureaucracy, including elected representatives and monetary professionals all working as
public servants, to be able to respond with adequate speed.�
stability?
As pointed out in #4 above, central bank or public control of the money supply could switch
the money supply system from being an unstable, positive feedback system to being a stable
negative feedback system. In the current system of bankmoney creation, the money supply
grows when growth is not needed and shrinks when it is needed – the boom/bust amplifier.
Central bank control, done in partnership with the Treasury Department could reverse that
and stabilize the system.
The financial sector will have to change in response to the introduction of CBDC. If money
creation shifts from commercial banks to the central bank, banks will have to shift their
business plan. They will have to shift to credit intermediation from credit generation, in the
terms of Hockett and Omarova’s “The Finance Franchise”
(https://scholarship.law.cornell.edu/clr/vol102/iss5/1/). �Stablecoins are an entirely
unsatisfactory basis for a money supply. Despite promises of staying linked to the dollar
through risk-free investment in treasuries, they will go beyond it, just as Money Market Mutual
Funds can and did. Stablecoins will have to be bailed out in the next crash just as MMMFs
were in 2008.
During the transition from money creation by commercial banks to money creation by the
central bank, banks may have to borrow from the Fed in order to sustain their liquidity. In the
long run, investment money flowing into banks for lending on a credit intermediation basis will
sustain liquidity.
Yes. It is also clear that digital access is not available to nor preferred by all, and we also
must be ready for internet and/or electric grid disruptions. Thus, cash must remain a
sanctioned and accessible medium of exchange. It should be forbidden for a business or unit
of government not to accept legal tender of any form.
CBDC?
In the absence of a CBDC banks will continue operating their payment services, but other
private digital currencies and so-called “stablecoins” will compete and are likely to destabilize
the system.
The decision of whether, how, and when to implement CBDCs should be based on a studied
conclusion that it will help the United States people, not on whether other countries are doing
it. But if we don’t move to have better control over our monetary system and economic
resources, we will fall behind. Credit guidance, that is, directions from the central bank over
how and from Congress over where newly created money goes—can play a major role. It was
essential for the rapid recovery of Japan following WWII, as documented by Richard Werner
in his 2003 book, PRINCES OF THE YEN, and for the rapid industrialization of China in the
recent past decades.
A. RISK OF CHANGE TO FINANCIAL-SECTOR MARKET STRUCTURE. A
non-interest-bearing CBDC is the way to go. A CBDC must function to protect the payment
system, not serve as an investment vehicle. Investments should reside in the private sector.
CBDC must provide safety, not a profit source. �B. SAFETY AND STABILITY OF THE
FINANCIAL SYSTEM. It is not clear that limits will need to be placed on CBDC holdings,
especially if the CBDC is non-interest bearing. Should a need for limits become apparent, it
can be achieved via demurrage on the portion of a balance that exceeds the limit for longer
than allowed, a charge that can be easily avoided by the account holder moving the excess
CBDC to a time deposit, savings-and-loan account, or investment fund. �C. EFFICACY OF
MONETARY POLICY IMPLEMENTATION. The real purpose of monetary policy is to
determine how much money is and should be in the system and how needed new money is
introduced into circulation (i.e., spent, lent, given, or invested) or (much rarer) how to
withdraw some existing money from circulation (i.e., taxed or borrowed out of the economy).
Congress then decides who gets the new money for what public purposes. Currently the Fed
does not control the money supply. It influences it by the setting of interest rates and open
market operations, but these are weak tools. They are clumsy, imprecise, and only
indirect.��With CBDC, money creation by banks could be halted and the Fed could actually
control the money supply in the public interest. In addition, all the seigniorage from the
creation and first use of newly issued CBDC, coins, and even paper bills can go to the public
sector, unlike in our 109-year-old FRBS in which banks gain the seigniorage from all the
paper notes and bankmoney, which together comprise over 96% of our money supply. This
would be a net gain for the public.
Government needs to know financial information from individuals in order to receive or refund
taxes and to determine if they are paying their taxes appropriately. Anonymity would only
facilitate illicit activity. Powerful private companies already monitor how we spend our money.
We see a strong need for privacy and respect for privacy, but no need for anonymity. What is
needed is more transparency, not less. There are already certain "firewalls" within the
government to protect financial information, particularly between the IRS and other branches.
Such could be created to protect CBDC accounts to strike the proper balance among privacy,
confidentiality, accountability, and transparency.��Within commerce, the vast majority of money
transactions are transparent; we write checks, use credit cards, bank transfers, etc. That
private information is protected and regulated and subject to normal legal accountability and
due process. A relatively small amount of money is in the form of cash which does provide
near anonymity, though each bill has identifiable serial numbers and dates. The same level of
legal protections and privacy should and can be provided to CBDC as is provided for our
current form of digital money (bankmoney). The same level of accountability by users of the
public utility, legal tender, should also be expected.��Despite our belief in the possibility of good
government, much of the public is skeptical. The Fed being bank-focused and the limitless
role of money in politics today are reasons for distrust. This skepticism and wide-spread
ignorance about money and our monetary system are the best protections our current system
has, a state of affairs we find tragic. Recent actions by federal governments to shut off the
bank accounts of people and foreign governments when they don’t like what those parties are
doing, without the formal processes required by law, makes achieving CBDC and Just Money
much harder.
This is an important concern. But it is not unique to CBDC. It is a growing challenge that
CBDCs and any sovereign Just Money system share with all types and levels of industry,
financial and otherwise. Regarding operational and cyber resiliency for CBDC, central banks
and their associations such as the Bank for International Settlements (BIS) have been
developing payment, clearing, and settlement systems over centuries already, for the digital
age since 1980 (https://www.bis.org/cpmi/history.htm?m=3066). Technologies like blockchain,
cryptography, and distributed ledgers can also play a role in CBDC if they prove to be
compatible with the demands of ecological sustainability.��Regarding cybersecurity, correcting
our money system will not alleviate all financial fraud. But it will eliminate the moral hazard
widely understood to be built into modern banking (see McMillan’s 2014 THE END OF
BANKING, pp. 16, 40-46, 84, 98, 117, 179-80). That will foster operational, cyber, and human
resiliency not only for our money system but also in the wider economy, especially in big tech,
and in the culture at large.
Absolutely. Without it being legal tender, you would just be playing games at the expense of
people and planet.
No. As stated above, a CBDC must function to protect the payment system and to protect the
money used in the payment system by providing a safe digital account. Money is not a liability
but our liquid asset. CBDC is not to function as an investment vehicle. Investments and
profit-making should reside in the private sector. CBDC must provide safety, not a profit
source.
This is not likely to be needed as long as CBDC accounts remain non-interest-bearing. The
rules should apply equally to all forms of money. See also our response to #11.
For CBDC to be inclusive, many intermediaries have to be involved. For transaction accounts,
as long as the contracts with the intermediaries are well written, it could be a variety of firms,
public or private, including post offices and public banks. They will have to be compensated
appropriately for the work they perform as intermediaries. In the case of usage of private
firms, the cost could be borne by the individual holders of the Fed Account as the market
bears. In the case of usage of the post office or other public providers, the cost, if borne by
users, must be kept low. �Savings-and-loan and investment services for central bank money
(CBM), including CBDC, should be entirely in the private sector. Trying to placate private
industry is not the job of government. Banks or peer-to-peer lenders should do what they do
best, authenticate and facilitate loans to credit-worthy borrowers, lending their own money or
savers’ time deposits; they should no longer be able to create money out of credit. Investment
firms will invest their and their shareholders’ or investors’ funds at their own risk. If Congress
wants to appropriate funds for certain types of public purpose lending, this may be funneled
through the Treasury’s underwriting facilities.��The payments system of banks,
savings-and-loan, credit card providers, etc. has to be appropriately regulated, and so should
any fintech competitors among those systems. But, as McMillan (2014) points out, once
money and credit are distinct, with the public creation and modulation of money and the
private organization of credit, “credit no longer requires a special treatment....Government
should implement a competitive regulatory framework around credit that treats the financial
industry just like any other industry. In essence, such a framework includes an effective and
efficient legal system to enforce private contracts, the prosecution of market participants that
engage in fraudulent practices, and antitrust laws to ensure that markets are not cartelized or
monopolized by powerful actors” (pp. 165-6).
Probably not. This is a digital currency; that means online and/or in electronic accounts.
Offline transactions can still occur using US bills and coins issued by the central bank or
Treasury Department. Small denomination and refillable CBDC smart cards like gift cards or
sim cards could be purchased and used at retail stores that have or develop their own internal
point-of-sale swiping systems.
sale? If so, how?
Yes. Payment by check or electronic transfer should be made possible to convert one’s bank
money to CBDC. Use of debit cards should continue with CBDC. The so-called fintech
industry is developing and providing these services already. Again, we advocate all US
money in circulation, whether paper, coin, digital or account-based, be public money and
legal tender, what we call sovereign or Just Money.
Different payment platforms will simply need their own CBDC accounts. As described by
Hockett and Omarova in their 2017 “The Finance Franchise,” this occurs now with
“peer-to-peer” payment systems in that these platforms all have their own bank accounts.
CBDC?
Technology does drive change, but it should not obscure the fundamentals of policy making
in a democracy. The fundamentals are that we need a monetary system, free of special
privilege, that serves all. We need a reliable, secure, and easily accessible payment system,
but we do not need to optimize wealth accumulation by pandering to the needs of financial
traders for ultrafast transactions.
benefits of a CBDC?
Design principles to achieve the potential benefits of a CBDC are the following:��A. In shifting
to CBDC, money creation itself must shift entirely from commercial banks to the Fed or
central bank, as detailed in Omarova’s 2021 “The Peoples’ Ledger,” and Huber’s 2017 “The
case for a central-bank currency register”
(https://sovereignmoney.site/how-to-account-for-sovereign-money). The payment system
must come to reside wholly in an institution that can offer the full faith and credit of the United
States Government. The “tradeoff” here is that it will require a change in business plans for
commercial banks, in which their lending will no longer be based on creating deposits, but will
utilize pre-existing money coming into banks from savers as time deposits, or from investors,
or from the Fed itself, if needed.��B. The Fed or central bank must be enabled to fund the
federal government directly with zero-interest loans—essentially grants if not actually
sovereign money—issued either in perpetuity or with guaranteed, unlimited role-over
privileges in order that government can meet public needs by spending (or giving, investing,
or lending interest-free) in the public interest limited, not by money, but only by the availability
of labor and of sustainably available raw materials. �C. CBDC accounts must be free of
interest payments and be available to all who participate legally in the nation’s economy.
Access to accounts must be easily and safely available through both private and public
intermediaries, for instance through post offices, as suggested above, for those without
internet service.��FURTHER COMMENT: The definition of CBDC given in the 2nd paragraph
of the Executive Summary and on p. 13 of the Fed paper “Money and Payments: the US
Dollar in the Age of Digital Transformation” is inappropriate. It is an anachronism, a holdover
from the age of gold-backed dollars; it does not describe a monetary system of fiat money.
There is absolutely no justification for regarding CBDC as a liability of the central bank.
Rather it is described properly as our social equity (Kumhof et al., 2020,
https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3730608) or our liquid asset (Huber,
2017, cited above).��These features of a monetary system, which can be utilized in or be the
context for CBDC, were put in the form of legislation and introduced into Congress in 2011 as
the National Emergency Employment Act (NEED Act,
https://www.congress.gov/bill/112th-congress/house-bill/2990). The Alliance For Just Money
(AFJM, monetaryalliance.org) has updated this legislation for 2022 as the American Monetary
Reform Act (AMRA, available upon request, reform@monetaryalliance.org). �Finally, at
AFJM’s annual meeting in July 2020, the AFJM membership ratified a “Resolution on the
Establishment of a National Commission of Inquiry Into the Monetary System of the United
States of America” passed by our Board in March 2020 and first proposed in 1994 by
renowned U.S. economist Dr. Hyman Minsky. This Resolution, including a link to Dr. Minsky’s
paper, are available at https://www.monetaryalliance.org/resolution-number-one/. AFJM
continues to believe the US Monetary System is our most primary matter of public policy, and
it warrants open, broad, public dialogue in the halls of Congress, in the state houses, county
boards, city and town councils, and in the classrooms, community centers, and places of
business across this country, including within the Board of Governors and the 12 FRBs of the
Federal Reserve System. �We would be at your service for fuller exploration of and
collaboration on the ideas presented here. Thank you for your time and consideration. We
look forward to hearing from you. �~~Board of Directors, Alliance For Just Money, Inc., May
19, 2022
_________________________________________________________________________
Sanjay Sharma
Industry
Individual
Country
India
State
Email
“The Federal Reserve” will get benefitted in numerous ways :�-�Eliminate high Cost of Currency
Printing.�-�Eliminate high Cost of disposal of soiled notes.�-�Zeroise the impact of Counterfeit
Notes.�-�Remove cash as a medium of corruption; source for Black Money.�-�Remove high cost /
risk in Currency Transportation and Distribution.�-�Enforce various kind of cash transaction
limits as per law.�-�Achieve 100% Financial inclusion.�-�Achieve 100% currency / payment
digitisation.�-�Cash related crimes would be negligible.�-�Eliminate currency smuggling across
borders and illegal transporting of money.�-�Strengthen anti-money laundering operations by
removing element of Cash.��CBDC-GULORI solution would enable “The Federal Reserve” to
achieve all the above listed benefits.
inclusion?
CBDC-GULORI solution would enable “The Federal Reserve” to achieve and maintain 100%
financial inclusion at all the time.
stability?
CBDC?
Pls. refer the response submitted against question 20 & 22.
CBDC deployment by “The United States” OR “The Federal Reserve” should be based on
the merits rather than be guided through issuance of CBDC by other large economy nations.
�“The Federal Reserve” has already seen the benefits of CBDC ( pls. refer response submitted
against question – 1). Considering the benefits and inevitable nature of CBDC, it is important
to expedite the decision, for comprehensive CBDC deployment.
Central Bank Digital Currency, it is evident that CBDC would be a solution based on digital
technology. Therefore, CBDC being a digital solution, by default facilitate logging / recording
of all transactions.��CBDC-GULORI solution can be customised to support data privacy laws of
US. CBDC-GULORI solution can �-�Log all transactions and transactions are visible to those
two persons only.�-�Log all transactions and transactions are not-visible to even those two
persons.�-�Logged transactions are getting uploaded into independent CBDC transactions
repository, being maintained by The Federal Reserve / US Government only. �Entire
transaction history would be available for analysis and monitoring to designated authority by
“The Federal Reserve” OR US Government. �-�In case US Laws do not permit to log CBDC
transactions, it would be a plain vanilla type of digital currency solution.
CBDC-GULORI solution, being a network independent and platform independent solution is

immune from all kinds of cyber attack.
“The Federal Reserve” may recall that, as per best banking practices, cash / banknotes are
primarily non-remunerative in nature. This means, banks are not liable to pay any interest on
cash / currency notes held by customer / account holder. �Therefore, CBDC balance should
also be treated at par with cash / banknotes balance and hence it should be non-interest
bearing.�CBDC-GULORI solution would facilitate “The Federal Reserve” to maintain
non-remunerative nature of cash / currency notes without stipulating changes in existing
banking procedure.
CBDC solution being a digital solution by nature, would enable “The Federal Reserve” to
enforce various transaction limits e.g.�-Daily Credit / Debit Transaction Limit�-Only Debit
Transactions Allowed�-Only Credit Transactions Allowed�- Max. Amount (Credit / Debit) per
transaction**�“The Federal Reserve” would be able to enforce above limits using
CBDC-GULORI solution through authorised bank(s) and their branch network. It would not be
the responsibility of “The Federal Reserve” to directly maintain and supervise various types of
limits.��It may please be noted that various government(s) are finding extremely difficult to
enforce cash transaction limits despite required rules / acts were pronounced time to time.
“The Federal Reserve” is not required to involve / engage any intermediaries, when
CBDC-GULORI solution is being used to provide CBDC services. “The Federal Reserve”
would be able to provide CBDC services using existing infrastructure and setup.
“The Federal Reserve” already achieved transformation of various payments into digital
payments, using network centric solution through Bank(s) or other similar institutions.
�However, a breakthrough is yet to be achieved to transform all CASH TRANSACTIONS
(especially person-to-person OR P2P cash transactions) into DIGITAL TRANSACTIONS in
NETWORK INDEPENDENT ENVIRONMENT.��In simple terms, “The Federal Reserve” need a
solution / device to digitise all banknotes in circulation and facilitate “The Federal Reserve” to
stop printing of banknotes. �It may please be observed that NETWORK INDEPENDENT
nature of CBDC solution necessitates that CBDC must have “Offline
Capabilities”.�CBDC-GULORI solution, provides complete offline capabilities to all account
holder(s), to undertake CBDC transactions in network independent environment, without
utilising any type of services from any network service providers.
sale? If so, how?
CBDC-GULORI solution is designed, keeping the needs of all category of users in

consideration. Some of the important feature(s) and functionalities of the solution
are:��-�Uneducated population would be able to use the solution.�-�Voice activated solution for
physically challenged people.�-�No dependency on communication network.�-�Record and
maintain all transactions for future tracking and monitoring.�-�Enabling The Federal Reserve to
enforce transaction limit.�-�Finger print based / PIN based mechanism for secure
usage.�-�Continue to recognize and respect “The Federal Reserve” as custodian of
banknote(s).
“The Federal Reserve” may kindly note an important point about existing cash / currency
notes – Transferability in physical form would be possible only when two party(s) would be in
hand-shaking distance and no payment platform would be required. �CBDC-GULORI solution,
in a similar manner, does not require any platform to achieve transferability. CBDC-GULORI
uses near field communication features and standard financial message architecture to
achieve transferability and undertake CBDC transactions between two entities.��Thus,
CBDC-GULORI is a completely platform independent solution.
CBDC?
benefits of a CBDC?
“The Federal Reserve” may kindly note that cash / currency notes transactions are mainly
Person-To-Person (P2P) transactions. The main aim of any CBDC solution is to digitise P2P
transactions. �It may please be observed that all other types of transactions e.g. funds transfer
between two accounts, programmable money, cross border payments etc. are already being
taken care by existing core banking solutions having interface with different payment
systems. Any CBDC solution provider, includes these feature in the solution, “The Federal
Reserve” should consider this, an attempt to overload CBDC functions with already available
core banking functions.�Therefore, CBDC-GULORI solution focuses to provide P2P
transactions and suggest that all other types of transactions, requiring network availability,
should be performed using core banking or other solutions.
_________________________________________________________________________
Neeraj Chawla
Industry
Individual
Country
State
Washington
Email
A US CBDC can be a great option and essentially an extension of the current US Federal
Reserve and US monetary policy, where along with notes issued by Federal Reserve, a
CBDC can be a new form of “legal tender”. It can be a new medium of exchange of “legal”
currency, in addition to coins and notes in circulation. In one aspect, the unique
alphanumeric serial no. on the notes is similar to a cryptographic key of a CBDC. The digital
wallet, blockchain, transmission, security and validation aspects may be new, that can also be
applied to existing currency notes.��However, a number of policy concerns and risks have not
be considered in the CDBC paper, which are becoming evident in the current state of turmoil
in the markets, and crypto mania that continues to add risks and uncertainty to financial
markets.��1.�Simplicity of monetary terminology.�a.�Terminology and financial concepts used
should be simple and something the larger public can understand. It is not necessary that
complex cryptographic concepts and algorithms will equate to a sound monetary policy, and
in fact the opposite maybe true if the complexity of such instruments can be used by
companies and individuals to take advantage of people, e.g. convincing them into speculative
investments they don’t understand.�b.�Most people can’t differentiate between Credit and Debit
Cards, and don’t understand the variable interest rates and behavioral challenges of using
such instruments that often put them into debt that they can’t recover from.�c.�Similarly, CDBC
and Crypto can be very dangerous terms that can be confused with each other, and innocent
investors will not know the difference.�d.�Clear differentiation is needed, and legal laws to
prevent manipulation that is rampant in Crypto market today.��2.�Speculation in the name of
innovation and decentralization needs to be avoided and eliminated, and “after the
manipulation” regulation is not enough.�a.�Federal laws and policies should clearly make illegal
to provide speculative information to non-accredited investors that is rampant in crypto
markets.�b.�Federal laws should also make it illegal to invest public money from IPOs, 401Ks,
and other institutional investors that are siphoning off billions and trillions off the public
markets into speculative virtual currencies.�c.�Any such virtual or alternative currency
information that promotes such speculative assets for its appreciation, store of value, etc.,
any such articles should be held to the highest standards of scrutiny by Federal Reserve and
SEC, with significant penalties for violations.�d.�A digital currency should be designed to be
stable, and there should be a single national currency, that is equal for all.�e.�Laws need to be
enhanced to protect people against any speculative manipulations.�f.�Most people don’t even
understand what is crypto, but get enamored by the speculation which is driven by the crypto
speculators and daily dose of speculative articles and statements, made without any action
being taken against such misleading information.�g.�Young generation, schools and colleges,
and especially financial institutions need to be educated for not falling prey to what they don’t
understand, and held accountable to not mislead a new generation of students and young
minds, as they are the least experienced in understanding the risks an pitfalls of speculative
currencies.�h.�Federal Reserve and other federal institutions should be chartered to evaluate
and frequently report on the demographics of investors of such virtual currencies, regardless
of whether CBDC is put in place or not. Reports on the numbers and types of accredited
investors, what age-groups, demographics, and how are they getting manipulated into such
schemes should be published.�i.�Crypto features designed to evade the monetary systems
need to be eliminated.��3.�Federal Reserve should clearly articulate what specific issues it aims
to address, and goals that CBDC and such monetary instruments and policy aims to achieve.
e.g.�a.�Eliminate speculative crypto currencies, and protecting investors from such speculative
and unregulatable decentralized currencies, �b.�Create a regulatory framework for such
decentralized currencies,�c.�Creating a centralized US legal currency that eliminates need for
other such speculative or decentralized currencies etc.�d.�Address fraud in the existing
currency notes by replacing them with new and more secure form of legal currency.�
Clearly, several of the potential benefits are related to the inefficiencies and high costs and
manipulations built into the current financial systems, which need to be addressed.��Also, many
of the potential benefits the early adopters of crypto are seeking are unrelated to what CBDC
or any currency can influence, and more driven by having good opportunities of investments,
sustenance and growth.��A sound policy for job creation, wealth distribution, and financial laws
and regulations governing stock markets are the other ways of achieving the same benefits
that are probably the fundamental drivers and issues that need to be addressed.�
inclusion?
A CBDC issued as legal tender by the Federal Reserve should be similar to current currency,
and can be fairly accessible, and equally valuable for all users. Equitable structure favors
inclusion, and does not position some early adopters in an advantageous position over other
users. It should be a net positive compared to other alternatives in the markets.
A US CBDC can successfully regulate and eliminate the misleading and illegal activities in the
crypto markets, the net effect would not only be positive, the confidence in the financial
markets should soar, which should lead to price-stability and maximum-employments.
stability?
Federal Reserve should evaluate how such a system will ultimately be used by general
public, commercial markets, investors, and at what costs to the public and markets. That
analysis will determine how the choices impact the financial stability. Assuming the concerns
related to speculative crypto markets are addressed by CBDC, the net effect would be
positive for financial stability of markets.�a.�What percentage of users are going to adopt a
digital wallet, and in what time period?�b.�What are the true benefits common people will see
while using it at the grocery store or in their checking, savings or digital wallet
accounts?�c.�What are the incentives that can be offered, in terms of lower costs, higher
interest rates, that can be sustainable over the long run?�d.�What will be the costs of enabling
changes in the financial systems?�e.�How much speculation and investments will be poured
into the markets due to lack of clear policy or regulation?�f.�Does it prevent and change the
speculative nature of crypto markets and how does it impact the trillions that are being
siphoned off the public markets?�
The recent failure of some of the crypto stablecoins is clear evidence that there is a huge
degree of speculation in crypto markets today. In the recent fallout of some of the crypto
stablecoin currencies, an estimated $60 Billion that was invested by the markets in 9 months
evaporated in a few days. Overall, estimates over $1 Trillion in speculative investments in
Crypto markets are not only concerning, the future possibilities of even more speculative
investments in crypto creates even bigger risks for the economy.��A CDBC may negatively
impact these speculative currencies, but majority of these are already expected to fail. In
general, it should bring stability to the financial sector.�
Most importantly tool is proactively coming up with laws and regulations, and timely
implementation of policy, and not a wait and see approach often taken by the federal policy
makers.
Cash usage is already a small percentage of overall digital money usage, and should not be a
major concern. The cash users are not going to be the early adopters, and cash can coexist
with CBDC.��Whether CBDC will even offer significant improvements in efficiencies over
current inefficiencies in banks and financial institutions remains to be seen.��How will CBDC
treat transactions? Will there be fractional usage similar to cash and coins, or other
mechanism will be needed. How does that impact the usage and adoption of
CBDC?��Hopefully, it will be much better than the confusion from complex new virtual
currencies, which can be expected to be more detrimental for markets than the standardized,
stable, and simpler and legal tender CBDC.�
CBDC?
Digital payments are facilitated today domestically and cross-border in many different ways.
A major concern is the high costs of currency conversions and fees charged by the banks,
credit card companies, and other such financial institutions.��Peer to peer crypto transactions
aim to eliminate such overhead, but add other challenges such as money laundering, lack of
accountability, and other illegal activities that are impossible to manage with the anonymous
nature of such technologies.��Why the transactional costs can not be reduced by better
policies, regulation, competition, and oversight, is a subject that free market economists
should address, instead of enabling large powerful interests to create new forms of currencies
that evade the monetary systems, in the name of decentralization, and innovation. Money
laundering in any form is not innovation, but a cost being passed on to public markets, directly
or indirectly.�
CBDC and monetary policy have global impacts, and US should work in concert with leading
countries decision to issue CBDCs. However, the world will also be influenced by clear
leadership from US in addressing issues arising from crypto.
An estimated $1 Trillion has been siphoned off public markets into crypto schemes, and any
delays in addressing these issues will only increase the exposure of public markets, and
make any corrective actions more damaging to economy.
Just like privacy for digital transactions is enforced with laws and regulations, CBDC should
be designed to safeguard privacy of information, but not create anonymity which creates huge
risks of money laundering and illegal activities. Any schemes to create anonymity should be
considered illegal activities, and penalties should be imposed by law.
CBDC should be designed for ensuring accountability and ownership of money, and
transactions. It does not need to be anonymous, or use blockchain or complex cryptographic
algorithms for mining.��What are the characteristics of a stable, national currency? By
definition, it is a national currency, and a transact-able unit of money held by an owner. It
should be stable, and hold its value over a long period of time, and not be subject to market
ups and downs. Issuance of currency notes should be managed by a lawful process that
ensures fair and just process for offering to investors, institutions, and public.��In the CBDC
context, much of these features should remain intact. Only the medium of issuance should
be changing to digital. It can aim to address monetary policy problems and operational
inefficiencies in the existing system and financial markets, but does not have to address such
problems if they are unavoidable, nor should it be morphed into new concepts that create new
risks in the financial markets. �
Yes, CBDC should be a legal tender, like currency notes.
A digital currency does not inherently pay interest. Interest is a separate function of banking
and financial markets. Such processes should be maintained. The process of adding interest
by new instruments to attract investment is misleading public into believing they are
sustainable policies.
The benefits of creating such limits in a free-market economy are not clear. If there are
inherent limitations on the currency issuance, some mechanisms to add such quantity limits
could be considered for a period of time to understand the market behavior in usage of
CBDC.
First and foremost, the crypto schemes, and companies with crypto mining activities should
be eliminated, and not be a part of CBDC intermediaries. Banking and financial institutions
that currently act as custodians of digital currency can evolve into CBDC
intermediaries.��Regulatory frameworks should be inherently built into the design without a
significant need for huge regulatory bodies. Initially, laws and regulatory frameworks will
need to be developed, however CBDC should provide an opportunity for inherent
accountability, ease of traceability for taxation and other monetary policy goals.�
Ideally, yes. However, just like today’s digital transactions require network connectivity, CBDC
transactions can also have a similar model. However, some ability to do offline transactions
would offer CBDC to be used similar to cash.
sale? If so, how?
One option is to make it very similar to current digital currency, and/or currency notes
denominations. Also, making it easy to access CBDC based on biometrics in POS, so no
additional wallets or cards are needed.
Yes, standards and guidelines for usage of CBDCs should be put in place.
CBDC?
As much as possible, CBDC should be designed to be simple, and not be constantly

changing, which brings uncertainties in the financial markets.
benefits of a CBDC?
Some key design principles mentioned in Fed’s paper need to be clarified.��1. What is CBDC,
and why is it different from today’s digital currency?�Fed states “a CBDC would differ from
existing digital money available to the general public because a CBDC would be a liability of
the Federal Reserve, not of a commercial bank.”��Even today’s digital money held in banks is
insured by FDIC, the Federal Deposit Insurance Corporation. �However, even if CBDC is a
Federal Reserve liability, how different is it from today’s digital currency? A run on any
currency can be equally damaging to any system. When the banking system or federal
reserve fails, it doesn’t matter who takes liability, it is a catastrophic failure of financial
markets.��What is important in both systems is that there is a fair, transparent, and accountable
system, that can not be manipulated by market forces to their advantage, and even when
financial powers of the world will try to influence, arbitrage, and misuse the monetary system,
there are safeguards that hold them accountable.��For such a system to exist, Federal
Reserve, and the Federal Government, along with other financial institutions such as SEC,
collectively must have regulatory control, and that checks and balances are in place, and
ownership and responsibility to maintain integrity of the system are clearly understood.��If there
is just a namesake CBDC under control of Federal Reserve, but there are many other
decentralized and anonymous backers running crypto that Fed has little or no control over,
that will be a huge problem regardless of whether CBDC is issued by the Fed.��The damages
to the system from the crypto mania engulfing the financial world under the name of
innovation can put the entire financial system at risk, and that’s why having CBDC under
federal reserve liability is a much better option.��2.�Fed’s paper states: “Cross-border payments
currently face a number of challenges, including slow settlement, high fees, and limited
accessibility. The sources of these frictions include the mechanics of currency exchange,
variations in different countries’ legal regimes and technological infrastructure, timezone
complications, and coordination problems among intermediaries, including correspondent
banks and nonbank financial service providers. Regulatory requirements related to money
laundering and other illicit activities introduce further complications.”��How does CDBC address
these problems? It’s also important to consider how crypto and decentralized systems, under
the name of innovation, are claiming to address these problems, but in fact are adding more
regulatory complications. Time zone and other legal and financial differences between
countries are going to remain with CBDC and crypto. In fact, new uncertainties are added to
an already complex system, and money laundering is getting far worse.��If the average cost of
remittance from US to other countries is 5.41%, these issues need to be addressed in the
international monetary systems, but not by creating work arounds the system, by creating
decentralized, unregulated, anonymous, non-traceable systems that defy all logic of any
manageable and controllable financial system.�
_________________________________________________________________________
Industry
Country
Japan
State
Email
We have separately sent a comment letter by e-mail （to

Digital-innovations@frb.gov）.Please kindly refer to the separate e-mail that
contains our response to this discussion paper.
inclusion?
stability?
CBDC?
sale? If so, how?
CBDC?
benefits of a CBDC?
_________________________________________________________________________
AIMICHIA TECHNOLOGY CO., LTD.
Industry
Technology Company
Country
Taiwan
State
Email
JIM.LIN@AIMICHIA.COM
To increase efficient value transfer, integrate the automation technology of artificial

intelligence with CBDC. If there is no risk management for AI technology in sensitive areas,
once an uncontrollable error occurs, the system risk is difficult to assess.
No comment.
inclusion?
If low-income households are unable to own or study the digital economy, CBDC has no real
impact on financial inclusion. Therefore, only by improving the basic digital capabilities of
low-income households can CBDC have a certain effect.
There are many variables in employment and price stability, and CBDC should not be used
as a tool that can accomplish its goals.
stability?
More observations and research are needed to determine how CBDC can affect financial
stability. However, using CBDC to increase the efficiency of financial operations is one of the
options.
CBDC and stablecoins have a certain impact on the management of HQLA for financial
institutions. They increase the cost of bank financing and the cost of credit to households and
businesses.
No comment.
Uncertain. If the cost of electronic payment is low and the popularity is high, CBDC may not
necessarily be issued.
CBDC?
The priority is to improve the efficiency of payment. For example, the time of cross-border
payment can be realised T+0. Even, T+3 hours.
Because the world's main international settlement currency is the US dollar. Therefore, the
policy impact of CBDC should be based on the United States.
No comment.
This can be achieved from the private key or credential management of the electronic wallet.
For example, a specific unit authorized by the government to escrow additional private keys
or credentials of consumers.
No comment.
We agree.
No interest is paid, just like cash. If interest needs to be paid, it will cause difficulties in
accounting recognition.
Quantitative limits can be used to manage liquidity risks and prevent financial crime.
Banks, credit unions and insurance companies. These units have more experience in risk
management than other units, and they are more willing to take risk appetites.
If it is a trusted electronic wallet device, the CBDC of the wallet can be directly transferred to
another trusted electronic wallet through the QR code.
sale? If so, how?
Barrier-free and easy-to-understand guidelines can increase usage and acceptance.
No comment.
CBDC?
No comment.
benefits of a CBDC?
No comment.
_________________________________________________________________________
League of Southeastern Credit Unions
Industry
Credit Union
Country
State
Florida
Email
david.pace@lscu.coop
A CBDC has the potential to provide a great many benefits to consumers and financial
institutions across America. If designed properly, a CBDC could become a replacement for a
lot of the infrastructure that currently exists within the financial space. If the CBDC can be
made to be a more efficient way of transferring funds between financial institutions and for
customers/members of a financial institution, then we could categorize it as an improvement
to the system overall. When designing the CBDC, the Federal Reserve needs to address how
it would be superior to the current wire system and how it could outcompete comparable
cryptocurrencies or peer-to-peer (“P2P”) financial apps, which have come to dominate money
transfer space. Current cryptocurrencies and P2P services are going to pose the greatest risk
to the mass adoption of a CBDC.��Other than having the endorsement of the United States
government, what benefit would this CBDC have compared to a similar stablecoin? There are
stablecoins that are connected to all sorts of currencies and goods and a CBDC will be
specifically trying to get into this market. Tether, one of the main stablecoin issuers, already
has a dominate position in this marketplace with Tether coins that are pegged to the dollar
and to gold. There are other stablecoin providers as well who allow for a great degree of
anonymity, something a CBDC can not have by design due to Bank Secrecy Act regulations
and the fact that any CBDC will necessarily have to be tied into the traditional financial space.
Anonymity is a major selling point for cryptocurrencies in general, while cryptocurrencies built
in the Bitcoin or Ethereum framework are too volatile to be a good means of transferring
value. Stablecoins are more currency-like than their Bitcoin relatives as a way of fulfilling the
original intention of cryptocurrency versus the reality of what cryptocurrency became, which is
a vehicle for speculative investment. Stablecoins are filling this niche successfully at the
moment, save for some concerns from the government on whether the issuer of the
stablecoin has a sufficient amount of liquid reserves to maintain the peg. This is where a
CBDC could outcompete a privately issued stablecoin. The Federal Reserve has a
theoretically infinite balance sheet and as such could guarantee the peg of any CBDC to the
dollar. The Fed needs to be prepared to back this peg fully in order for this coin to compete
with the already existing stablecoins. In a sense, it is a trade off between anonymity and
security. A privately issued stablecoin may give the buyer of that coin the anonymity they
desire for their transaction, but they would not have the government backing to be certain that
the peg will be maintained. �P2P has become a major subsection of the financial space and
has moved away from paper checks, wires and even the utilization of cash. When a member
of a credit union or a customer of a bank can pull up their financial institution’s app and have
Zelle already downloaded, allowing them to send money without having to utilize any
traditional financial tools, we can say that we are already moving rapidly into a new era of
payment systems. A CBDC will need to compete with these P2P systems as well as the
stablecoins discussed earlier. A solution for a possible CBDC to compete with these P2P
systems would be resolved through ease of use. Most integrated P2P systems do have a
basic sign-up process, even when operating within the app of a financial institution. If a
financial institution is offering CBDC services to its members or customers, then having a
wallet tied to the account from the moment it is opened would put a CBDC ahead of a P2P
app as far as ease of use is concerned. The clearing of any transaction between two people
utilizing a CBDC should also be faster than any other comparable services. A Bitcoin transfer
can take anywhere from an hour to and hour and a half to complete. A CBDC should be
transferred much quicker than that in order to be viable and competitive. �
The proposed CBDC would be specifically competing in the already existent stablecoin
market, there are a variety of stablecoins available to the public pegged to a wide variety of
assets. A CBDC will need to be better than all of its competitors to be the game changer that
the Fed would like it to be. From our understanding of it, the Federal Government is exploring
this CBDC mainly due to distrust around the existing CBDC companies and concerns
regrading these companies’ ability to maintain their cryptocurrency peg. Should the
government decide against issuing a CBDC, it should consider the way it regulates the
companies that have stablecoins on the market. Wider acceptance of a private stablecoin
might be less burdensome to the administration while increasing access to financial
resources as is desired with a CBDC. We are not saying that this is necessarily preferable to
a CBDC, in fact, we feel that a CBDC would go a long way to legitimizing stablecoins as a
whole and would be beneficial to the cryptocurrency ecosystem.
inclusion?
According to the white paper on CBDCs, Money and Payments: The U.S. Dollar in the Age of
Digital Transformation, “inclusion” is noted as one of the key reasons behind the creation of a
CBDC. Depending on how the CBDC is designed, it could be a marginal net benefit for
financial inclusion in the United States. We say marginal because many of the reasons that a
digital asset is preferred over traditional banking is due to how easy it is to access and use
them. This ease of use coupled with anonymity is the foundation upon which stablecoins are
built. The white paper notes that about 5% of all U.S. households remain unbanked. We in
the credit union industry strongly support adding these people to the financial system so that
they can avoid many of the financial institutions that prey on the vulnerable like payday
lenders and check cashing businesses. Outreach and education would probably be a more
effective way of banking these individuals than a CBDC, if the CBDC is designed as an
addition to the financial system as opposed to a more independent system. �The Federal
Reserve should consider this, any person can go to Bitcoin’s website, create a wallet on their
hard drive, and start accepting Bitcoin as a payment from that moment on. There is no know
your customer/member (“KYC/M”), there is no Office of Foreign Asset Control (“OFAC”)
check, and there is no Bank Secrecy Act (“BSA”) compliance involved. This comes back to
the Libertarian roots of cryptocurrency, the individuals involved in the creation of these digital
assets were extremely dubious on the reliability of the Fed and distrusted the government
overall. As such, the design of Bitcoin and most other cryptocurrencies is centered around
anonymity and independence. People who are not banked but are attracted to cryptocurrency
would be turned off by a CBDC due to the regulatory requirements that go in hand with any
financial tool created by the government. If a CBDC wallet is only available at a traditional
financial institution and the financial institution has to collect personal information just like they
would, to open a traditional account, then those who believe in cryptocurrency’s original
mission will not utilize it. Conversely, if the Fed was to set up a website where any person,
banked or unbanked, could create a CBDC wallet and start trading in this hypothetical dollar
pegged cryptocurrency, then the financial industry will be building a massive hole into its
Anti-Money Laundering (“AML”) defenses. We are supposing in the second scenario that
CBDC wallets would be available at traditional financial institutions as well. �In order to solve
this conundrum, the Fed should look at a variety of solutions, ones that would provide access
to this CBDC to as many people as possible, while reducing or eliminating the money
laundering risk. For those who wish to utilize a CBDC but do not want to, or are unable to,
become banked for whatever reason could have access to a CBDC wallet through the Fed’s
website, but that wallet should be limited based on what KYC/M information that person is
willing to provide. While it may seem heretical to suggest this, but an anonymous CBDC
wallet that is extremely limited in the amount of funds it can hold and the amount of value it
can transfer would encourage some unbanked people to start using this financial ecosystem.
This wallet may not allow for more than $3,000 to be stored in it at one time, or it may limit the
amount of CBDC that can be moved at one time to an amount even below that ($500 for
instance). Any sort of anonymous wallet would need to be designed with the purpose of
making money laundering as slow and painful as possible. �It is entirely possible that a CBDC
will lead to a mass movement of unbanked people to the financial industry, we feel this
scenario is improbable though, given the current environment around cryptocurrency. What is
more likely is that a CBDC will improve the efficiency with which money is able to move within
the financial industry. A CBDC may allow banked individuals to send money in a cheaper and
quicker manner than writing a check or sending a wire. Overall, a CBDC might provide a
slight improvement to the problem of financial inclusion in the U.S., however, we do not see it
as being a game changer for this issue. �
A CBDC is unlikely to meaningfully impact the Fed’s ability to implement its monetary policy
goals. As long as the CBDC is being exchanged for dollars that already exist there should be
no impact on inflation. A CBDC would also not be much easier than using a credit card to
purchase goods and services and as such would likely not increase the velocity of money
either. In the event of a recession, the Federal Government could utilize a CBDC to quickly
get stimulus into the pockets of Americans, should the need for stimulus checks arise again.
We also do not expect a CBDC to significantly impact the Fed’s ability to meet its full
employment target.
stability?
A CBDC is unlikely to meaningly affect financial stability. If designed properly, there should be
no doubt as to the government’s ability to maintain the peg of the CBDC to the dollar which is
one key area of stablecoins that is the riskiest. Private companies do not control the dollar
and as such it is a balancing act for them to maintain the peg of their stablecoin to the dollar,
whereas the Fed can guarantee that peg forever. There is a risk that the system could be
compromised by hackers on a grand scale, and this certainly could elevate the risk created by
the CBDC that might not have otherwise existed. Strong passwords coupled with dual
authentication to access a CBDC wallet is a method for mitigating this risk. The last risk we
would like to touch on is one of the harder ones to predict. Exotic financial instruments
created around a CBDC could destabilize its convertibility. Could a credit default swap (“CD”)
be paid out in CBDC? Could a major financial event lead to many of these CDs being called
in leading to a large amount of CBDCs being transferred and converted to dollars? How
would the Fed deal with this situation? These are all factors that need to be considered. A
smart contract could hypothetically be created that uses CBDC that is immediately paid from
one account to the another when the contract is fulfilled or terminated. Would a CBDC have
an ability to be integrated to such a scheme? The ability of investors and other financial
experts to take something that should be stable and bend it in such a way that they can make
a profit is remarkable and the Fed will need to be prepared to contend with these possibilities.
It is unlikely that a CBDC could adversely impact the financial sector aside from the risk that
the peg might not be maintained. A CBDC would be unique in that it is designed with financial
institutions in mind whereas the Stablecoins that are currently on the market were created by
private companies who wanted to provide a way around the erratic price swings of
cryptocurrency without using the traditional financial space. Stablecoins are not built into the
traditional financial space and can only be accessed by intermediaries like Coinbase or
Kraken, whereas a CBDC would be available without those intermediaries. We see a CBDC
being able to increase the usage of cryptocurrency in America while posing a minimal risk to
the consumer.
The main adverse impact that we are concerned with is the potential for money laundering
through a CBDC. This is also an area where the adoption of the CBDC could be hurt as there
will need to be controls in place similar to a traditional bank or credit union account in order to
combat potential money laundering. These requirements will reduce the number of individuals
who might adopt the CBDC as those who are currently unbanked in America are likely so due
to not meeting KYC/M rules and regulations. These rules against anonymity would also push
away more conventional cryptocurrency users who value their privacy much more highly than
the general public or are distrustful of the government in general. There are other elements to
be considered too, such as how will the login system for this currency be designed? Will the
login system be sufficiently secure to protect against hacking and other malicious actors?
These problems, though, occur at the developer level, and while we have concerns about it
we feel that a well designed coin will address them right from the start.
We agree with the sentiment that some form of central bank currency needs to be available
for payments even if the usage of cash declines. The number of transactions that are
conducted in dollars has been on the decline for years. Credit and debit cards gave people
access to the full funds of their bank accounts without needing to write checks or carry cash.
Couple this with the computerization of finance and we have a system where the amount of
physical cash in the United States is, but a tiny fraction compared to the amount of money
stored in the form of ones and zeroes. Comparing the current system with one that includes a
possible CBDC does not lead us to believe that there is going to be a need to do away with
paper money
CBDC?
We feel that cross-border and domestic payments will continue to evolve along the lines they
have been for the last couple of decades. P2P will continue to dominate the transfer space
while privately issued stablecoins will be utilized for the transfer of funds between people who
desire to maintain their anonymity for certain transactions. Credit unions and banks will also
continue to fulfill the role of issuing checks and sending wires for people who do not wish to
utilize one of the newer FinTech systems.
The United States should look to see what other nations do, should those other nations
choose to issue their own CBDC. While the United States is unique due to the size and
complexity of its economy, we can still study how smaller nations handle the rollout of a
CBDC. Of particular interest should be the rate of adoption that we see from these other
countries. China, for instance, is also looking to issue its own CBDC while at the same time
outlawing the mining of cryptocurrency. The data that China provides on economic and
financial matters has been dubious at best for the last couple of years, but what we might be
able to learn about adoption of a CBDC from China could be potentially valuable, if the Fed
can parse the truth from the propaganda. Other factors should also be considered when
analyzing another nation’s launch of a CBDC, factors like access to the internet, electricity
and the percentage of the population that is already banked will affect how the rate of
adoption and utilization of a CBDC.
Many of the risks around a CBDC as were brought up in the paper and in this letter pertain to
the possibility of it being used as a tool for money laundering and criminal financing. The
amount of anonymity that the CBDC is willing to give to a potential user is directly
correspondent to the degree to which it can be used for these criminal actions. There are also
the technological risks that are posed to the CBDC from hackers and other elements looking
to do harm or gain unlawful access to the CBDC system. Without a more in depth look at how
this currency is going to be designed, what encryption method will be used, how it will be
mined and stored, and a myriad of other technical elements, we cannot say with certainty
what potential risks there are or how to mitigate those risks.
It is unlikely that such a thing could be done. The Fed could state that the transactions in the
CBDC ecosystem are not monitored by the government beyond what must be monitored
according to regulation, such as with SARs and CTRs. The Fed could even say that it was
designed to not let them monitor every transaction, the problem though, is that people who
are concerned about this are also going to be disinclined to believe what the Fed is telling
them. Many of the people who are interested in using a CBDC are going to initially view it as
a novelty, those are going to be some of the very first adopters. The demographic that the
Fed is trying to reach out to (cryptocurrency enthusiasts) do not trust the government enough
to utilize a CBDC coin unless they can find a workaround for it to give themselves total
privacy. They would also be dubious about using such a currency as they do not agree with
the Federal Reserve’s “money printing” as they would call it. The Fed stepping in during the
recent crisis to buy up U.S. Treasuries and keep the government funded while Congress
passed big spending packages like The American Rescue Plan and the CARES Act. These
actions are largely blamed for the recent surge in inflation, as such, there is a deep distrust
from certain elements of the public in the Federal Reserve and in the government’s ability to
manage the dollar. These problems are a bigger issue for the adoption of a CBDC than the
ability to meet cryptocurrency advocates halfway on the issue of privacy
There is not one mention in the white paper as to how these coins are supposed to be mined,
transmitted, or stored. Without these key details it is hard to give a definitive answer as to
what risks are posed to a CBDC in the cyber space. Will the mining of these coins be done
centrally by the Federal Reserve? Will they be stored in traditional cryptocurrency wallet like
with Bitcoin? How will the password system to access these coins be set up? Will dual
authentication be utilized to access these coins? The Fed needs to address these questions if
they want to get a good reading on what risks are posed to a CBDC. If the Fed decides to
mine or create these coins centrally, what protections will they put in place to ensure that their
mining is not disturbed by bad actors? Will the Fed facilitate every transaction since they
would be the miner and distributor of these coins? Alternatively, the Fed could allow the
verification of transactions be done by financial institutions in exchange for a fee, much like
how Bitcoin operates. In that case the Fed needs to consider how they would prevent a few
large banks from forming a cartel around the facilitation of these transactions. There are
simply too many questions around the design of this coin to give a definitive answer as to
what risks are posed to it by the cyber space.
Any CBDC should be considered legal tender for several reasons. In line with the drive to
make the adoption of this digital asset as attractive as possible, individuals that know that this
CBDC will have the same status as a regular dollar will encourage people to utilize it and
knowing that it is a safe way to hold and transfer value. Another avenue that would encourage
the adoption of CBDC even further would be allowing for the payment of taxes with CBDC.
This will further legitimize it in the public’s eye and could allow for the quicker and easier
payment of taxes or of tax refunds. This is something that would be up to the Treasury to
decide, but if they are willing to work with the Fed on the creation of this coin, then we hope
that they would work with the Fed on the adoption of this coin as legal tender on par with the
dollar.
We would not be opposed to a CBDC paying a moderate interest rate as that could
encourage the adoption of the Stablecoin, there are several possible mechanisms to pay out
this interest. The Fed could allow for the creation of CBDC savings accounts at depository
institutions that would pay out interest in CBDC. The Fed could also have an interest payout
scheme where the Fed pays the interest rate on CBDC accounts. This could be used as a
way to add money to the system during times of recession. While we are uncertain of what
legal limitations the Fed would have on engaging in this sort of scheme, it could act as a way
of enticing people to use the CBDC and be a mechanism to help the Fed in its goal of
stimulating the economy in a downturn. This interest rate could also be used to pull money
out of the economy during periods of high inflation as a CBDC savings account with a higher
than market rate of interest would draw in more people than a traditional savings account
would. We are neutral on this matter, we would like depository institutions to be able to set up
savings accounts using CBDC, but we would need to know more about how this
cryptocurrency will work before we can give a definitive answer.
A bank or credit union account has no limit on the amount of funds that can be deposited into
it in theory. In practice it would not be advisable to deposit more than the $250,000 that are
insured by the Federal Deposit Insurance Corporation (“FDIC”) or the National Credit Union
Share Insurance Fund (“NCUSIF”). We would not support putting a limit on the amount of
CBDC that can be deposited into a wallet, accept for unique circumstances that are
mentioned elsewhere in this letter. If the Fed does decide to limit the amount that can be
deposited into a single CBDC wallet, then we feel that the CBDC wallet should be insured just
like a regular account would be and that limit be the same as what the insurance will cover.
This will do two things to encourage adoption of this coin. First, it will give very rich Americans
a place to park their money where it will be insured, and while that is not inline with the
mission of financial inclusion that the Fed is putting this coin forward as, it would do a great
deal for the wider adoption of this coin. Should the transmitting of these coins be easier than
a wire then those very same rich individuals might use it for day-to-day transactions. The
other thing that giving these wallets insurance will do is that it will give people a sense of
security when converting funds into CBDC, knowing that their funds are insured just like their
normal depository account will encourage them to utilize this new tool as well.
We see an environment where credit unions, banks and MSBs are the main intermediaries for
a CBDC. A CBDC account should be very similar to a regular account at a bank or credit
union in that the account must be compliant with BSA and KYC/M. This is necessary in order
to preserve the safety and soundness of any CBDC system that is created by the Fed. All
three of those entities are already regulated by either a federal body or a state regulatory
agency and as such will be familiar with what information they need to collect for a CBDC
account or will already have the information on hand if they are adding CBDC as a new
service to existing accounts. �There is also the possibility of one other entity being an
intermediary for a CBDC, that being FinTech companies built around the CBDC or
cryptocurrency in general. There are plenty of FinTech companies that are already built to
cater to those who are interested in digital assets and as such have a unique interest in
utilizing a possible CBDC. They would also have the technical knowhow to quickly add CBDC
to their app or website, making them possibly the very first adopters of this cryptocurrency
while more traditional financial institutions would need time to decide if they would want to
participate and get the technical experts, they would need to access the system. Despite the
slowness with which traditional financial institutions may have in regard to adopting a CBDC,
we still feel that a CBDC should be more oriented towards them given the regulatory reasons
noted earlier and because the traditional financial space remains much larger than the
FinTech space in America. By designing the CBDC to fit well with traditional finance, the Fed
will be giving it the best chance they can at mass adoption.
If a CBDC is to have offline capabilities, then we would like to see those capabilities severely
limited. The online element of the CBDC is going to be the main facet through which an AML
program can be run. By giving the CBDC an offline capability, the ability to conduct AML will
be severely limited. If two CBDC wallets could transfer funds without the internet, then it is
possible that those transfer could be successfully hidden from the financial institution hosting
the wallets. It might make sense that any wallets hosted completely within a single financial
institution may have a capacity to transfer funds without the internet and then it is up to that
financial institution to oversee the AML risk for that transfer. A better utilization of any sort of
offline capability would be for emergency situations. Should a natural disaster strike an area,
it might make sense for the Fed to allow the transfer of CBDC without the internet through
some sort of prebuilt mechanism. Designing a CBDC that has an offline capability will be
difficult for the Fed as the public ledger is the backbone upon which most cryptocurrency is
built. The ledger would need to have some way of updating without the internet or the Fed
would need to have a mechanism in place to find coins that may go missing when utilizing
offline transaction capabilities. We think that having some sort of offline capability would be
good but designing a CBDC around this one niche use case would be prohibitively
complicated.
sale? If so, how?
Ease of use for both merchants and financial institutions will be key for the mass adoption of
CBDC in the U.S. Setting up a CBDC wallet for a merchant should be as easy as adding it to
whatever account they have with a traditional financial institution, or they should be able to go
to the Federal Reserve’s website and be able to set up a wallet there. Merchants may end up
utilizing CBDC in mass if the fee to transfer funds is comparable or less than a credit/debit
card and the transaction can be cleared as quickly as a credit or debit card. Giving people
more ways to pay for things will contribute to financial inclusion, not everyone can get a
rewards credit card (one of the main drivers of the card industry today), as such, someone
who wants a quick and easy way to pay for a good or services without using a check or debit
card could use a CBDC. However, we do not think that this will replace card transactions
entirely, our member credit unions have mentioned how popular rewards credit cards are with
their members and it is unlikely that this could unseat those cards from their current
dominance. Ease of use for both merchants and individuals is going to be a key element for
the mass adoption of a CBDC.
A CBDC should take elements from Bitcoin in this respect. Anyone who has a Bitcoin wallet
can transact in Bitcoin. All it takes to do that is an internet connection and a storage medium
to put the wallet on. While a CBDC can’t be as simple as Bitcoin is to create a wallet, it should
be simple for merchants, financial institutions and FinTech companies to plug a CBDC wallet
into their apps and websites. This ease of use and necessarily self-contained system will
allow for transferability across a wide range of platforms. The Fed can control who is able to
create these wallets through a licensing scheme that will give them the power to allow certain
institutions into this network. The Fed could also contract with a third-party vendor to give out
these licenses if they do not wish to control that process themselves. At a fundamental level,
cryptocurrency is designed with integration into as many electronic systems as possible and a
CBDC should consider how it would rework the ease of use to allow for as many individuals in
institutions to use this currency as possible while minimizing the money laundering risk.
CBDC?
A unique element of cryptocurrency is the computing arms race element. Bitcoin was
designed to require more and more computing power to mine new coins, as such early
miners of the coin became extremely wealthy as even a basic desktop computer could mine a
few Bitcoin a day during the early period of Bitcoin’s life. The actual mining of the coins has
become much more difficult over the years as the algorithm that decides the difficulty has
increased every few years. A regular desktop computer would likely only be able to mine a
tiny fraction of a Bitcoin a day. The people who make money off Bitcoin mining at a large
scale are those who have large mining operation that are optimized for that task. There are
two problems that exist based on this design: what happens when over 50% of the mining
operation is controlled by one miner or mining group, and what happens if someone builds a
better computer. �Bitcoin has a weakness that in that it is majority rules in regard to the
verification of transactions. As part of the mining procedure, miners can also verify
transactions for a fee and earn their Bitcoin that way. Since it is majority rules, there is a
problem of what happens if a single entity has over 50% of the mining power in the network. If
this happens, many actions that were thought impossible in the Bitcoin network become
possible, such as being able to reverse transactions or move all the Bitcoin in the world to
one wallet. A possible CBDC cannot have this same weakness. It is one thing if a group of
private entities are mining Bitcoin as a means to make a profit. It is another if the coin is
issued by the government and is mined by government computers. There are foreign actors
who would have an interest in attacking that infrastructure or finding a way to undermine it. It
could be as simple as finding a way to quietly add their own computers to the network until
they have 50% control of the computing power in the network. They could then use that
control to cause havoc with the CBDC. It isn’t just foreign state actors that could cause this
harm to the network, there is currently a race among private companies to build a new type of
computer that could change the way we encrypt everything.��Traditional computing, computers
that use ones and zeroes, appears to be reaching the limits of computational power and
speed. The gates that make up the ones and zeroes used to compute everything are getting
so small that the principles of quantum mechanics is starting to interfere with the ability of
these computers to function. This is where a new form of computing is coming about. The
quantum computer is a computer that uses atoms as its ones and zeroes, but, because they
use individual atoms, they also have a third state that is both one and zero. This interesting
quark of quantum computers makes them vastly more powerful than a comparable traditional
computer. These machines are so much faster than traditional computers that they can easily
break the encryption method that is used by most cryptocurrencies, SHA-256. The point at
which these machines would be able to break the encryption of SHA-256 is around the one
million qubit mark. The current largest quantum computer in the world is a 127-qubit machine
built by IBM. It may seem like we are a long way from the million-qubit machine, but IBM
plans on more than doubling the number of qubits every year with the goal of a 4,000-qubit
machine by 2025. At that rate, a million-qubit machine could be a reality by the early 2030s. A
CBDC that has its long-term viability in mind needs to be prepared for a world where a private
company could have vastly more computing power than the government. This is the main
future technology that we are concerned about, and the Fed should give some thought as to
how to counter it.
benefits of a CBDC?
The Fed must make key choices between the privacy of an individual using the CBDC system
and the risk that privacy poses to the wider financial system. There are more technical
elements that the Fed did not raise in their white paper like would the coin be more like
Bitcoin or more like Ethereum? What method of encryption will be used and what kind of log
in protections would be utilized to ensure the safety and soundness of the system? The main
tradeoff for having a more secure system is that the bar for entry is made much higher and
the rate of adoption may be lower than desired. Which institutions will be able to use the
CBDC system is another design element that the Fed will need to answer for. If it is just
depository institutions then how will those institutions access the system, set up wallets for
their members or customers and how will the transfer network between wallets work? There
are numerous cryptocurrencies out there with different types of wallets and ways of
transferring the coins, the Fed should carefully inspect some of the larger ones and see if that
fits with the mission of a CBDC. There should be an emphasis on the speed with which a
transaction is cleared, people want their money as soon as a transaction is made and in the
traditional financial world it can usually take 24-48 hours to clear most debit and credit card
transactions. A CBDC would be highly competitive in this market as having the transfer of
funds be almost instantaneous would be a major selling point for the utilization of the CBDC.
At this point it is hard to give a definitive answer on design principles since we only know the
goals of the coin but not how the Fed wishes to reach those goals in a definitive technical
sense. With another white paper detailing the preliminary designs of a CBDC we would be
able to give better and more in-depth feedback.��We would like to thank the Federal Reserve
for the opportunity to comment on this matter. If you would like to discuss this matter or our
comments further, then please feel free to reach out to us.
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Lex Futurus Group
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“additional potential benefits”�i. Money printing production cost expenses reduction. CBDC has
the potential benefit to avoid wastages and keep printing costs under control, or eliminate
same. Central banks incur huge expenses printing and producing money for economic
activities and consumption, and keeping sovereign economies afloat and operational. Per
some sources including the US Fed. Res. Board itself, there are relevant costs for paper
dollar money minting.��A CBDC could potentially cut and reduce the United States dollar
printing and production costs as a USD CBDC money supply cryptographic algorithm would
only need be programmed based on the Federal Reserve Board monetary policy tool
preferences, i.e. expansionary monetary policy, contractionary monetary etc.��ii. Distribution,
circulation, and enhanced digital money spending convenience. A CBDC would allow
distribution and circulation enhancement, both in spending and transacting convenience for
the reasons that technology is fast-becoming ubiquitous, and especially distributed ledger
technology adoption on upward spiral growth trend.��iii. Frictionless transaction
operation�Another additional CBDC potential benefit is frictionless transactional operation, and
real-time transaction settlement and finality hitherto impossible with fiat paper money
transaction payment guardrails. �“policy considerations”�Some of the other policy
considerations not mentioned and discussed in the paper range from security, architecture,
governance, smart contract policy to auditing:��CBDC Security�How sound and secure should a
US CBDC dollar be in terms of payment system infrastructure resilience? This is a threshold
question. Though there are many CBDC design choices, the security consideration question
permeates the length and breadth of all these different CBDC design choices. The security
consideration questions encompasses factors like fraud, double spending, counterfeiting,
Denial of Service (DoS) attack, Anti-Money Laundering(AML), Countering the Financing of
Terrorism(CFT), financial system stability, consumer protection and the likes.��Since
Distributed Ledger Technology (DLT) solution is most often considered for CBDC
implementation projects by sovereigns, there is every possibility that regular cryptocurrency
distributed ledger cybersecurity and security consideration questions arise in the eventual
CBDC operations. Thus, there are certain unique security benefits which could accrue to a
US CBDC as a direct result of the cryptographic distributed ledger system implementation
and leveraging for a USD CBDC. Some of these are:��i. Single point of failure minimisation �ii.
Availability enhancement �iii. Transaction record security strength enhancement via
cryptographic hashes��The security question ubiquity with CBDC implementation irrespective of
the design choice technology adopted, is prerequisite for any CBDC implementation strategy
effort. Though there are not many different security consideration questions between
blockchain technology-based CBDC on one hand, and legacy monetary and financial
systems i.e. incumbent payments systems, regular online banking, and related financial
services on the other hand, the common legacy security questions that exist range from
phishing attacks, malicious insider attack, malware attack (to obtain asset private keys for
instance) to nation-state critical infrastructure espionage attack to mention a few. To forestall
against these, and more, having in place a virile and resilient USD CBDC robust information
security programme becomes imperative. �CBDC Architecture �The underlying system atop
which a USD CBDC dollar would be implemented is a fundamental question yearning for
consideration short term and long term both. Should the US dollar CBDC be implemented
atop a blockchain architecture, or any other distributed ledger technology, i.e. Hederah
Hashgraph etc.? Or should the USD CBDC leverage a distributed ledger system at all? What
are the tradeoffs, if any, and why? To answer in the affirmative, almost all the sovereign
nation-state central bank authority CBDC projects so far have leveraged one distributed
ledger system or another. �Though a CBDC project can either be account-based or
token-based, there are further retail CBDC and wholesale CBDC design principles as well.
There are multiple combined CBDC design architecture questions liability, issuance,
operational role, and record keeping to be
considered.��REFERENCES� https://www.postgrid.co.uk/reduce-printing-costs/�� https://www.inves
topedia.com/news/fed-will-print-more-50-bills-year/#:~:text=Printing%20a%20one%2Ddollar%
20bill,because%20of%20
fewer%20security%20features�� https://www.federalreserve.gov/faqs/currency_12771.htm�� https:
//www.sciencedirect.com/topics/computer-science/cryptographic-algorithm� �https://corporatefin
anceinstitute.com/resources/knowledge/economics/contractionary-monetary-policy/
� https://www.federalreserve.gov/econres/notes/feds-notes/
The potential benefits of a USD CBDC which have been identified thus:��“Spurring innovation.
...�Cross-border payments. ...�Support the international role of the U.S. dollar. ...�Financial
inclusion. ...�Extend public access to safe central bank money. ...�Changes to financial-sector
market structure. ...�Safety and stability of the financial system.”.��cannot be achieved in a
different way, which leaves out CBDC as the latest technology iteration of, and innovation on
money, and derivative finance as we know them.��Though some of the potential benefits of
CBDC can be achieved in different ways, all of the potential benefits of CBDC cannot be
better achieved in a different way except through leveraging the blockchain technology
money, payment, and finance platform use cases. The reasons for this are not far-fetched,
and they are the main features and characteristics of the blockchain or distributed ledger
technologies generally for instance, which introduce process efficiency gains, and specifically
introduced money, payment and finance operation efficiency gains into the markets et al.
Here below are some of these reasons the germane and pertinent ones:��Real-time USD
CBDC transaction data transparency�Real-time USD CBDC transaction data accessibility �USD
CBDC transaction ease and data recognition �USD CBDC transaction data distributed ledger
cryptographic security assurance�USD CBDC transaction data
verifiability.��REFERENCES� https://www.skadden.com/insights/publications/2022/02/the-federal
-reserve-weighs-risks#back-to-top� �https://lexfuturus.io/wp-content/uploads/2019/09/CBN-PBo
C-currency-swap-deal-and-the-blockchain.-Research-Paper-1.pdf
inclusion?
A CBDC could have a far-reaching effect on financial inclusion, as it could enable sovereigns
to lower the money and finance space entry barrier for the unbanked, and underbanked
through the CBDC onboarding layers and requirements. More to the datapoint,
technology-oriented financial services provision have led the charge globally to financially
include the unbanked and underbanked. Per the World Bank financial inclusion
data:��“Financial inclusion means that individuals and businesses have access to useful and
affordable financial products and services that meet their needs – transactions, payments,
savings, credit and insurance – delivered in a responsible and sustainable way.”.��A CBDC
financial inclusion would have positive net effect since it would expand money and finance
through an overall value chain digitisation
process.��REFERENCES� https://www.worldbank.org/en/topic/financialinclusion/overview#1�� https
://www.researchgate.net/publication/356382835_Can_central_bank_digital_currency_increas
e_financial_inclusion_Arguments_for_and_against� �https://thefintechtimes.com/how-to-bank-th
e-unbanked/ � https://www.worldbank.org/en/topic/financialinclusion/overview#1 �
A potential USD CBDC can enhance the U.S. Federal Reserve’s ability to effectively
implement monetary policy in the pursuit of its maximum-employment and price-stability
goals. �For instance, the CBDC financial inclusion benefit factor, which has been critically and
objectively identified, can prominently enhance the Federal Reserve monetary policy
implementation ability, and engender attendant maximum employment and price stability in
the process. More specifically, economic price stability could be potentially guaranteed
through a centralised money supply blockchain cryptographic consensus algorithm, where
price is programmed and controlled from the central source(though there is a potential central
point of failure risk inherent), and thus its stability can be achieved and maintained.��Further,
since making an economy sustain full employment entails avoiding unwelcome inflation, a
potential USD CBDC can be programmed to prevent inflation; imbued with anti-inflationary
monetary and fiscal policy guides; blockchain/Distributed Ledger Technology(DLT)-based,
and programmed with a fixed supply for a long period of time, so that economic growth
without inflationary tendencies overtime can be guaranteed. �Anti-inflationary fiscal policy
guides viz: �government expenditures adjustments�borrowing �debt management policies
�taxation �wage and price controls et al. �can be programmed into the CBDC blockchain
cryptographic distributed ledger code system. This is the same as the Bitcoin blockchain
platform, whose monetary system value chain policies are embedded into the code
itself.��REFERENCES� https://www.imf.org/en/News/Articles/2021/11/15/na111621-five-observat
ions-on-nigerias-central-bank-digital-currency�� https://www.google.com/amp/s/www.brookings.
edu/blog/up-front/2022/02/23/how-does-the-fed-define-maximum-employment/amp/�� https://ww
w.economicsdiscussion.net/fiscal-policy/anti-inflationary-fiscal-policy-economics/26178
stability?
stability?��Per CBDC financial stability implications report 2021 by the Bank for International
Settlement(BIS) and a certain of central banks, a CBDC could affect financial stability in the
following ways:��Possible significant commercial bank deposits decline/Possibility of CBDC
substitution for bank deposits.�Aggregate reserves level reduction sufficient for pressure
exertion on key market rates short-term.�CBDC adoption influence on household sector
balance sheets and incomes.�Bank funding and lending implications.�CBDC adoption possible
systemic bank runs effects/abrupt money-market withdrawals. �Pursuant to above
consideration, a potential USD CBDC net effect would not be positive for financial stability,
but rather negative for financial stability. Nonetheless, there are available, constructive
optional safeguards (which could overall make a CBDC adoption net effect to be positive for
financial stability, if introduced alongside), which the BIS financial stability report above
mentioned also touched upon. These are:��Central bank reserves supply adjustment for rate
pressures stability. �Measures to manage bank run risk. �Quantity-based safeguards.
�Price-based safeguards.��REFERENCES
�https://www.investopedia.com/terms/c/central-bank-digital-currency-cbdc.asp#:~:text=A%20C
BDC%20also%20provides%20a,currencies%20in%20their%20current%20form�� https://www.bi
s.org/publ/othp42_fin_stab.pdf�
Since a CBDC has no liquidity and credit risk issues, a CBDC is safe and stable value
guaranteed within any jurisdictional legal tender law system better than any other exchange
medium. A CBDC could have both national and cross-border adverse financial sector stability
implications, but there are constructive, optional and complementary safeguards, as
highlighted and discussed in #5 above.��CBDCs generally are potential stable moneys, since
they are sovereign-backed fiat currencies which have been around overtime, and have seen
worse days, but still maintain their relative value and remain stable. CBDCs have different
infrastructure, maintain different design choices from stablecoins, most of which at the
moment are cryptocurrencies backed either by other cryptocurrencies, or in few cases,
backed by the regular sovereign paper fiat moneys.��CBDCs and stablecoins are going to
affect the existing financial market infrastructures in ways profound. Though the jury is still out
regarding how CBDC will affect the financial sector differently from stablecoins or other
non-bank moneys, is almost certain that money and payment system efficiently, and financial
inclusion short-term and long-term both are guaranteed..
�REFERENCES� https://www.moneyandbanking.com/commentary/2022/2/27/comments-on-fed
-cbdc-paper#:~:text=How%20might%20a%20CBDC%20affect,plunge%20in%20periods%20o
f%20strain.�� https://www.ecb.europa.eu/pub/pdf/scpwps/ecb.wp2351~c8c18bbd60.en.pdf� �https:
//www.mckinsey.com/industries/financial-services/our-insights/cbdc-and-stablecoins-early-coe
xistence-on-an-uncertain-road
CBDC?
sale? If so, how?
CBDC?
benefits of a CBDC?
_________________________________________________________________________
Oracle
Industry
Technology Company
Country
India
State
Email
abhiram.yanamandra@oracle.com
Most of the benefits, policy considerations or risks have been largely outlined at length in the
paper. The extent to which these risks outweigh benefits changes from central bank to central
bank, considering that each of them have different goals towards rolling out a CBDC – some
for financial inclusion purposes alone, some for promoting an alternative currency to reduce
cost of physical currencies etc
As mentioned, some of the benefits need to be evaluated on a case-to-case and country to

country basis. While the benefit derived from a centralized CBDC framework may apply to
one country, it could be a completely different story for another country that is better off
implementing a decentralized, node level framework, for instance. The benefits to the
problems arising from a CBDC implementation have largely been addressed in the paper
already
inclusion?
The key premise around financial inclusion is availability of financial services to individuals or
businesses that are not part of the formal financial services net. Therefore, there need to be a
couple of key framework and technology design elements for CBDC to positively affect
financial inclusion efforts of various banks: �1.�Recognition and inclusion of non-bank players
such as fintechs, mobile service providers as part of the CBDC framework �2.�Technology
design framework that allows integration between mainstream banks, the central bank and
non-bank financial service providers in the chosen design approach��Notwithstanding this, we
believe that the effect of CBDC on financial inclusion would be largely positive owing to the
recognition and availability of a central bank backed digital currency that can be made
available to individuals irrespective of financial or non-financial channel availability
The CBDC, while not being the panacea, could be a very effective tool that assists the Fed’s
goals of effectively implementing monetary policy in the medium to long term. One of the
most talked about aspects is the interest rate zero lower bound. It would simply eliminate the
need for interest rates to be left at zero percent when it is unsustainable in certain scenarios
such as in a deflationary scenario.��Also, charging an interest on a CBDC allows a central bank
to control interest rates more effectively. The availability of a CBDC in more hands would
mean that no one would lend at less than a CBDC interest rate. �
stability?
In the event that a CBDC holding value or time period is not regulated, after a point of time
when reasonable CBDC embracement has occurred, there is a possibility of a flight towards
CBDCs away from traditional deposits at commercial banks and financial institutions. This
could lead to the Fed needing to maintain a larger balance sheet in normal times than it
possibly does, while purchasing more from government and private securities. However, if
any of these were to happen gradually and there are regulations in place for a CBDC holding
value or time period for individuals and businesses, the long term effect could still be positive
since there is a larger, more flexible legal tender that can be managed by the central bank
It is clear that if a CBDC were to achieve its intended state as an alternative legal tender or
currency, there is bound to be disruption in the financial sector. There could be flight of capital
from traditional deposits to CBDCs which could lead to massive amounts of liquidity
requirements for banks to maintain deposits and interest rates, there could be potentially
systemic risks for a few banks. But while this is being done, it is important that central banks
identify risk areas for existing banks and financial institutions and address policy and
regulation in the CBDC framework to safeguard some of these risks.
Any tools to counter the adverse impact of CBDC need to be complementary in nature and
not at the cost of negatively affecting CBDC adoption. From an incumbent financial
institution’s perspective, some measures could include enhancing deposit insurance for
individuals and businesses, strengthening banking and insurance regulation.��From a CBDC
perspective, some key measures to be considered could include limiting the number of
transactions or value of transactions using CBDC, clearly defining permitted criteria for
access to users
One of the biggest advantages offered by cash as a currency is anonymity in its usage. Apart
from that, it is one of the most complex and difficult modes of legal tender that can be handled
by a central bank , especially considering its printing, distribution, maintenance and
replacement costs. �There is a traditional segment of the population that always prefers cash
and will continue to do so for the near future. Offering a CBDC as a digital alternative to cash
alone would not help achieve the required adoption for this digital currency. The benefits of
CBDC are far beyond that and pushing and defining policies for larger usage is a better
option.�
CBDC?
Domestic and cross-border digital payments continue to evolve rapidly across boundaries
driven by complexities of regulation, security, privacy and adoption. Global payment
standards bodies such as SWIFT and Fedwire are setting the standards in terms of digital
payment regulations and guidelines. The emergence of ISO 20022 for payments is a game
changer and expected to drive global adoption towards a common standard in payment
transactions. �The US CBDC, as envisaged at the moment, is an alternative digital currency to
cash. The pace and quality of impact on domestic and cross border digital payments will
entirely depend on the extent to which the shift is made from cash to CBDC and also to a
larger extent on how CBDC is viewed as an alternative payment method to existing digital
cryptocurrencies and digital payments. �
Some factors that are worth considering and looking into are the benefits that most of these
large economies are looking to reap from CBDC. Additionally, what are their data privacy and
security regulations and how they are trying to fit in CBDC around this framework? What are
the long term costs of moving to CBDC? Do they eventually outweigh the benefits? Is CBDC
a sustainable long-term alternative to cash? These aspects need to be considered
irrespective of whether the other large economies are going ahead or not with issuing CBDCs
None beyond those mentioned in the paper at this stage.
While a CBDC system would require to comply with existing privacy norms the world over, a
few basic aspects need to be considering in the design. The questions on privacy frequently
center around what data is to be protected, from whom it needs to be protected and to what
degree it needs to be protected. There is always a trade off to be made when payment
systems capture increasingly personal information. It is clear that boundaries and policies
need to be set for the extent of information that can be shared with each stakeholder within
the payment value chain, for example data about the payment parties needs to be shielded
from the issuer of the money, the payment network or service provider or any other
non-relevant parties. �Additionally, the CBDC system will need to leverage some of the
upcoming developments in cyber security and cryptography such as layered data
management in payment systems, offline smart cards etc. Evaluating and implementing these
on a case to case basis may help alleviate some of the privacy concerns�
We believe the future revolves around enhancing privacy of the individual for which various
countries are taking concrete steps in defining and legislating guidelines around identifying
and protective confidential data of individuals and businesses. The second aspect is around
security of data with most countries mandating data residency norms for technology providers
and financial institutions that handle this data. �For a CBDC system design, the above two
elements play a crucial role especially in a cross-border or multi-country transaction scenario.
System design needs to be flexible enough to allow incorporation of country level data privacy
laws through parameterization. Additionally, cloud based deployments across geographies
that confirm to data residency norms also need to be thought through. These aspects would
improve resiliency and make a CBDC system fairly future proof. �A CBDC system may not
necessarily be exposed any more operational or cyber risks apart from the risks associated
with a centralized payment system including fraud and AML, infrastructure unavailability etc.
These need to be addressed holistically through adoption of frameworks that have inbuilt
resiliency and capabilities to handle these potential risks. �
Yes, a CBDC needs to be a legal tender. Governments that are keen to adopt CBDC need to
promulgate policies that recognize this as legal tender. In the absence of a legal backing, a
CBDC is no different from a privately traded cryptocurrency.
To start with, a CBDC needs to be promoted as a mechanism for buying and selling goods
and services and efforts need to be made to push it towards mainstream acceptance. A
CBDC needs to pay interest since it needs to be incentivized for adoption and also be offered
as a reliable alternative investment option apart from the traditional deposits in financial
institutions. �A prime example that comes to mind, by way of suggested promotion elements,
include the Universal Payments Interface (UPI) in India that saw exponential adoption in a
very short timeframe. It was first launched in 2016 after being piloted by the National
Payments Corporation of India (NPCI) by 21 banks. Today it has evolved to being used by
more than 164 banks. Today most banks have their UPI apps uploaded on Google Playstore.
Banks believe that three things have been driving the widespread use of UPI – easy interface,
two factor authentication and interoperability. The emergence of the pandemic also
contributed to accelerating adoption of UPI in lieu of cash transactions�
To some extent, there need to be checks and balances to the extent of CBDC held by a
single end-user. This shouldn’t be strictly quantifiable but a mix of qualitative criteria such as
restricting CBDC transactions to certain categories alone – for instance, utility bill payments
etc. Additionally, transaction limits can be set, for instance, a CBDC could only be used as
legal tender for transaction values up to USD 1000.
The central bank needs to the key authority that allows creation and maintenances of digital
certifications for CBDCs. The primary intermediaries need to typically be accredited financial
institutions and payment service providers that have a successful record of being in the
lending and payments businesses for a significant amount of time. These primary
intermediaries need to be allowed to strictly operate within the regulatory confines of a CBDC
framework. A certain proportion of reserves need to be maintained by the primary
intermediaries at all times with the central banks and any breach of reserve limits needs to be
replenished within a reasonable time frame. Moreover, ring fencing of liabilities against CBDC
exchange values also could be considered
Having offline capabilities for CBDC is critical to remove load from critical transactional
systems that record and update the amount of legal tender being exchanged as well as
accounting systems that need to maintain a record of CBDCs. Moreover, in geographies
where a CBDC is being used to complement financial inclusion, an offline system is the best
way to get around deficiencies in any technology or network connectivity infrastructure. �The
CBDC system needs to be designed to allow exchanges to take place up to a certain value
limit in an asynchronous mode and logs or batches of all tanked transactions need to be
maintained. Peer to peer offline payments should be encouraged and allowed to improve
efficiency. Further, there needs to be a timeframe defined for the system to ping back the
central CBDC network and refresh values of transaction logs and update the status of all
transactions. �
sale? If so, how?
The primary goals of CBDC are centered around reducing cost of distribution, improving
access to financial products and services, irrespective of eventual adoption by various
countries. CBDCs therefore need to be designed to eventually become one of the chosen
mainstream methods of payment even at Point of Sale (POS). Integration or addition of
CBDC method of payment to existing payment gateways both through traditional switch
networks that handle POS settlements as well as the modern network payment gateways is
one of the ways to achieve this.
The global scenario when it comes to achieving interoperability among payment platforms
starts with defining and implementing common minimum standards for messaging and
processing among various payment platforms and schemes. A CBDC payment rail would also
need to confirm to some of these minimum standards to achieve transferability of
interoperability. Global payment networks are transitioning to ISO 20022 to achieve significant
economies of scale through common processing capabilities. While each networks
interpretation of ISO 20022 varies, the standard framework of messages exists for network
players to build upon. Some of these considerations would need to be built into the design of
a CBDC payment rail.
CBDC?
We believe the future revolves around enhancing privacy of the individual for which various
countries are taking concrete steps in defining and legislating guidelines around identifying
and protective confidential data of individuals and businesses. The second aspect is around
security of data with most countries mandating data residency norms for technology providers
and financial institutions that handle this data. �For a CBDC system design, the above two
elements play a crucial role especially in a cross-border or multi-country transaction scenario.
System design needs to be flexible enough to allow incorporation of country level data privacy
laws through parameterization. Additionally, cloud based deployments across geographies
that confirm to data residency norms also need to be thought through. These aspects would
improve resiliency and make a CBDC system fairly future proof.�
benefits of a CBDC?
At this stage, two of the most common design principles being considered: �•�The distributed
ledger system which consists of a central authority responsible for issuing digital certificates
pertaining to the CBDC and multiple intermediaries that act as nodes and are responsible for
authorizing and validating the currencies across the network�•�The central system where a
single authority is responsible for issuing, maintaining and managing digital certificates
pertaining to each instance of the CBDC issued�Obviously, at this stage and based on the
experience of various central banks across the world, there is no single cookie cutter design
principle that fits a CBDC framework. There are inherent benefits and trade-offs associated
with both the above design principles identified. As the market evolves, there are likely to be
hybrid design models that combine the best of both these principles to suit individual country
requirements. For instance, the digital certificate issuance and updation process could be
completely centralized with a single authority while intermediaries are responsible for other
associated functions around maintenance, tracking, infrastructure and network connectivity. �
_________________________________________________________________________
Ohio Credit Union League
Industry
Trade Organization
Country
State
Ohio
Email
sbrown@ohiocul.org
The Federal Reserve’s paper exploring the efficacy of a CBDC raises several prime concerns
the credit union industry has with a centralized, digital currency. Mainly, the fact that a CBDC
runs a significant risk of disrupting private banking; specifically, how a CBDC would affect the
cost and availability of credit, the safety and stability of the financial system, and the efficacy
of monetary policy. The Federal Reserve should withhold any final determinations until those
issues are addressed.��Additionally, if the CBDC is as efficient and widely used as posited, a
CBDC would divert deposits from existing, brick and mortar, financial institutions to the
Federal Reserve. Credit unions are committed, even formed, to serve the communities they
are a part of, and deposits are necessary to fund personal and commercial lending.
Specifically, if credit unions lose the regular inflow and outflow of account activity, members
and communities may experience lesser access to capital and affordable and safe lending
options.��Lastly, it is more important than ever to ensure the United States’ digital currency
policy maintains the dollar’s dominance and cultivates innovation while continuing to protect
financial privacy. According to the Federal Reserve,18% of U.S. households are either
unbanked or underbanked. Of those underbanked individuals, privacy concerns and mistrust
are often cited as reasons behind those Americans who are financially unbanked or
underbanked. Any design framework for a CBDC would have to delicately balance the idea of
personal data privacy and the need to combat and thwart financial crimes without further
driving people to leave traditional banking. A CBDC originated and operated exclusively by
the federal government would centralize large amounts of sensitive consumer data, raising
concerns on data privacy and security.
Some, if not all, benefits of a CBDC could be achieved by empowering credit unions with
digital currency custodian authorities. Credit unions already have the infrastructure and
regulatory framework necessary to offer depository and payment services. An ambiguous
patchwork of state laws, and unclear direction from federal and state regulators inhibits credit
unions from leaping into digital currency. The National Credit Union Administration (NCUA)
recently announced federal credit unions are authorized to establish third-party provider
relationships to extend digital asset services to their members. This authority includes
third-party provided services to allow federal credit union members to buy, sell, and hold
uninsured digital assets with the third-party provider outside of the federal credit union; thus,
rather than creating a novel government program to buy, sell, and hold digital currencies,
grant credit unions the authority to do so.��Rather than recreate programs currently thriving
within the private market, the federal government should partner with established and
well-regulated financial institutions, like credit unions, for increasing public access to CBDC
opportunities.
inclusion?
As stated above, OCUL is concerned that a CDBC could negatively affect financial inclusion.
Specifically, the underserved, underbanked, and technologically challenged population could
be further removed from safe, affordable banking. The digital age will continue to expand
general access and opportunity but may further the technological divide for some populations.
A prime example of this is the current usage of remote banking. As of May 2021, mobile
banking penetration has grown to 95% of Gen Zers, 91% of Millennials, 85% of Gen Xers,
60% of Baby Boomers, but only 27% of Seniors. This study shows that while one end of the
generational spectrum is moving into the digital age at an overwhelming rate, the other end of
that spectrum is slower to adopt technology. This trend of nearly 75% of seniors choosing
more traditional banking options in lieu of digital or remote banking now exposes a potential
generational gap that a CBDC might widen.��On top of demographic considerations, banking
deserts and areas without viable broadband access will be additional barriers to CDBC
usage. Existing brick and mortar financial institutions will remain a necessary option for rural
populations. Digitally migrating the financial services market could lead to financial exclusion
for consumers who lack access or desire to participate. While there are real, tangible benefits
that could stem from a well-run CBDC, OCUL cautions the Federal Reserve from
marginalizing certain communities through exclusivity to digital currencies.
At this time, OCUL has no response to this prompt.
stability?
Generally, cryptocurrency stability is unknown with noted, extreme volatility. Like any other
currency, loan, or obligation, CBDC values should be expected to ebb and flow. However,
with the extreme price fluctuations witnessed within existing digital currencies, the proposed
CBDC framework would need to accommodate volatile values. In the event of a massive
price shift, how will the current CBDC remain adequately capitalized?��Additionally, Gresham’s
Law states that good money drives out bad, and vice versa. It is currently unclear how the
introduction of a CBDC would interact with the current dollar or other decentralized
cryptocurrencies. Creating competing currencies has a high likelihood of driving unnecessary
competition, as well as opening the door to money laundering and illicit activities. As a result,
financial unpredictability and uncertainty must be categorized as a net negative.
The Federal Reserve recently stated that “a CBDC could also pose certain risks and would
raise a variety of important policy questions, including how it might affect financial-sector
market structure, the cost and availability of credit, the safety and stability of the financial
system, and the efficacy of monetary policy.” OCUL agrees with the Federal Reserve’s
identified risks and the related effects on the financial sector.��More specifically, the adverse
effects to the financial sector could manifest through a continued move away from traditional
banking solutions. Banking privacy is a primary cause for people to leave traditional banking.
Creating a digital federal banking system may further add to this fear. Credit union members
will be concerned about the government housing all their financial data with a CBDC as more
recently revealed in a proposed IRS transaction reporting requirement.��Additionally, a shift to a
CBDC financial system could take necessary capital away from existing financial institutions.
When consumers begin moving cash, savings, and investments into a CBDC, private
financial institutions will have less liquidity for lending activities. Credit unions’ main purpose
is to serve local communities, and without adequate capital at their disposal, credit unions
lose the ability to help people, families, and businesses thrive.��Lastly, a CBDC must have
significant privacy safeguards without limiting the private financial sector. As this paper
suggests, a thriving CBDC allows transactions to flow freely and in real time. There must be
data privacy and security mechanisms designed and implemented for each consumer. OCUL
believes strong cyber security standards are necessary to protect consumers and their
partner entities, or credit unions. Credit unions and other financial services entities are
already subjected to the Gramm-Leach-Bliley Act and have the infrastructure in place to
protect consumer data. Empowering current providers to extend cryptocurrencies as an
intermediary, specifically financial institutions, would better ensure data security and privacy.
OCUL believes cash, or tangible currency, will always play a role for entire generations of our
population. The push forward into a faster, safer, and digital financial system is generally a
positive development for the system, however, the need to preserve a physical form of money
is paramount to financial inclusion. Whether it is a personal choice, generational trend, or a
business decision, the use of physical money will be necessary to a complete financial
marketplace.
CBDC?
The most efficient way to ensure consumer privacy without fostering illicit financial activity is
to operate any CBDC through existing financial institutions. Credit unions deploy Bank
Secrecy Act (BSA) and Anti-Money Laundering (AML) programs to capture illicit or suspicious
activity for FinCEN oversight; therefore, the consumer privacy concerns would not extend
beyond normal banking activity if a CBDC is operating through BSA/AML compliant
institutions. By empowering credit unions as CBDC custodians, existing BSA/AML channels
be used to ensure consumer privacy, as well as safety and soundness of the financial market.
Any permanent CBDC, assuming volatility can be controlled, should be a viable, legal tender.
If the goal is widespread, efficient access and use, making a CBDC a legal tender is the only
outcome suitable. Having a cryptocurrency-style dollar, backed by the full faith of the federal
government, allows a CBDC to become a more normalized, trusted currency. Anything other
than being a full-fledged legal tender would render the CBDC unnecessary, and harmful to
the financial market without apparent positives.��However, the simplest option for successful
execution of a CBDC still remains in existing financial institutions. While the CBDC being a
legal tender is necessarily tied to its ultimate success, allowing financial institutions to be its
custodians will ensure its widespread, trusted usage.
Simply, the existing, heavily regulated financial institutions that are already in place should
serve as intermediaries. If given the necessary authority and regulatory framework, credit
unions are a prime candidate to serve as CBDC intermediaries. A credit union’s role would be
to do what it already does best: serve people, families, communities, and businesses with
safe and reliable financial access. A digital currency, or CBDC in an intermediary capacity,
would be another service option that a credit union could offer to its interested members. As
stated above, federal credit unions already can partner with cryptocurrency platforms; thus, a
digital currency is already within a credit unions’ capabilities.��Moreover, the credit unions’ role
would be to act as a neutral third party in these transactions. As the Federal Reserve has
repeatably identified, consumer privacy is vitally important to the success of the CBDC. Thus,
allowing trusted financial institutions, or credit unions, to serve as intermediaries puts a buffer
between unnecessary additional government monitoring and consumer financial decisions.
�Lastly, the current financial regulatory structure for a CBDC is already in place. Credit unions
are already regulated by the National Credit Union Administration (NCUA) and Consumer
Financial Protection Bureau (CFPB) at the federal level, and even more entities at the state
level. Should a CBDC be put under a new financial regulatory scheme, it opens the door to
conflicting regulations for what ultimately amounts to be the same currency, albeit different
mediums. Existing financial institutions demand regulatory parity, clear and conspicuous laws,
and predictable regulations, and the CBDC should be no different.
sale? If so, how?
Yes, to be successful, any CBDC design should make ease of use a primary focus. If the
CBDC serves as legal tender, it needs to be as efficient and acceptable as every other form
of currency currently in the marketplace. A CBDC would need to operate and function like
every other form of currency at the point of sale, or its widespread usage will suffer. Credit
unions constantly seek out experience efficiencies, so comparatively, a CBDC would need to
be designed to keep pace with the constantly changing and evolving financial payments
market.
CBDC?
benefits of a CBDC?
_________________________________________________________________________
GLEIF Americas
Industry
Other: Not-for-profit
Country
State
New Jersey
Email
peter.warms@gleif.org
GLEIF is not able to provide a response.
inclusion?
stability?
CBDC?

sale? If so, how?
Established by the Financial Stability Board in June 2014 under the mission of improving
financial stability and transparency due to the aftermath of the financial crisis, the Global LEI
Foundation (GLEIF) is tasked to support the implementation and use of the Legal Entity
Identifier (LEI). Even though the primary and initial usage and adoption of the LEI was around
financial markets and financial instruments, the LEI is use agnostic and therefore has been
embraced by different industry sectors and regulators since its introduction by the Regulatory
Oversight Committee, which includes the Federal Reserve Board, and the Financial Stability
Board in 2012. Further details on the use of the LEI in regulatory initiatives is provided here:
https://www.gleif.org/en/lei-solutions/regulatory-use-of-the-lei �The LEI is the only global
standard for legal entity identification. There are innumerable national or regional standards
for entity identification across the world. Different identifiers might serve national needs;
however, these differences create conflicts and inefficiencies when it comes to the
reconciliation of data across borders. Therefore, the LEI responds to the critical need for a
universal system of identifying entities across markets, products, and regions. The LEI
connects to key reference data that enables clear and unique identification of legal entities
participating in financial transactions, while also providing free access to verify parties to
transactions, including in payments.��GLEIF recommends that the design of a CBDC should
include the LEI to identify each party involved in a CBDC transaction. The inclusion of the LEI
would allow the Board, Reserve Banks, and payment platforms to know the legal entities
behind each party in the payment messages through the use of richer, structured data. The
Inclusion of the LEI could improve interoperability between the Board and other future CBDC
payments systems.��The LEI would also be the key to achieving real time settlement. In a
recent interview, Merlin Dowse of J.P Morgan sums it up best “Corporates have to connect
with multiple providers, each of which issues them with a client reference number that is
meaningless outside of that provider’s system. Every time they interact with a third party, they
have to share their information again. Reducing all of this to one unique identifier in the shape
of the LEI allows for interoperability across networks and removes friction, saving time and
costs.”��Lastly, ISO 20022 is driving the inclusion of LEIs in payment messages as it becomes
the global standard language for financial transactions. Within five years , ISO 20022 is
expected to be the main language for payments. Many experts believe that ISO 20022 will be
beneficial for CBDCs by standardizing the communication instructions for electronic payments
within CBDC technologies, which promotes interoperability and makes the LEI more
accessible for CBDCs.�
CBDC?
GLEIF has developed a fully digitized LEI service capable of enabling instant and automated
identity verification between counter-parties operating across all industry sectors,
globally.��GLEIF invited stakeholders from across the digital economy to engage in a
cross-industry development program to create an ecosystem and credential governance
framework, together with a technical supporting infrastructure, for a verifiable LEI (vLEI), a
digitally verifiable credential containing the LEI. See
https://www.gleif.org/en/lei-solutions/gleifs-digital-strategy-for-the-lei/introducing-the-verifiable
-lei-vlei � The vLEI will give government organizations, companies, and other legal entities
worldwide the capacity to use non-repudiable identification data pertaining to their legal
status, ownership structure, authorized representatives, and employees in a growing number
of digital business activities. This includes approving business transactions and contracts,
onboarding customers, transaction within import/export and supply chain business networks
and submitting regulatory filings and reports. GLEIF already is engaged in research
partnerships and technical trials with stakeholders across the pharmaceutical, healthcare,
telecom, automotive and financial services sectors.��The credentials in the vLEI Trust Chain
are chained to each other as vLEIs are Authentic Chained Data Container (ACDC)
credentials. This allows for the provenance of vLEIs to be traced back to GLEIF as both the
Root of Trust for the vLEI Trust Chain as well as the entity that ensures that operational
integrity of the Global LEI System. �The vLEI infrastructure is a network-of-networks of true
universality and portability, developed using the Key Event Receipt Infrastructure (KERI)
protocol, along with other supporting technical specifications. The infrastructure will support
the full range of blockchain, self-sovereign identity and other decentralized key management
platforms. vLEIs will be hostable on both ledgers and cloud infrastructure supporting both the
decentralization of ledgers plus the control and performance of cloud. Portability will enable
GLEIF’s vLEI ecosystem to unify all ledger-based ecosystems that support the vLEI.��One
example of supporting technical capabilities is the above mentioned chaining of credentials.
The vLEI infrastructure can support approving business transactions and contracts,
onboarding customers, transactions within import/export and supply chain business networks
and submitting regulatory filings and reports, signed in whole or in part by one of more
persons representing their organizations (the multi-sig feature). Combining these two new
features within the infrastructure takes the level of security to a new level for both the
identification and verification of the credentials. �
benefits of a CBDC?
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The Fed paper outlines well what the vast majority of central banks around the world engaged
on this topic, and HSBC, believe to be the main policy considerations, benefits and risks of a
retail CBDC. �Ultimately, the most important element to the success of any CBDC is trust. As
the discussion paper mentions, a U.S. CBDC would be the safest digital asset available to the
general public because it would be a digital liability of the Federal Reserve, free from liquidity
and credit risk. It is critical that the public trust all forms of available money, whether digital or
not, so that they may be used in confidence for daily transactions and as a store of value.
�Existing digital money and associated infrastructure brings real benefits to the public.
Consumers are increasingly able to transact from anywhere, at any time, using mobile
phones and existing payment infrastructure such as the RTP network and the forthcoming
FedNow Service. Improvements to critical US payment infrastructure, such as Fedwire, have
already been planned. �These improvements have, and will bring, real benefits, and offer the
potential for further innovation, in terms of transaction speed, efficiency and settlement
finality. All of these benefits are being achieved while maintaining full public trust in money.
This balance of realising tangible benefits through innovation, while retaining full public
confidence, should be maintained for any U.S. CBDC, and we believe that the tangible
benefits of a U.S. CBDC should be specifically identified, over and above existing and
planned improvements. �People interact with commercial banks and commercial bank money
daily. It is likely that the majority of the public is not aware that existing digital money is
commercial bank, rather than central bank, money. It can be reasonably inferred that most
people trust private money either because they do not understand the difference between
private and public money, or else see no practical difference. �The stability of money
represents the practical reality of financial stability for most people rather than the technical
infrastructure of central bank money, financial regulation and other tools that keep the
relevant institutions safe. We believe that the public perception of any changes to money, and
the confidence that this creates, will be critical. In all circumstances, we believe that a healthy
and resilient financial system will require the presence of both commercial and central bank
money.��We therefore support the view that the optimal CBDC model for building trust is an
intermediated design, due to its basis in partnership between central banks and authorised
financial intermediaries. If designed well, CBDCs offer the possibility of faster and lower cost
payments for consumers and businesses and could drive other innovations, such as
programmable transfers to consumers and smart contracts to stimulate demand. They could
improve identity and verification and security while respecting privacy, and enable business
growth and investment. Furthermore, if designed well, CBDCs would also not incur the
energy costs of some other digital assets. �In addition to the risks raised in the discussion
paper, we also think that the potential impact of dependencies on wholesale markets requires
careful thought. The replacement of commercial deposits with wholesale funding could lead
to a number of undesirable consequences. If the cost of wholesale funding compared to
commercial deposits is higher, there would be cost of credit implications. It could lead to less
diversification of funding or increased concentration risk for bank liabilities, increased
refinancing risk due to reduced market windows, and increased exposure to market volatility.
Market capacity is also a factor and increased dependency on less stable investor bases may
exacerbate exposure to market conditions and thus refinancing risk.��These concerns align to
the Fed’s previous analysis regarding the significance of the risks presented if a CBDC were
pursued. In particular, we think it vital to consider carefully the effect on aggregate credit
provision due to the potential loss of bank deposits. �
As noted above, the specific benefits that CBDCs can deliver compared with the benefits from
improving existing transfer approaches will need to defined carefully. The paper references
the already considerable ongoing work and investment by the industry and authorities in the
U.S. to redesign and improve retail and interbank payment systems, namely the RTP network
and the interbank FedNow Service, which will enable 24/7/365 payments. The required
investment and change across the industry to adopt a retail CBDC will also need to be
considered. �As the paper also notes, there are remaining challenges for the U.S. payment
system, such as the speed and cost of cross-border payments. We do believe that CBDCs
may represent an important technological opportunity to resolve key issues in these areas.
The principal potential benefit is near instantaneous payment. Many financial transactions can
be thought of as ‘delivery vs. payment’. Delivery is a transfer of ownership of the asset while
payment goes in the opposite direction. Distributed Ledger Technology allows a secure,
certain and near instant transfer of delivery, but this is of limited value unless you can also
process the related payment in a similar manner. CBDCs have the potential to further this
goal.��Near instantaneous secure and certain payments and other transactions can reduce the
number of intermediaries (and associated potential risks) involved in payment chains, reduce
settlement risk, resolve issues related to time zone differences and reduce transaction costs.
These benefits could be passed along to consumers. Well-designed CBDCs could ensure
that this is all done in a manner that corresponds with existing approaches to tackling
financial crime.��There are continuing global efforts, notably by the Committee on Payments
and Markets Infrastructure (CPMI), to enhance existing cross border payments infrastructure.
This multiyear global effort aims to tackle identified frictions in order to enhance cross-border
payments. These frictions include: fragmented data standards or lack of interoperability;
complexities in meeting compliance requirements, including for anti-money laundering and
countering the financing of terrorism (AML/CFT), and data protection purposes; different
operating hours across different time zones; and outdated legacy technology platforms.
HSBC is closely involved in discussing these developments with policy makers, and we are
working to support improvements to the existing cross border payments regime.�
inclusion?
It is not clear how or whether a CBDC could help those that remain ‘unbanked’, or whether it
is best-placed to do so in comparison to existing initiatives. As the discussion paper mentions,
the private sector ‘Bank On’ initiative already promotes low-cost consumer checking
accounts.��Some claim that a CBDC with offline capabilities and which is mobile friendly might
drive financial inclusion. This claim and others should be subject to evidence, and reference
research regarding the factors that prevent some consumers accessing bank accounts, and
others declining to do so. �Others, citing examples in very small developed economies, have
claimed that a direct CBDC could help drive bank inclusion, but, in fact, direct CBDCs have
only been adopted or proposed in economies that have relatively under-developed banking
systems. They have not been proposed seriously for any advanced economy, and even major
emerging markets have so far declined to create direct CBDCs. We do not think that a direct
CBDC is an appropriate approach for the U.S.�
The introduction of a CBDC could have an impact on the range and effectiveness of a
number of monetary policy measures, and also a broader impact on markets. A CBDC should
be designed so that it does not negatively impact the ability of the Fed to ensure financial
stability and guide the positive development of the U.S. economy. We believe this may be
possible but more research is needed to confirm the appropriate design considerations, as
described below.��We believe that an interest-bearing CBDC should be avoided, as it would
likely encourage a loss of bank deposits, which could threaten financial stability and wider
economic growth. The October 2020 paper ‘Central Bank Digital Currencies: foundational
principles and core features’ , by the Fed and a number of other leading central banks, states
that an interest-bearing CBDC would create financial stability trade-offs and that more
research is required in this area if such a possibility were to ever be considered. �The CPMI
has noted that greater demand for CBDCs could affect repo and government bill markets and
also reduce interbank activity. CBDC design choices could therefore have broader
implications for the role of central banks in financial markets and monetary policy
transmission mechanisms. These need to be carefully considered, and extending the Fed’s
work to consider these impacts in more detail would be an important step.��There is also the
possibility that CBDCs could extend the range of policy options available to central banks and
governments, via programmable money, or direct, and potentially conditional, fiscal transfers
to citizens. Careful consideration must be given to questions of privacy and freedom of action,
as well as determining whether new approaches would offer clear benefits over and above
the approaches that have been used in some countries, including the U.S., during the
COVID-19 pandemic. �We recommend that a ‘do no harm’ principle, as put forward by the BIS
in the report on CBDC principles cited above, should be applied, so that the risks associated
with a CBDC are fully considered before implementation. CBDC implementation requires a
fuller understanding of how consumers and the financial markets would react to digital money
before a CBDC can be issued in confidence.�
stability?
As the discussion paper indicates, there are trade-offs that must be considered fully. This
includes the impact of a U.S. CBDC on financial stability both domestically and globally. The
latter is important for the dollar’s continuing status as the primary global reserve currency.��As
mentioned in our answer to question 1, state-backed CBDCs certainly offer the potential to be
more robust, transparent, stable and less risky than private digital currencies, such as
stablecoins and cryptocurrencies. The introduction of CBDCs may help counter the adoption
of these riskier assets. �Yet the behaviour of consumers in situations of general economic
stress is a vital factor. We agree with the Fed that any ‘flight to safety’ from commercial to
central banks that CBDCs could encourage might present or exacerbate liquidity issues for
financial institutions and pose risks to the operation of markets and to financial stability. It is
therefore vital that new forms of digital money do no lead to ‘digital bank runs’. �Any CBDC
that is interest-bearing could have a significant impact on the creation of money in the
economy. It would likely reduce the amount of available funding for commercial banks and
some banks may choose to compete to protect deposits by offering higher interest rates in
order to influence consumer behaviour. They may do this based on the economic trade-off
between raising rates versus raising expensive and inherently riskier wholesale funding. Such
a dynamic is undesirable for financial stability and credit provision.��It is for these reasons that
we believe an interest-bearing CBDC should be avoided. As noted in the discussion paper,
additional measures to protect financial stability could potentially include introducing limits to
the amount of CBDC held by any end-user.��A U.S. CBDC could have a significant global
impact, given the USD’s continuing global primacy. Careful consideration should be given to
the design of a U.S. CBDC so that it does not negatively impact global efforts to reduce
financial crime, in which the U.S. continues to play a leading role. The Fed may also wish to
consider whether a U.S. CBDC would materially increase the degree of offshore USD
deposits, and what impacts this would have on the U.S. and global economies, and the Fed’s
associated management of the USD both domestically and internationally.�
As mentioned in our answers to previous questions, depending on the CBDC design, there
are a number of potential impacts on the financial sector to consider when developing a
CBDC. Benefits and risks both need to be considered carefully.��The introduction of new forms
of digital money, including a U.S. CBDC, may improve the range of transaction services
provided to the public. However, depending on the design choice made, some forms of digital
money may reduce the overall efficiency of credit provision in the economy. Any aggregate
increase in the cost of credit as a result of a policy decision in relation to new forms of digital
money could have serious economic and social consequences, which could in turn
undermine trust and confidence in authorities and the financial system they oversee.��The risks
to financial stability are not just applicable to commercial banks but also systemic stablecoin
issuers, where a rapid loss of consumer confidence triggering a material liquidation of the
backing assets could have impacts for financial markets. As the financial system rapidly
evolves towards a more digital environment, it is critical that regulatory regimes encompass
the full scope of digital money instruments to ensure the safety and stability of the financial
system. This should certainly include stablecoins, and we particularly note and support the
conclusions of the 2021 President’s Working Group on Stablecoins.�As the FSB noted in their
October 2020 report on stablecoins, authorities agree on the need to apply supervisory and
oversight capabilities and practices under the 'same business, same risk, same rules’
principle. We think that proper regulation of stablecoins will be a critical component of a safe
regulatory regime governing the new and evolving forms of digital money.�
The discussion paper has set out the potential benefits and adverse impacts of a retail CDBC.
As mentioned previously, we agree that an intermediated CBDC model is the most promising
and could provide effective public access to central bank money in a digital world. It is the
most similar to current market structure, with its basis in partnership between central banks
and financial intermediaries and seems to us, and to many other commentators and
authorities, to be on balance the most promising option under consideration.��Nevertheless,
there are still substantial risks associated with this model. In particular, this includes
potentially significant impacts on commercial deposits – with subsequent impacts on the
supply of credit, financial markets activity and overall financial stability – that could develop
very rapidly. The trade-off between the anonymity provided by cash, and potentially a CBDC
depending on the design choices made related to anonymity, and the requirement to ensure
high standards of AML/CFT must also be considered carefully.��Some of the potential negative
impacts could be mitigated by avoiding an interest-bearing CBDC and introducing withdrawal
caps on commercial deposits, although the latter needs to be considered carefully and tested.
�
We think it is critical that, even as new forms of digital money are introduced, cash remains
available for so long as there is public demand. Cash is a direct, tangible form of central bank
money that has anchored transactions in the existing economic system. Losing access to
cash could have important consequences for the U.S. economy and public interaction with
the financial system. Those consequences could be especially important with regard to
financial inclusion and the elderly, who on average use cash more. We think that cash should
be retained until such time as there is no public demand for it.��As set out in our answers to
previous questions, an intermediated CBDC would help to preserve sufficient access to cash
by the general public, notwithstanding the risks and trade-offs that will need to be considered
fully.�
CBDC?
We note the continuing global efforts – notably by the CPMI’s Payments Roadmap – to
enhance existing cross border payments infrastructure, both by improving existing systems
and introducing new initiatives. This multiyear global effort aims to tackle identified frictions in
order to enhance cross-border payments. These frictions include: fragmented data standards
or lack of interoperability; complexities in meeting compliance requirements, including for
anti-money laundering and countering the financing of terrorism (AML/CFT), and data
protection purposes; different operating hours across different time zones; and outdated
legacy technology platforms. �HSBC is closely involved in discussing these developments with
policy makers, and we are supportive of the ongoing work to improve the existing cross
border payments regime.�
The motivations for considering CBDCs vary for each jurisdiction, and are often driven by
specific local circumstances. There are, however, common considerations that are seen
across many major economies, and we think that these are well explored in this consultation.
We appreciate the work of the G7 to coordinate global efforts on the development of digital
money, particularly between advanced economies. �We note that no major advanced
economy has yet fully launched a CBDC and most that are actively exploring or piloting
CBDCs are largely focused on domestic retail models. As such, we believe it is too early to
assess accurately the overall potential geopolitical implications of CBDCs, if any.��There has
been much recent interest on whether certain potential or actual CBDCs could threaten the
reserve status of the U.S. dollar. We note that economists and economic historians often
suggest that reserve currency status requires a large and stable economy, perceptions of
political stability from investors (that is, that the rules of their investment will not be changed
as they hold it), and deep, liquid and accessible financial markets in that currency. �It is often
also noted that whilst some other global currencies have fulfilled these criteria for decades,
they have not affected the U.S. Dollar’s reserve primacy. It remains to be seen whether
CBDCs change any of these considerations. This is a fluid and complex debate and we will
continue to follow it with interest, but we suggest that it would be premature to draw any firm
conclusions at this stage.�
Please see our responses to previous questions. We think the paper is generally well
considered and comprehensive.
There are important design considerations regarding transaction data access, personally
identifiable information and Anti-Money Laundering/Customer Due Diligence requirements
that should be a primary focus of CBDCs research and testing. The ability to meet consumer
privacy expectations, as well as legal and regulatory requirements around financial crime, will
be critical to the success of any CBDC, because these factors are critical for trust. �CBDCs
could create data that could negate anonymity. In considering CBDC designs, privacy needs
and expectations must be balanced against other public policy priorities. Cash is almost fully
anonymous once obtained through a transaction or withdrawn from an ATM, but full privacy
and anonymity in digital payments could lead to a breakdown of the current Anti-Money
Laundering regime. �Digital money should include data privacy and protection in designs to
coexist with, and support, the wider legal and regulatory framework for the financial sector
and the overall integrity of the financial system. Financial institutions must ensure that they
comply with all laws related to privacy, and also that they respect their customer’s privacy
expectations. If a reduction in privacy is seen to outweigh the benefits to user, then
confidence in these new forms of money will decrease, and usage will be negatively
impacted.��There are some potential benefits from the use of data obtained from a CBDC, such
as improved products and services. However, considerations around privacy need to be
included throughout the design process. That includes the acknowledgement that under
certain circumstances (e.g. anti-money laundering screening during onboarding), consent
may not be possible or desirable. In other circumstances, it must be clear that only specific
actors have access to certain types of customer data (e.g. bank level transaction data). For
CBDCs to be trusted widely and therefore used, end users need to have clear information as
to what data is being held by commercial banks, central banks or other actors, and know how
their privacy rights are being maintained. �This design balance is possible with technologies
that are under testing. There are options for developing new mitigations for privacy, as noted
in the BIS paper “III: CBDCs: An Opportunity for the Monetary System”. In certain retail CBDC
designs the payment authentication process can be built to conceal personal data from
commercial parties and public authorities. �There may also be value in allowing different
levels of information to be shared through reporting mechanisms, for example, by making
more data on macroeconomic level monetary flows available to a central bank. This would
need to be explored further and carefully considered.�
CBDCs have the potential to present increased operational and cyber resilience challenges,
not least due to the significant monetary and data value for cyber threat actors. While cash is
truly anonymous, any CBDC must enable the sharing of sufficient information for the
purposes of tackling fraud and implementing anti-money laundering and countering terrorist
finance measures. This provides the potential for threat actors to identify and track
individuals, as well as hacking a CBDC both to disrupt operations and to steal currency. The
architecture of a CBDC will have a bearing on the requisite degrees of anonymity and data
privacy, cyber security and overall operational resilience.��As mentioned above, we note that
CBDCs could have potential to develop new mitigations for privacy, cyber and broader
resilience risks in the existing payments system. Testing and careful gradual implementation
of digital money in real world situations with an appropriate regulatory framework for digital
money is necessary. This would likely include proper evaluations, rigorous use case
modelling and code and attack vectors testing, while complying with standardized, dedicated
frameworks. This would allow the U.S. to explore the potential risks and the appropriate
design options to mitigate them.�
We believe that, in principal, a U.S. CBDC should be legal tender as it would be a digital form
of the U.S. dollar. However, in practical terms, we note that consumers, merchants, and other
payment actors would need access to CBDC technology to access a CBDC on similar terms
to cash. This may in some cases limit the ability of some to accept a CBDC as a form of
tender. This aspect should be considered carefully.
Our answers to previous questions, particularly answer 4, explain why we do not think that a
CDBC should be interest-bearing.
We believe that four limits outlined in the Bank of England paper ‘New Forms of Digital
Money’ are a good basis to manage the risks of a CBDC. These are aggregate holdings,
transaction limits, access eligibility and remuneration. �Before allowing digital money to be
widely used or accessible to the public, we encourage the Fed to undertake assessment and
testing to see what impacts those limitations may have on the risk created by new forms of
digital money, particularly a CBDC, and also the realisation of its potential benefits. �We think
that the first three limits mentioned are appropriate for any initial testing. It is possible that any
final version of a CBDC should have all four limits in place when first implemented, with
adjustments made as needed.��Of the four, the most important, and likely candidates for
longer-term controls, seem to be the aggregate holding and transaction limits, in order to
minimise the potential for ‘digital bank runs’.�
While competition and innovation should be encouraged and supported, authorities must also
ensure the continued resilience and stability of the financial system, as well as the proper
conduct of all market participants. The regulation to which banks are subject would appear at
this stage to be appropriate for CBDC intermediaries.� �An intermediated CBDC approach
would ensure the continuation of division of labour between central banks and the market.
This would see the private sector continue to perform customer-facing activities and
operational tasks and enable the potential for greater innovation and competition. Assuming
that central banks grant access to existing payment systems for appropriately regulated and
licensed firms, these firms could compete to provide both CBDC wallets for consumers and/or
a myriad of overlay services. �It is crucial that regulatory regimes encompass the full scope of
digital money instruments, to ensure the overall safety and stability of the financial system.
Authorities must apply supervisory and oversight capabilities and practise under the principle
of ‘same activities, same risks, same rules’. This will be a critical component of a safe
regulatory regime governing CBDCs, and other types of digital money, such as stablecoins
and cryptocurrencies. �
As with existing electronic payment systems, we believe it will be very important for a U.S.
CBDC to have offline capabilities. For CBDC transactions to become ubiquitous, building and
maintaining merchant and end user trust and confidence is paramount. Central to this will be
the ability make CBDC transactions anytime, anywhere. Offline capabilities bring several
benefits, ranging from enabling better operating conditions to providing resilience in the event
of major incidents. It is also seen by many authorities as critical to increasing financial
inclusion by providing services to communities with limited or no network coverage and
inconsistent electricity supply. �Offline transactions would operate in a similar fashion to cash
payments. While further study would be required, this might be achieved either by a stored
value card or through a mobile phone application, using NFC and/or Bluetooth. This could be
linked to existing payment rails with the cooperation of third parties or settlement via
peer-to-peer using tokens removing the need for back-end settlement systems. �Several
aspects would need to be considered in detail, including ensuring accurate balances and
deposit outflows, frequency of transactions, transaction limit amounts, any offline periods,
anonymity and traceability. Ensuring AML, CFT and fraud risks are mitigated and that
double-spending is prevented would also be vital. Cooperation between software, hardware
and service providers, in partnership with regulators and financial institutions, will be
important in order to develop a harmonized framework and security standards.�
sale? If so, how?
A retail CBDC will have to compete with existing retail payment systems in the U.S. In order
to succeed, it will need to achieve high levels of participation and adoption by multiple
stakeholders, including banks, non-bank intermediaries, merchants and end-users. This will
require seamless integration with existing payments infrastructure, a strong end-user and
merchant experience and competitive yet fair incentives across both sides of the market to
drive adoption.
Any CBDC must promise, credibly and consistently, to be fully interchangeable with existing
forms of money. We note that the discussion paper does not go into the details of the specific
requirements to achieve this, including technology requirements. At this early stage of
thinking we are supportive of technological agnosticism. For example, it is not yet clear which
technical approaches (e.g. centralized/decentralized, DLT or traditional) may be most suitable
for a CBDC.��We also think it is important to support innovation, for instance with respect to
smart contracts or ‘programmable’ money. These developments should be allowed to be
explored within an appropriate, safe framework, that is technologically agnostic – potentially
in approved sandbox environments. �
CBDC?
At this early stage of design considerations, it is still unclear what the optimal technology
solution might be for a U.S. CBDC. In our answer to Question 20, we have mentioned the
importance at this stage of technological agnosticism. �While this will be resolved in due
course, new challenges will arise that may be solved by new technologies, so the underlying
principle of technology neutrality – possibly combined with open architecture – remains. This
needs to be supported by a flexible and outcomes-based approach to public policy and
regulation, in order to encourage safe and responsible innovation.�
benefits of a CBDC?
The previously mentioned joint report by the BIS and a group of central banks proposed that,
however designed, there should be three underlying principles governing the design and use
of CBDCs:�1.�They should do no harm to monetary and financial stability; �2.�They should
co-exist with cash and other money in a flexible and innovative payments ecosystem; and
�3.�They should promote broader innovation and efficiency in the financial system.��While these
are sensible and valuable guiding principles, the report also recognises that there are
trade-offs that must be considered. Most notable is that of financial stability vs. the usability of
a CBDC. Measures taken to mitigate financial stability risk could affect the level of parity
between a CBDC and cash and commercial bank money. Further study is required to better
assess the impact.��The report also identified other trade-offs that the Fed could usefully
consider as it progresses its thinking on a U.S. CBDC:�•�Tackling fraud vs optimising user
experience: to maximise consumer adoption, it is likely that multiple functionalities will need to
be addressed. This added complexity would likely require additional safeguards to tackle
fraud risk, which in turn could limit functionality and affect adoption.�•�Resilience and privacy vs
system performance: the development and roll out of new technologies requires firms and
public authorities to pay ever closer attention to new forms of operational and cyber risk.
CBDCs must therefore be developed and managed with operational security – as well as data
privacy – at the heart. Depending on the design features, this could have an impact the
performance of a system that would be required to settle instantly very large numbers of
authenticated payments.�
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R3
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New York
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jack.fletcher@r3.com
We believe that the Federal Reserve Board’s (hereby referred to as ‘the Fed’) paper, Money
and Payments: The U.S. Dollar in the Age of Digital Transformation provides a good starting
point in the public discussion of U.S. central bank digital currency (CBDC). The paper covers
many of the most salient points concerning the potential issuance and the potential
implications of CBDC. In the answers to the following questions, we provide input on the key
themes addressed and would be happy to discuss any topics that the Fed feels useful in
future engagements. Amongst these are the potential for CBDC to: 1) encourage a new
digital payments and services marketplace; 2) support the shift in payments infrastructure
from the physical to the digital, thereby better servicing citizens; 3) providing policy makers
with new tools for the transmission of monetary and/or fiscal policy through programmable
money; 4) support the dollar’s domestic role in payments from third nation or private sector
competition; and 5) strengthen financial compliance tools. �From our involvement in central
bank CBDC projects including Jura, Dunbar, eKrona, eTenge, Khokha, Jasper, and Inthanon,
the importance of identifying the specific motivating factors that require a CBDC solution and
designing solutions derived from them should not be understated. This judgement should be
based on considered and informed evaluation of the U.S. domestic payments environment in
which any potential retail CBDC would be expected to operate. This will allow policy makers
to determine what requirements are needed from a solution and provide specification for
technical designs to deliver against. In this sense, we believe that the Fed is starting from the
sensible place - by identifying the problem before it examines potential solutions. This is to be
commended. �By way of example, one motivating factor for the introduction of a retail CBDC,
might be the trend in payments away from physical cash and towards digital payments. If we
consider this trend permanent, absolute, and inevitable, a foundational question the Fed
might ask itself is whether public money needs to be made available in a digital, so that it
continues to circulate and provide a competitive payment option for citizens. We note that this
issue is one that the paper highlights. If the answer is that public money should continue to be
issued, identifying which, if any, of cash’s distinctive properties should be replicated in a
CBDC will also a design to form. This in turn, will allow for further, more detailed analysis of
the potential impact that a CBDC might have. �Cash has many properties, with several not
currently replicated in the digital sphere. For instance, there is not any one digital payment
medium that offers the ability to transact: �-�using central bank money; �-�on a peer-to-peer
basis;�-�without the permission of a third party; and �-�without the knowledge of a third party. �If
the Fed were to decide that the right of the individual to privacy (at least at some level) in the
payments sphere was an important element of citizenship, then the technical design choices
of a retail CBDC would be required to reflect these requirements. We discuss privacy in
response to the set of questions later in the consultation but use it here as an example to
illustrate the connection between the benefits that any solution might deliver and the
relevance of those benefits to the ecosystem. �
From our observations of working with central banks, we note a common thread running
through the examination is the question of whether the provision to the public of a central
bank liability should be made available in a digital format. This is naturally an issue for each
respective jurisdiction to consider on its own terms, but we believe that the issuance of a retail
CBDC is the only way to replicate the property of cash as a public liability in the digital
payments landscape.��It should be noted that the issuance of a CBDC can be delivered
through different underlying technologies; however, distributed ledger technology (DLT) offers
considerable and unique benefits to existing infrastructure. The programmability of
DLT-issued CBDC allows for new services and innovation to emerge that can serve the
public. This might be issued directly by the State (for instance, welfare payments or helicopter
money) or by private sector payment service providers (PSPs) who could utilise the core
functionality and value of CBDC to wrap additional programmability into the tokens and offer
that to users. The adoption of innovation at the issuance layer can therefore foster a new and
innovative marketplace and service providers, which non-DLT solutions cannot deliver.��Some
examples of programmability being examined include the provision of CBDC to children that
supports digital payments but with protections programmed into the token preventing
spending on age restricted items such as alcohol or cigarettes. Another example could be
services aimed at supporting those with mental health issues to manage their spending, for
instance preventing purchases at certain times of the day or requiring a countersignature to
complete. The State might also wish to utilise the programmability of CBDC to issue welfare
funds to recipients with policy targeted restrictions, akin to food stamps. �In our view, the
benefits that programmability offers could be achieved through a regulated stablecoin regime,
which would allow PSPs to mint their own DLT digital currency token, likely backed 1:1 by fiat
or even CBDC. To enable the private sector to offer such services and for the public to have
confidence in them, we believe requires a prudent regulatory regime within which PSPs would
operate, and that would provide protections against risks to financial stability. �
inclusion?
The reasons for financial exclusion can be complex, meaning that solutions often require the
support of a wide degree of stakeholders in the public sector, private sector, charities, and
community to be effective. We recognise that financial inclusion covers both access to
banking and access to financial services and believe that CBDC might have an impact upon
both these elements. �Given that the design of a CBDC is not yet in development in the U.S. it
is difficult to make a precise judgement on how effective it may be as a tool for financial
inclusion. From our experience, nations who are pursuing the development of CBDC with a
view to widening financial inclusion do so on the understanding that the provision of a new
payment settlement medium, CBDC, will be accompanied by the availability of digital
identification to support it as a payment medium and as part of a package of measures aimed
at widening inclusion.��We note that in April 2022 the Bank of International Settlements and
World Bank produced a joint report on the possible impact of CBDC on achieving greater
financial inclusion. This report can be found using this link:
https://www.bis.org/fsi/publ/insights41.pdf. One observed issue with access to financial
services is the difficulty for an individual using cash to build up a financial history. This blocks
the route to credit facilitates as there is insufficient data on which to assess credit worthiness.
Were CBDC to be adopted by this user, they could build up a recorded financial history and,
in turn, choose to share that data with potential providers to gain access to a wider range of
financial services. For the financial services sector, it is important to recognise that
compliance requirements determine the criteria that potential customers must meet to be
provided with banking services. The capacity for CBDC to assist citizens in meeting these
requirements is potentially a significant benefit of its introduction. �The question of whether
CBDC itself is the only way of achieving this end result is a good one, indeed, it may not be.
However, CBDC does provide the opportunity for new innovative players to enter the market
and provide services to customers, which have otherwise been underserved by the existing
market. It also, and perhaps crucially, shifts the burden away from brick-and-mortar solutions
to digital ones reliant upon internet connectivity. Given that some are financially underserved
by virtue of physical proximity to infrastructure such as ATMs and bank branches, the
adoption of CBDC could lead to greater adoption and confidence in digital tools and in turn
increase participation, generating market demand. �It is difficult to see how the introduction of
a CBDC could negatively impact financial inclusion whilst the availability, interoperability and
substitutability of physical cash remains. The current payment landscape, which includes card
and digital payments alongside cash, provides us with a reasonable model for how CBDC
could avoid payment fragmentation with respect to financial inclusion.�
We believe that CBDC is the third form of central bank money, in addition to cash and central
bank reserves. In this sense, CBDC would represent an additional payment medium through
which to implement monetary policy, with decisions over issuance and governance entirely
within its exclusive control. �Subject to design preferences, a CBDC solution could provide the
central bank with new data sets from which to better analyse the effectiveness monetary
policy decisions. Such data might include the real-time flow of money across the system,
potentially strengthening the ability of the Fed to model the outcomes of monetary policy
decisions and pursue policy goals such as maximum employment and price stability. One
feature of DLT enabled CBDC is the potential for programmability to enable interest bearing
tokens as an additional (optional) tool for transmission of policy decisions. We cover this topic
in more detail in response to Q15. �
stability?
We do not believe that the introduction of CBDC would have any effect on financial stability in
and of itself. We consider careful study of the potential impact it may have vital in designing a
solution that generates adoption and creates positive economic and societal outcomes. �From
our experience, discussions concerning financial instability and the introduction of CBDC
chiefly relate to a direct issuance model of CBDC. As the Fed’s paper points out this would
likely be in breach of existing legislation and runs the potential risk of disintermediating the
existing commercial banking sector from retail customers. We note that the direct model of
CBDC issuance has gained little traction amongst central bankers researching the topic.��In
contrast, we observe that indirect or hybrid models of CBDC are more common architectural
choices being examined by central banks. In both these models, the central bank is issuing a
CBDC and allowing licensed PSPs to compete for users at the distribution layer. This
preserves the fundamental roles currently enjoyed by the payments landscape and would
mitigate the potential for financial instability caused by the introduction of a new payment
settlement medium. �
As outlined in our response to question five, there are different suggested models for how
CBDC might be distributed across the population, each with different implications for the
financial sector. From our experience of working with central banks across the world, this
topic is a key area of investigation and one that has received significant attention. �We believe
that digital currencies operating on DLT have the potential to create a new ecosystem of
financial companies, products, and services. In a vibrant and competitive financial sector,
there will be winners and losers, as competition between new entrants and the existing
providers will provide consumers with innovation and choice. As CBDC is a payment
settlement medium its issuance does not, in and of itself, have any de-facto impact on the
financial sector. To model the impact, adoption will be a critical factor, which itself will be
influenced by the relative attractiveness of functional and non-functional properties of CBDC,
availability, market readiness, and consumer preferences. As such, analysis of the impact will
vary by the design of the CBDC solution itself. �With respect to the impact of CBDC versus a
stablecoin or similar, this is a complex issue that depends upon the design of those
respective instruments to consider. In our view, CBDC and stablecoins have the potential to
be complimentary payment mediums within a two-tiered digital currency landscape. PSPs
could offer and distribute CBDCs and stablecoins with different programmable features
alongside one another, with CBDC continuing to be the liability of the Federal Reserve and
stablecoins the liability of a private (likely regulated) entity. Much like the relationship between
private money and public money in the current payments landscape, the substitutability and
interoperability of these two forms of money is key in maintaining the value of both to
represent a dollar and the confidence of the public in using both. In this landscape, the
capacity for a CBDC to be ‘wrapped’ (programmability layered on top of the underlying token)
or used as collateral against the issuance of a stablecoin will provide the financial sector with
the technical foundations to innovate and grow. �
There are multiple tools (separate from architectural choices) that could mitigate the impact of
CBDC on the financial sector through deposit migration. As the question highlights, some of
these tools might detract from the appeal of CBDC adoption, so their use will likely need to be
tested against research and analysis to achieve the desired outcome. �We note that the
European Central Bank has undertaken research on the impact of CBDC on the financial
sector, highlighting potential tools to protect deposit holding institutions from deposit migration
into CBDC. This is available via this link:
https://www.ecb.europa.eu/pub/pdf/scpwps/ecb.wp2351~c8c18bbd60.en.pdf �This report
highlights potential tools: 1) restrictions on how much can be held in CBDC; and 2) a tiering of
renumeration. We note that in the People’s Bank of China’s CBDC pilots, users are only able
to exchange fiat for CBDC through designated financial sector intermediaries; that custody of
CBDC can only be provided by designated financial sector intermediaries; and that access to
CBDC has been limited to a set population size. Through such measures central banks would
also be able to mitigate the risk of widespread migration of deposits into CBDC. The impact of
this could also be observed and validated/dismissed using a staggered introduction. �In our
CBDC Sandbox, these types of controls are available to users, with programmable controls
imbedded in the design of a CBDC ensuring that the distribution of CBDC can be controlled,
thus allowing for choices that might reinforce the role of existing financial sector players or to
widen access to increase competition.��In our view, the best way for a central bank to mitigate
against any adverse impact of a CBDC is through a thorough examination of the payments
landscape and by designing a CBDC with clear and specific purpose(s) in mind. Having a
clear understanding of the role that CBDC will play within a payments environment will help
establish what, if any, tools are needed to mitigate the risks of an adverse impact upon the
financial sector. For example, if a CBDC is designed to be the payment medium of choice in
cross-border remittances then its impact on the financial sector will be much different than a
design that is targeted at general day-to-day payments and competing (possibly with new
functionality) against cash, and credit card and debit card payments. �
N/A
CBDC?
We note that a common motivation for the examination of CBDC is the role that a third nation
or a privately issued digital payment token might play in the absence of a domestic central
bank offering. Analysis of this question is by its nature speculative and dependent upon key
factors such as the utility of a CBDC/stablecoin, projected adoption of those tokens, and how
the regulatory environment might support, hinder or prevent adoption. �In a domestic setting,
the capacity of the State to impose a regulatory regime on acceptance and use of such
tokens is a key tool, and likely to mean that adoption of a third nation or private currency
remains niche, if not non-existent. In a cross-border setting this might prove more
challenging, and the availability and functionality of an alternative currency could lead to
some levels of currency substitution. The popularity of bitcoin as an alternative currency has
arguably been for its speculation potential, rather than as a payment medium. By extension,
the attractiveness of CBDC depends upon it having features that make it appealing as a
payment medium. �In the wholesale space, we are seeing an increasing demand for CBDC to
be made available to institutional players on DLT. Our work on Bank of International
Settlements (BIS) supported projects such as Jura, Helvetia, and Dunbar with major G20
central banks illustrates how the benefits of DLT providing atomic, instantaneous delivery vs
payment (DvP) and payment vs payment (PvP) has been established. The U.S. dollar
currently dominates cross-border exchanges, however, if its functionality or availability does
not meet the demands of the market, it presents an opportunity for the currency of third
nations to replace the hegemonic role of the dollar. However, the extent to which this threat is
real depends upon a multitude of political and economic forces that reinforce the use of the
dollar remaining stable and may be worthy of specific independent examination.�
CBDC as a retail level payments instrument may not suit all jurisdictions and may struggle to
compete in some payment marketplaces where consumers see no need for it. We encourage
all central banks to examine the economic and policy case for issuance based on domestic
factors and independent of decisions by third nations. �We encourage the United States to
engage with the private sector and internationally with central banks and multinational
agencies to share information and learning points from CBDC examinations to date.
Technology led studies – regardless of their geography – will be of interest to all nations and
provide learning points that can be included in domestic examinations of CBDC, if even the
underlying policy or economic conditions differ from that of the United States. At the retail
level, R3’s Corda is supporting retail CBDC examinations in Sweden and Kazakhstan
together with numerous projects focused on wholesale CBDC, such as projects Jura,
Helvetia, Dunbar, Khokha, Jasper, and Inthanon-Lionrock. We would welcome any
opportunity to serve the Fed directly in your work also. �
N/A
When we consider privacy, we do so in respect to privacy of what and from whom? In our
experience, the answer to this varies by jurisdictional preferences and should be assessed
alongside the lens of adoption and through analysis of consumer choices where privacy is
often traded against convenience and cost. For instance, it may well be that the consumer is
more comfortable with a private entity having access to their transaction data (much as card
companies currently enjoy) than the State, or vice-versa. It could also be the case that a
CBDC designed to provide cash-like privacy and anonymity be an attractive prospect for
citizens and lead to successful adoption. �The design of a CBDC, its characteristics, and
distribution model is one for nations to take themselves, but we believe that it is possible to
achieve privacy and compliance in one solution using DLT infrastructure. �With Corda enabled
CBDC, the programmability of CBDC would allow for the implementation of policy decisions
to spread across the CBDC system. Programmability can be applied at the token level, at the
network level or both to achieve the desired policy outcome. It is important to note that on
Corda consensus is pluggable/customisable. This means that whilst Corda’s default model
offers privacy by default, it can also be designed to enforce network rules that require a
designated authority to have a view of specific or all transactions. �With direct respect to
privacy, the programmability of a CBDC system could enforce compliance at the technical
level. For instance, transactions below an agreed threshold could be made private with the
use of technical solutions, such as chain-snipping/reissuance, secure enclaves, or
zero-knowledge proofs. These solutions would provide the CBDC network with the
assurances necessary to process the transaction without revealing associated data. In
contrast, programmability would also allow for the automatic reporting of certain financial
transactions. For instance, payments over the $10,000 threshold for Internal Revenue Service
reporting could be done automatically and in real time. We would be happy to discuss our
privacy solutions and development roadmap with the Fed should they find this helpful. �
N/A
Yes. We believe that to maximise the adoption and utility of CBDC that it should be
recognised as legal tender and become the third form of central bank money, alongside cash
and reserves.
It is possible for CBDC to be designed and issued with an interest rate programmed into the
token. This feature has not been examined or implemented in any CBDC project to date but is
one of those available to users of our CBDC Sandbox and allows users to examine the
possibilities that such an optional design feature might deliver. At the wholesale layer, the
capacity for a CBDC to hold interest bearing properties could provide central banks with a
technical tool to enforce monetary policy decisions concerning interest rates by attaching the
rate to the token itself. This might also be a feature that is passed on directly to retail CBDC
issuance, should the central bank wish. �At a technical layer, this is achieved by attaching a
smart contract to the token, which implements the accrual or erosion of value to the CBDC at
the required predetermined interval. As such, this would allow for the potential of both
negative and positive interest rates to be applied to a CBDC. �The decision of whether to
design a CBDC with interest bearing properties is entirely in the hands of the issuer but is
possible using DLT. From our work in this space, we have increasingly seen great interest in
this functionality and with a view to it being a tool likely to only be used in later phases of
implementation. R3 has no opinion on whether a CBDC should have interest bearing
properties, but simply note that it is technically possible on DLT and demonstratable in our
CBDC Sandbox. �
From a technical perspective, limiting the amount of CBDC that can be held by a single
end-user is possible. This would require the technical capacity for the holding of individual
wallets to be controlled and for an identity system to ensure that the same end-user could not
hold multiple wallets with different PSP wallet providers. Both could be achieved through
technical solutions alone or in coordination with legal or regulatory compliance requirements
placed on PSPs. �In our view, the use of DLT would enable a highly configurable system that
could respond to policy decisions designed to limit the use of CBDC and enforce those rules
instantly across the system. This would allow for the enforcement of rules and the
implementation of them, including the potential tightening or relaxing of quantity limits in real
time.��The issue of account capping is often associated with the issue of disintermediation of
the financial services sector should CBDC be introduced, although it is not the only tool to
mitigate this risk, as covered in our responses to Questions 6&7, respectively. �
In a two-tiered retail CBDC solution, PSPs serving as intermediaries provide custody and
payment services to account holders. PSPs could be made up from the existing deposit
taking market players, eMoney entities who grow to facilitate payments in CBDC, or new
market players. �We believe that given the role of these entities they should be regulated with
the current eMoney regulation providing a good starting point for the kind of activity that a
narrow CBDC intermediary could undertake. This might include the registration of entities,
regulation of custody arrangements, reporting and disclosure of capital or underlying assets,
and requirements concerning the redemption of tokens for fiat (or other assets), to name a
few. We believe that the assessment of the risks that this activity represents should be
reflected in the underlying regulatory regime, including recognition of any existing regulatory
frameworks that possible PSP participants might be adhering to. �
In examining the case for a new payment rail in CBDC, requirements are emerging for the
inclusion of additional benefits that could be facilitated by its development. Existing digital
payment mediums cannot facilitate offline settlement, but CBDC supported by DLT could
through peer-to-peer transaction with instant settlement. This would provide resiliency in the
payments environment and offer the potential for end-users to better manage their financial
affairs. As work conducted on Corda has investigated in the most recent report by the
Riksbank, offline payments are possible in a CBDC solution. �When considering offline
payments, from a technology point of view, it may be helpful to focus on settlement finality
and double spend protections. With regards to settlement finality, solutions could range from
payments acting akin to an IOU, with payments only settled with finality once connectivity has
been restored, to a bearer asset (cash-like) design that facilitates finality in offline scenarios
using technologies such as NFT or Bluetooth messaging. In the second model, a CBDC
token would act as a true barer asset and the instant settlement would allow for users to have
an accurate and real-time view of their balance, something which is not currently possible.
�With respect to protections against the risk of double-spend, offline payments could be
achieved by using trusted hardware solutions, such as smart cards or secure enclaves in
smart phones to custody and transact during offline periods. These hardware devises would
be required to uphold the integrity of the network, so would need to validate transactions
whilst offline by attesting that the token being transferred is unique and unspent. This is
technically possible within today’s commercial offerings, although retail focused last-mile
projects have not been the focus on central bank projects to date. We are working
independently with industry players to further develop this leg of CBDC distribution.��It is
perhaps important to note that pursuing offline payment functionality as a means of resiliency,
should examine CBDC against a true picture of the resiliency of payments. Cash remains the
only offline settlement medium that provides finality, however it should be noted that the
system underpinning cash relies upon an infrastructure that is partially dependent upon online
elements, messaging systems and electricity and wholly dependent upon physical
infrastructure. Therefore, whilst the comparison to cash in the moment of transaction is a
good benchmark, we should assess how access to cash in offline environments compares
between cash and CBDC - and crucially, how the two can support one another. In this
instance, the capacity for CBDC to be available instantly to users via their mobile phones may
support user choice and needs should the physical cash supply struggle to meet demand in
prolonged periods of outages or be unavailable in rural geographies. �
sale? If so, how?
Yes, we believe that this is essential for CBDC to be successful. As stated in previous
answers, CBDC should be developed through the prism of a product seeking market
adoption. Ease of design and acceptance at point of sale are essential factors in the
successful adoption of CBDC. In our view, adoption of a two-tiered distribution system for
CBDC will allow the central bank to continue to focus on its core functions, whilst inviting the
private sector to design an innovative and user-friendly wallet product that drives adoption.
We believe that the successful adoption of CBDC requires a collaboration of the public and
private sector, with ease of use and acceptance one of the areas for joint work.
Interoperability between traditional payment rails and DLT is a core focus of our work with
central banks, in projects such as the E-krona and Jura. We would be happy to discuss this
work with the Fed directly. �In our view a two-tiered model of CBDC, whereby the central bank
acts as the issuer of the token and the PSPs provides distribution to the end retail user
creates a huge potential for the development of a new ecosystem of financial service
providers and payment service providers. Whilst we believe that there are clear and strong
benefits to the selection of our platform, Corda, across this issuance and distribution model,
we are actively working on models that support interoperability across Corda and non-Corda
platforms to facilitate the effective transferability of assets across ledgers and payment rails.
In project Jura, we developed a technical solution called Proof-of-Action, which allowed for
entirely separate and sovereign networks to transact using atomic swaps. In Jura, that
allowed the respective Banque de France and Swiss National Bank networks to transact
whilst maintaining absolute sovereignty of their network and currency. In this instance, the
project did not require our Proof-of-Action solution to operate across different blockchain
protocols, but the solution design could be employed to achieve interoperability more widely.
To achieve this, certain technical primitives (core computing code) are required from the
platforms involved, principally the capacity to encumber, lock, redeem and destroy an asset
issued on that platform. This would enable transferability across multiple payment platforms.
We would be happy to discuss this work and others with the Fed. More information on the
solution deployed in Jura is available via this link:
https://www.corda.net/blog/facilitating-cross-network-cbdc-interoperability/. �
CBDC?
One of the benefits of a DLT system underpinning the CBDC system is the capacity for policy
decisions to be implemented and enforced throughout the system at the technical layer. The
rules of a DLT network are determined by its governance arrangements, with the architecture
of DLT infrastructure providing enforcement of these rules at a technical layer, with the
network and/or token design adhering to predetermined rules. The enforcement of policy
choices at the technical layer provides an additional, but powerful, tool for regulators and acts
as a potential compliment to governance measures charged through legal and regulatory
compliance. Moreover, should changes be made to policy affecting the operation of the
network, these can be proliferated and enforced across the DLT infrastructure. �The
programmability of a CBDC token also enables rules to be attached to its transfer. This is
achieved through the attachment of a smart contract to the token and allows for the
enforcement of the conditions contained in the contract in its use. For instance,
programmability would allow for a CBDC token to only be transacted according to pre-set
conditions, such as use within a certain geographic location or for the purchase of specific
goods. If an attempt to use the token is made outside of these conditions, then the system
prevents the transaction, thereby enforcing the relevant policy decisions. �Many of our
projects with central banks have included governance requirements within the technical
design, most notably in cross-border projects Jura and Dunbar, respectively. Our CBDC
Sandbox provides examples of the programmability available in CBDC, which the Fed may
wish to examine. By way of example, one of those designs choices provides the issuer of a
CBDC token to control which entities can receive, hold and transfer CBDC. In this specific
example, functionality allows for this access to be granted and withdrawn, allowing for policy
choices (such as the sanctioning of an entity) to be enforced at a technical layer, making it
impossible for an entity to transact in CBDC that the issuer has not permitted to do so. �As a
detailed illustration of how a DLT infrastructure can provide the tools for the enforcement of
policy decisions, we have recently published a blog on how sanctions might be enforced
using DLT infrastructure – this is available via this link:
https://www.r3.com/blog/blockchain-and-the-future-of-sanctions/�
benefits of a CBDC?
The design principles outlined in the paper are an excellent start in considering the
requirements for a CBDC technical solution, and any additional principles should flow from
considered analysis carried out by the Fed following public dialogue, engagement with
stakeholders, and interaction with the private sector. �In our view, the four principles outlined
could be accommodated within one architectural design and CBDC solution. Privacy
protection is something we have discussed in previous answers and a solution requires more
input from the Fed to cover in precise detail what data must be private and from whom, but
nonetheless, we believe that we could design a solution that enables this requirement through
DLT enabled functionality. �The requirement for intermediation is one that is also deliverable
and could be achieved through a two-tiered architectural model, amongst others. From a
technical perspective, the two-tiered model forms part of the distribution of a CBDC and we
have different solutions available to facilitate the possible roles that a PSP might play and the
function that their network node would play. �The transferability of CBDC between different
intermediary parties is a principle that we strongly support and our work in project Jura is a
good example of where we have facilitated the use of CBDC tokens by different parties using
independent and sovereign networks and assets. To facilitate this principle in a design, a
CBDC token model would provide a better solution than an account-based model. �The final
principle, identity verification, is one that we strongly support. Corda’s core design as a
private-permissioned design recognises the importance of connecting real-life legal identities
to the activities of nodes on the network and can be incorporated within a CBDC design. We
recognise the role that intermediaries are likely to play in the on-boarding of users into the
CBDC environment and in this sense, this principle marries well with the requirement for
PSPs to play a role in a potential solution. �
_________________________________________________________________________
The Club for Growth Foundation
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mthomas@clubforgrowthfoundation.org
A CBDC is an existential gamble in search of a problem that risks the stability of our financial
system and threatens a radical expansion of both state surveillance and of financial control by
unelected bureaucrats lacking appropriate judicial oversight. It is inappropriate for the Federal
Reserve to even contemplate such a dangerous experiment without explicit direction from
Congress.��We have detailed several risks neglected in the paper including the potential of
draining trillions from commercial deposits, resulting increases in financial instability, and
concentration of economic power in what is, ultimately, a government agency. Broadly
speaking, just as the federal reserve does not manage its own grocery stores, despite food
unavailability potentially causing financial distress, it should not manage its own
cryptocurrencies. Particularly when that management carries potential existential risks to
financial markets, to fundamental political rights, and to the integrity of the US dollar.��A large
cost neglected throughout the paper is the precise economic and social consequences of the
Federal Reserve owning a potentially dominant share of private-sector assets. The paper
admits that CBDC’s are likely to result in much higher levels of Federal Reserve ownership of
assets, which should raise concerns not just about state domination of our capital markets,
but whether the Federal Reserve would be inviting deeper political influence in its decisions
and conduct. The Federal Reserve has heretofore taken care to avoid being seen as directing
private capital beyond the minimum needed to ensure financial stability, and has been
particularly cautious about purchasing discretionary assets like corporate equities. Were a
CBDC to radically increase Federal Reserve holdings to a degree that ownership of
controlling stakes in corporations became widespread, even standard practice, such
prudence may become politically untenable. This would further move us away from
free-market allocation of capital and towards a Communist model of capital
allocation.��Ironically, the paper cites a concern from the President’s Working Group that
stablecoins’ consolidation could someday lead to a concentration of economic power. The
paper does not address the corollary that a CBDC, by concentrating the entire stablecoin
industry into a single government-run version, then potentially adding trillions in commercial
deposits to that pool, would constitute by definition an overwhelming concentration of
economic power, this time in the hands of a government agency that is already highly
politicized on topics as varied as climate change and social equity.��
The paper states that a CBDC should provide benefits that exceed costs and risks, and do so
more effectively than alternative methods. However, the paper does not engage in a rigorous
assessment of the most obvious alternative method: private stablecoins. Instead comparing a
putative CBDC to the strawman of legacy payment systems. On transaction cost and speed
benefits, private stablecoins and even Bitcoin already offer instant settlement and near-zero
fees; last August payments on Bitcoin’s Lightning network averaged one satoshi, currently
1/3000 of a penny.
https://markets.businessinsider.com/news/currencies/the-lightning-network-is-driving-mainstre
am-bitcoin-adoption-2021-8. Meanwhile, stablecoins could increase financial inclusion even
more than a CBDC, given their lower compliance burdens on customers as well as the fact
that, being a competitive industry, they can likely design and market consumer-friendly
products better than the Federal Reserve can. Finally, stablecoin run-risk, mentioned in the
paper, can be straightforwardly mitigated with oversight of stablecoin reserves.��In short, the
paper explores creating a good that already exists in the private sector: a version of the US
dollar that works reliably on blockchain infrastructure, and that provides excellent payment
service and cost to a wide population. Rather than re-inventing speculative wheels, it would
be less burdensome and less risky to simply monitor the existing private stablecoin industry
for fraud and for quality of reserves. �
inclusion?
A CBDC would likely reduce financial inclusion, by “occupying the field” currently filled by
private stablecoins, which offer superior privacy considerations and likely offer superior costs
and user experience given competitive dynamics. World Bank research has found that cost
and trust are the most important reasons Americans are unbanked. An intermediated CBDC
model that includes not just commercial banks but an agency of the US government is likely
to be more expensive than existing unintermediated private stablecoins, while such a model
may worsen trust issues and further unsettle Americans who might prefer their banking
remain private to government. �Many unbanked consumers are not financially or
technologically sophisticated, so may resist banking on what is, to them, a cryptocurrency.
While many others among the unbanked are abnormally privacy-minded, perhaps due to
grey-market earnings, and may be strongly resistant to what they may see as a
government-run cryptocurrency. In either case, a CBDC may be uniquely unsuited to address
this population — too novel and risky for the financially wary, and too much government in the
product for the privacy-minded. �Meanwhile, the paper mentions excellent existing projects to
promote basic bank accounts such as Bank One, so any CBDC must be measured against
those projects which, of course, do not raise fundamental threats to our financial system nor
to individual rights. �
A CBDC likely introduces several risks to implementation of monetary policy, as well as the
potential for deeply harmful collateral effects. Because a CBDC can be easily programmed to
impose negative interest rates on users, the monetary zero bound disappears in proportion to
CBDC uptake. To the extent the Federal Reserve is pursuing maximum employment goals at
the expense of current inflation, this could lead to magnification of interest rates swings,
exacerbating economic and financial instability. Related, this increases the temptation for
politicians to apply pressure to the Federal Reserve to, effectively, force consumer spending
in order to drive up current employment. Adam Smith famously warned that discretion over
the currency is akin to a “Waggonway in the sky” — a seeming benefit that carries enormous
risk. Negative rates on deposits would be quite an escalation in this risk, and they further risk
destabilizing the tenuous trade-off between employment and price stability with which the
Federal Reserve already struggles.��CBDC’s can also easily be programmed to impose limits
on the amount bought or sold. Indeed, the paper touts this feature to potentially attenuate the
heightened risk of bank runs it freely grants CBDC’s may cause. While the candor is
admirable, the paper fails to address that, during a financial crisis, CBDC’s could similarly be
programmed to limit sales, potentially to zero. This could lock depositors in, forcing them to
go down with the ship. As inconvenient as a bank run is for the banks involved, forcibly
preventing bank runs, not by prudential oversight of banks, but by brute-force preventing
consumer withdrawals risks catastrophic harm to American families in a crisis. If the Federal
Reserve is imposing such a welfare trade-off, it should be explicit about its reasoning and
about the probability-adjusted economic costs.�
stability?
�A CBDC could present a number of novel risks to financial stability, starting with the potential
single point of failure inherent in the design. Considering the Federal Reserve has no
expertise running anything on a blockchain, so would likely have to rely on partners chosen
by an inevitably politicized process, perhaps not choosing on merit, this risk is magnified.
Either way, that single point, as the backbone of the U.S. financial system, would become an
irresistible magnet — a “honeypot” — for hackers, including state-sponsored hackers,
seeking to steal money or assets, to steal or disrupt customer information, or to create
mayhem in one of America’s most critical industries.��Yet larger risks come from the potentially
privileged competitive threat that a CBDC would constitute to commercial banks, discussed in
answer #6.��
A CBDC raises serious concerns for the integrity of the financial sector. Because a CBDC
lacks default risk, one of the core risks in commercial banking, without careful and ongoing
design it could occasionally or permanently become inherently superior to a bank deposit.
This means that, absent constant efforts to keep CBDC’s unattractive to depositors in every
financial scenario — an effort that should not be taken for granted given changing political
dynamics — the CBDC could amount to a roundabout way to eliminate commercial banking.
This could, however unwittingly, effectively impose a state-run capital regime on the United
States, closer to what China, currently a prominent CBDC promoter, might impose.��Just as the
“public option” was intentionally promoted by some during debate over the Affordable Care
Act as an indirect way to wipe out private competition, a CBDC could stand as an existential
“public option” threat to private banking. Even were a CBDC initially designed to be
intentionally unattractive compared to bank deposits, the mere existence of this superior
standing alternative to commercial deposits could immediately change behavior among
commercial banks and their investors, dramatically reducing capital exposure, investments,
and time horizons in the banking sector. Historically, even the prospect of nationalization of
deposits has had an enormously disruptive effect long before the fact, and a CBDC may act
as a standing threat awaiting the right politician.��The paper grants that CBDC’s raise the risk
of a run from commercial bank deposits towards the CBDC. However, given this inherent
superiority, it is likely that were such a run to occur, the former depositors may be less willing
to return to banks. This could give a ratchet effect that gradually shifts deposits to the Federal
Reserve in every crisis, magnifying the perceived risk to commercial banks and their
investors.��It should be noted that this risk does not exist from private stablecoins, which do not
occupy a privileged risk profile given they are not a liability of the central bank.�
One possibility that avoids threatening commercial deposit banking is to render the code of
the CBDC unalterable. This would mitigate risk to commercial banking, assuming the CBDC
were initially designed to be unattractive to bank depositors. Of course, this inalterability could
likely make the CBDC vulnerable to increased hacking attacks, as well as hasten its
obsolescence. �A second risk discussed has been that of execution given the Federal
Reserve’s paltry expertise in blockchains. The most obvious solution is to use intermediaries
who do have that expertise. Of course, existing government agencies do try this, often with
mixed results. Moreover, to the extent intermediaries are used, it could negate some or all of
the alleged costs savings from using a CBDC in the first place. After all, if intermediaries are
used that approximate private—sector expertise, this will likely cost the Federal Reserve as
much or more than it costs those existing firms, while adding an additional layer of a
bureaucratic Federal Reserve on top. �
Paper cash remains popular, inter alia, for its ease of person-to-person use, for its privacy
features such as evading a domestic abuser, and for its last-resort insurance function such as
in a natural disaster. If CBDC’s accelerate the disappearance of cash, this may cause
enormous hardship to people who find themselves in such situations. Some people will
doubtless seek out other last-resort media, such as foreign currency or gold, but empirically
the vast majority probably will not. The Federal Reserve should thus make efforts to retain
wide enough usage of paper cash that it remains widely accepted. The efficacy and economic
impact of such efforts should be credibly estimated and included in a tally of the cost-benefits
of a CBDC.
CBDC?
In the absence of a CBDC, domestic and cross-border payments will likely continue improving
at a dramatic speed. Private service providers such as Apple Pay and Venmo have made
great strides in quality and price of service for domestic payments. Meanwhile, stablecoins
and cryptocurrencies such as Bitcoin are increasingly used for low-cost cross-border
payments, at prices approximating small fractions of a penny.��Indeed, a CBDC could put these
innovations at risk, effectively “occupying the field” and chasing out existing and future
private-sector providers. This risk comes at little benefit; the paper itself outlines several
sources of friction in cross-border payments, including “currency exchange, variations in
different countries’ legal regimes and technological infrastructure, time zone complications,
and coordination problems among intermediaries, including correspondent banks and
nonbank financial service providers.” Of these 5 sources of friction, a CBDC alone
meaningfully solves none of them compared to current methods. In contrast, a private
stablecoin or even Bitcoin, because they permit payments to bypass the traditional banking
system altogether, could substantially improve all of these five frictions but the time zone and
currency risk. Even currency risk can be mitigated by private stablecoins since many large
exporters also import, so they may actually want to keep substantial reserves in dollars, yet
CBDC’s remove this option if the payment must pass through traditional banks in each
country.�
Perhaps counterintuitively, if other countries issue CBDC’s while the US does not, it would
likely improve the dominance of the US dollar. The key mechanism is if those other countries
“occupy the field” for stablecoins in their own markets, they effectively reduce demand for
private stablecoins denominated in their own currency. If private sector stablecoins prove
more attractive to users than government-controlled versions, which we might expect given
competitive dynamics and less red tape, then each country that issues its own CBDC
effectively takes itself out of the running to be the standard currency used in the most popular
global payment mediums.��We might expect, then, that increased issuance of CBDCs by
foreign governments could actually reinforce today’s US dollar dominance of online
payments, reinforcing the network effect from exchange rates and ease as unit of account.
Indeed, this process is already quite advanced, as USD stablecoins dominate the industry
worldwide, while Chinese Yuan (CNY) denominated stablecoins are moribund. Perhaps the
greatest gift China could give the US dollar is to rigorously promote their own CBDC, hence
decimating private-sector CNY-denominated mediums.�
Beyond mitigating security and competition risks discussed in answer #7, mitigation of privacy
concerns could occur by licensing outside agencies to own that data. This would obviously
raise a number of issues, not only in choosing and monitoring such partners, but in whether
the Federal Reserve, as an agency of the federal government, has the power to even access
that information.��To mitigate the risk that CBDC’s “occupy the field,” and cripple existing
private stablecoins, in theory the Federal Reserve could consider granting legal tender or
other privileges to an existing private stablecoin to promote its wider use in domestic or
cross-border payments. This would obviously raise a number of fundamental risks, from
single point of failure to politicization of the process of selecting and managing of such a coin,
which suggest this is a bad idea.� �Another feature that could mitigate trust and security issues
surrounding a CBDC would be maintaining the code open-source. This is quite standard in
cryptocurrencies, indeed it is expected, and could increase consumer acceptance and
confidence in their ability to assess the hacking risk. Of course, keeping a CBDC, that is the
backbone of the financial system, open-source could potentially open it to increased hacking
risks in the first place, it could be untenable given military or law enforcement priorities, and at
any rate those risk trade-offs are likely to be poorly understood by the Federal Reserve given
its lack of expertise.�
Privacy would likely present an impossible challenge to a CBDC under our Constitution. The
paper asserts, correctly, that “Any CBDC would need to strike an appropriate balance
between safeguarding consumer privacy rights and affording the transparency necessary to
deter criminal activity.” This is likely impossible; because a CBDC would need to be unable to
facilitate illicit activity under the Bank Secrecy Act, it would necessarily need information on
individuals. While Banks are able to collect this information, in many cases a government
agency may not be. Further, this information, once deposited in government possession, may
lack important judicial safeguards to misuse. Finally, it is not credible to assume that
information collection will be minimal; given the one-size-fits-all design of a CBDC, it may
require as much information from all users as it does from the most extreme users —
suspected terrorists, say. Beyond privacy concerns, such a honeypot of centralized personal
information would be an astoundingly attractive hacking target, almost guaranteeing on a long
enough timeline that it will indeed be hacked. Such a risk, and the likely economic
consequences to potentially hundreds of millions of Americans, must be credibly quantified in
any responsible cost-benefit analysis of a CBDC.��
Cryptocurrencies have been targets of hackers since their inception due to their novel
architecture and the possibility of anonymous receipt of hacking proceeds, particularly in early
coins. These attacks sometimes target the assets themselves, they sometimes aim to cripple
the blockchain instead, and where anti-money laundering (AML) and know your customer
(KYC) data is collected, such as exchanges, hackers also focus on stealing information. �As a
result of this, there is today a well-trained and global veritable army of hackers who the
Federal Reserve will almost certainly be unable to match. It will thus likely need to rely on
outside contractors or private-sector partnering organizations. This would not only attenuate
putative cost savings, it could raise management and legal questions, as well as further
expose the Federal Reserve to outside political pressure. A CBDC could be a uniquely
attractive honeypot defended by a uniquely incompetent and politically compromised guard.��
A CBDC should not be legal tender because the risks outlined above suggest it should touch
as few important parts of the financial system as possible. Ideally, to the extent that a CBDC
is explored as an academic exercise, it should remain an experimental “sandbox” where no
important transactions occur. �One interesting idea is to use the “dual legal tender” model
implemented last year in El Salvador, in that case designating both the US dollar and Bitcoin
as legal tender. Of course, Bitcoin does not enjoy the default privilege that a CBDC might, so
it avoids the existential threats to deposit banking discussed. Still, such a model could
theoretically be used to designate an existing private stablecoin as dual tender, which is
briefly discussed, and rejected, in answer #11.�
No, because paying interest on CBDC’s magnifies the risk of draining deposits from
commercial banks, which risks effectively nationalizing both retail banking and the nation’s
private savings. If such were to occur, the Federal Reserve would likely become subject to
perhaps overwhelming political pressure to then deploy these government-controlled savings
towards pet projects or simply towards funding federal deficits, which creates moral hazard
for Congress and the executive to increase spending. In effect, private savings could become
a piggy-bank for federal spending.
Yes, individual holdings of CBDCs should be limited. Without that limit, a CBDC could amount
to an unlegislated arbitrary increase in the current deposit insurance limits. This would further
increase the competitive risk CBDC’s pose to commercial bank deposits, further draining
private savings towards Federal Reserve control.
Given the core functions of intermediaries include managing customer information and
onboarding and serving accounts, commercial banks are the obvious choice. Of course,
because a CBDC threatens to obsolesce their core business, good-faith cooperation cannot
be assumed and the banks may need substantial oversight, subject to gaming. Noting that
commercial banks employ very smart people, this gaming may evolve in ways the Federal
Reserve is unable to predict. Beyond monitoring, this process should ideally reduce
AML/KYC and other regulatory burdens to address the very transaction and administrative
costs raised in the paper as justification for considering CBDC’s. �Finally, assuming a
transition would be gradual in order to minimize market and industry disruption, the process of
introduction would itself have to be tightly monitored for unexpected behavior by depositors,
and for unexpected counter-measures by the very banking partners presumably relied upon
to manage the new competing CBDC. In short, it seems very likely that this process will yield
one or more crises for the Federal Reserve and for the financial industry.�
It is always better for a money to have “offline” capabilities, but in the case of a CBDC this
would likely have to be in the form of physical tokens, either sold directly by the Federal
Reserve or via intermediaries. Such physical representations are not a common practice with
existing cryptocurrencies, whether stablecoins or traditional crypto, so there is probably little
demand for it, assuming some form of physical cash remains in wide usage, about which
please see answer #8.
sale? If so, how?
No, a CBDC should not be designed specifically for point of sale. Existing private-sector
payment systems are established, widespread, and well-run, including ApplePay, Venmo, or
the Strike app for Bitcoin Lightning payments. The Federal Reserve has no experience
designing and operating such systems and apps, so it should rely on such partners to design
and market payment systems, just as they do today with fundamentally hard-to-use tokens
such as Bitcoin or federal reserve notes.
Cryptocurrencies today, including stablecoins, run on a wide variety of platforms, sometimes

accessing multiple platforms to achieve a transaction. This can happen at low cost and
seamlessly to the customer, because substantial engineering resources have been deployed,
including generation and propagation of novel programming languages and innovative tools
such as Lightning Network. The good news is that a CBDC, however poorly designed from a
technical perspective, would likely benefit from this infrastructure and knowhow so as to be
transferable across multiple platforms easily and cheaply. The bad news is that regulatory
constraints may be higher with a CBDC than they are with normal cryptocurrencies or
stablecoins, such that this existing infrastructure could be unable to experiment and tweak
interfaces, rendering a CBDC at a critical, and self-inflicted, disadvantage. In theory, the
Federal Reserve or some other agency could make up the gap, expending resources to
achieve similar ease and costs as the private sector would, but in practice this seem unlikely
given expertise and legal constraints ranging from inability to tolerate illicit usage to legal
constraints on gathering personal information as a government agency.
CBDC?
The cryptocurrency space is moving very fast — it’s a challenge even for experts to keep up
with new technologies, even new words. Therefore, it is almost certain that a CBDC will be
obsolete before it is even released. This means that design choices should be extraordinarily
simple, indeed humble, and not aim to add too many features. The model here is Bitcoin,
which despite a very simple design has endured for 13 years by relying on outside partners,
such as wallet or Lightning developers, to keep the product useful, while remaining as simple
as possible and also remaining robust to outside attack.
benefits of a CBDC?
An important mechanism used in the cryptocurrency community is open code architecture —

every aspect of the code must be transparent and easily visible to anybody in the world. This
allows thousands of professionals and amateur coders to easily police the code, and it is
critical to maintaining trust in the currency. If a CBDC is to be trusted to the degree it
competes with both bank deposits and with existing stablecoins and cryptocurrencies, it
should ideally have an open-source design that enables stakeholders to see what’s
happening to their money, and to assess any risks. This openness obviously presents
potential conflicts with national security or law enforcement priorities, which may ultimately
render the CBDC a doomed concept given the poor market survivability of closed-source
coins and their dramatically reduced public acceptance.��A final important design point: a key
debate within cryptocurrencies has been the trade-off between adding features and
increasing attack surface. There is a broad recognition that simpler code, hence simpler
features, reduces the opportunity for potential hackers, while more complexity inevitably
equals more attacks. Given that, on a long enough timeline, some percent of those attacks
will succeed, and given the exponentially greater attractiveness of hacking a CBDC, both for
private hackers and state-sponsored hackers, this wisdom should not be lost in the design
stage of a CBDC. Indeed, given those stakes, a very strong starting assumption should be to
keep the code as simple as possible.�
_________________________________________________________________________
Electronic Transactions Association
Industry
Trade Organization
Country
State
Email
stalbott@electran.org
�The payments industry is innovative, dynamic, and competitive, focused on delivering cutting
edge products with robust security measures to help consumers connect with merchants,
make payments, and move money. Consumers have numerous cost-effective products
available for payments, including credit and debit cards, mobile wallets, and ACH payments,
among others. The industry continues to innovate, particularly in the area of real-time
payments, where the private sector has introduced faster, real-time bank settlement services,
and the card networks have developed new push-to-card services. In addition, ETA members
are working with the Federal Reserve on FedNow Instant Payments, which will provide
instant payments once it is complete.��The Federal Reserve’s paper identifies many of the key
benefits, policy considerations, and risks presented by the potential adoption of a CBDC. As
discussed throughout these comments, the most critical factor is for the Federal Reserve to
design a system that (a) continues to leverage private industry and supports interoperability in
order to ensure broad adoption, innovation, and efficiency for users, and (b) protects user
privacy while balancing the need to combat money laundering and other similar risks. In
support of these broad goals, key considerations of a CBDC should include “(i) continued
access to central bank money, (ii) resilience, (iii) increased payments diversity, (iv)
encouraging financial inclusion, (v) improving cross-border payments (vi) supporting privacy
and (vii) facilitating fiscal transfers.”
As the Federal Reserve moves forward with exploring a CBDC, ETA encourages the Federal
Reserve to consider carefully potential downside risks along with the potential benefits,
particularly given that the adoption of a CBDC would have a dramatic impact on the U.S.
financial infrastructure and broader economy. �Most proposals envision CBDC to be a direct
substitute for cash using the same underlying technology as cryptocurrency. While all
electronic payments are cash substitutes to some degree, a CBDC would be issued,
maintained, and settled by the Federal Reserve. The CBDC would be transacted P2P, but
since it lacks physical form, the transfer would be recorded to a digital ledger (possibly using
blockchain technology). �Regardless of its final design, the adoption of a CBDC would have a
profound impact on the U.S. economy and the existing financial infrastructure. In light of this,
ETA believes there is a common set of principles against which any proposed CBDC should
be measured. As the federal government assesses a potential CBDC, it should carefully
consider these principles and ensure that any proposal best serves the needs of consumers,
furthers financial inclusion, preserves and strengthens the financial system, and ensures that
consumers continue to have access to a robust and innovative array of secure banking and
payment options.�If the Federal Reserve decides to move forward with a CBDC, ETA submits
that the only way to achieve the potential benefits of a CBDC are by designing a system that
supports the concepts set forth in ETA’s Principles. The ultimate design of a CBDC will have
a significant impact on the extent to which it provides additional benefits for consumers and
businesses. On one extreme, the Federal Reserve could adopt a model in which it is
interfaces with end-users. ETA and its members do not support this approach because it
would place the Federal Reserve in the difficult (if not untenable) position of operating the
entire system, would limit the potential for future innovation, and would disintermediate the
existing financial sector in a way that would ultimately harm consumers. The better approach,
in ETA’s view, is an intermediated solution—again, if the Federal Reserve ever issues any
CBDC at all—where the CBDC represents a direct claim on the central bank, but onboarding
and real-time payment services would continue to be operated by private intermediaries (e.g.,
banks and fintechs,) through the two-tier model similar to how it is done today. An
intermediated approach would allow the Federal Reserve to leverage existing payment
infrastructures and the ongoing private innovation, while also minimizing operational risk for
the Federal Reserve.
inclusion?
As policymakers and the Federal Reserve consider implementing a CBDC, ETA supports a
CBDC that advances these 7 guiding principles:�1.�Innovation: Continual investment in
innovation is at the heart of past, present, and future improvements to the financial ecosystem
— enabling new capabilities, strengthening cybersecurity and consumer protection,
increasing efficiencies, and expanding access to financial services. Any public sector
engagement with the financial sector, including the deployment of a CBDC, should serve as a
catalyst and a platform for continued innovation.��2.�The Right Tool for the Job: Policymakers
should compare the suitability of a CBDC with existing systems and other ongoing
improvements to payments infrastructure — such as real-time payments systems — to find
the approach that best fits their country’s transactions needs.��3.�Private Sector Participation:
Expanded financial inclusion, ongoing payments innovation, and the efficiency of national and
international payment flows all depend on vibrant private sector competition in payments. A
CBDC should seek to preserve those functions and minimize effects on the broader financial
system through a two-tiered ecosystem that includes the private sector in its design, piloting,
and distribution.��4.�Interoperability: Any CBDC would be introduced into an established, robust,
well-functioning payments ecosystem. Ensuring interoperability between a CBDC and other
forms of national and international payments systems is necessary to avoid weakening
existing mechanisms and harming consumers and businesses. Any CBDC must be able to
interoperate seamlessly across the existing landscape.��5.�Open Acceptance: Consumers will
be more likely to adopt a CBDC if it can be used on existing acceptance infrastructure and is
supported by known and identifiable payment methods (e.g., in-person and online) that are
linked to the user’s existing devices and accounts. To be useful to consumers, any CBDC
would need to take advantage of existing acceptance networks and acceptance infrastructure
to allow any merchant that accepts cards to also accept the CBDC.��6.�Consumer Protection: A
CBDC should require a framework of standards and rules that safeguards the privacy and
security of every transaction, protects consumers’ interests, and gives consumers the
confidence necessary for in-person and online transactions. It should also ensure that
consumers understand those protections and how they may differ from those offered by other
payment methods.��7.�Regulation Tailored to the Risk Profile of the Participant: Entities
engaging with a CBDC should be subject to regulation that is tailored to the activities and
risks that they pose due to their position in the payments ecosystem. Appropriate regulation
should consider potential harm to consumers as well as safety, soundness, and financial
stability risks.�If the Federal Reserve decides to move forward with a CBDC, one of the
underlying themes of these principles is the need for a clear regulatory framework that
facilitates the modern payments infrastructure in administering CBDCs in a way that protect
consumers and drives economic benefits.��ETA’s members support the goal of providing
universal financial inclusion. In this regard, the payments industry continues to advance the
global flow of commerce while delivering affordable financial tools and services that meet the
needs of underserved consumers. A goal of ETA member companies is to continually
enhance the electronic payments and financial ecosystem so that it is accessible for all
consumers, while ensuring that their transactions can be completed securely, efficiently, and
ubiquitously. The payments industry continues to innovate in this area, whether through the
development of prepaid cards, buy-now-pay-later, or other technologies, like cryptocurrency
and stablecoins. �In order for a CBDC to further financial inclusion, the following should be
taken into account: �•�The CBDC should support the two-tiered payment system, which can
support broad adoption through enrollment and education on CBDC.�•�The CBDC should
support interoperability, including with existing domestic and international payment
instruments like bank transfers, payment cards, and other similar technologies. �•�The CBDC
should protect privacy to the greatest extent possible to encourage broad use and adoption. �
The Private Sector is Best Positioned to Administer CBDCs Consistent with Existing Market
Structures��If the Federal Reserve moves forward with a CBDC, the program should be
structured to model after the existing intermediated system, and designed to take into account
the expertise and input of the private sector. This is one of the key design requirements given
that central banks generally lack experience in implementing and administering the various
day-to-day functions required for a nationwide retail payments service. In the case of a CBDC
operated exclusively by a central bank, the central bank would be required to maintain and
update all aspects of the payments and banking system. Accordingly, in ETA’s view, the
potential benefits of a CBDC can only be realized through an intermediated model that
includes the private sector in its design, piloting, and distribution. �With an intermediated
model, the private sector would take the lead in providing consumers and businesses with
access to the CBDC, whether through digital wallets or other technologies. In this model,
consumers would access their CBDC at a bank or fintech, likely through a digital wallet-type
service. One of the key benefits of this model is that it does not require the central bank to
provide retail banking services. As recognized by the Bank for International Settlements, a
“natural split in any tiered CBDC system would be for the central bank to be responsible for
the core of the system to the extent that they could steer the system to deliver policy goals
and a safe and efficient payment system. Multiple private entities would then act as
intermediaries, competing and offering choice within an ecosystem to drive innovation and
efficiency.” �This approach makes economic and practical sense because the private sector is
in the best position to manage the various functions necessary to administer CBDCs – ETA’s
members, for example, already facilitate the provision of numerous safe, innovative, and
convenient payments products and services. The payments industry has decades of
experience in managing functions such as anti-money laundering compliance, customer
service, dispute resolution, privacy protection, cybersecurity, and the deployment and
updating of technology on a regular basis. If a CBDC is adopted, the private sector has the
tools, experience and proved track record needed to assist consumers in accessing, using,
and transferring funds in a safe and reliable way. �
stability?
A significant policy risk involving the adoption of CBDCs is the potential negative impact on
bank lending and credit availability. Under the current two-tiered banking model, banks hold
deposits for depositors, but are not required to maintain the entire amount of the deposit on
hand. This system of fractional reserve banking provides borrowers with access to safe,
low-cost deposit services, while also allowing banks to increase their ability to lend funds to
consumers and businesses. The implementation of a CBDC could negatively impact the
fractional reserve banking system and the corresponding benefits, particularly if the CBDC is
designed in a way that encourages the move of bank deposits to the Federal Reserve. This
would reduce access to credit and have a substantial impact on the U.S. economy and
monetary policy. �Similarly, a Federal Reserve CBDC could allow consumers to make
equivalent electronic transactions without the need for a bank account. Banks would need to
offer higher interest rates and improved services to induce consumers to deposit their funds
rather than leaving them in the form of CBDC. In this respect, a CBDC could lead to volatility
in deposits or even a long-term reduction in deposits, which, in turn, would likely negatively
impact bank lending the provision of financial services. �Finally, it is important that any CBDC
be designed with resiliency as a key characteristic. To be successful, a CBDC must
guarantee the availability and usability of funds. One of the reasons the current payments
system has been so successful is that private industry offers consumers multiple safe and
efficient payments options. A key way to ensure resiliency is for any CBDC to work as an
intermediated system and leverage private industry, including by supporting interoperability
between a CBDC and other forms of national and international payments. �
A poorly designed CBDC might adversely affect the financial sector in a number of ways, all
of which would ultimately have a negative impact on consumers and businesses that rely on
having access to safe, efficient, and innovative financial services. As a starting point, any
CBDC that does not include private sector participation risks losing the innovation that is
critical to ensuring improvements to the financial ecosystem. In addition, while stablecoins
and certain other private developments have been designed with interoperability and the
private sector in mind, a CBDC that shuts out the legacy private sector would negatively
impact a core aspect of the U.S. economy, with the potential for significant disruption. �And, as
noted, the adoption of a CBDC could negatively impact the fractional reserve banking system
and the corresponding benefits, particularly if the CBDC is designed in a way that encourages
the move of bank deposits to the Federal Reserve. This would reduce access to credit and
have a substantial impact on the U.S. economy and monetary policy.�
The best– way to mitigate any adverse impact of CBDC on the financial sector is for the
Federal Reserve to design a system that includes the private sector in its design, piloting, and
distribution. This approach is also the only approach that has a realistic chance of achieving
the numerous potential benefits offered by CBDC.
Each year, ETA members make global commerce possible by processing more than $27.5
trillion in purchases and P2P transfers worldwide through the deployment of innovative
payment products and services. In the U.S. alone, in 2021, consumers and businesses spent
$8.2 trillion in card volume and at least $1 trillion was moved over the largest P2P networks.
The infrastructure supporting this system is sophisticated, secure, and fast — processing over
270,000 transactions per minute. The electronic payments system is also reliable — it
operates 24/7/365, in the U.S. and around the globe, without interruption. And ETA members
are not slowing down; the industry is constantly investing and innovating, creating new
financial services and payments products that benefit individuals and small businesses
alike.�Accordingly, consistent with the CBDC Report, ETA has long advocated for a federal
approach to a CBDC that takes into account potential benefits of the technology while also
minimizing any negative or unintended consequences. To this end, ETA has previously
published “7 Guiding Principles for CBDC” against which any proposed CBDC should be
measured. As the Federal Reserve assesses a potential CBDC it should, consistent with
these principles, ensure that any proposal best serves the needs of consumers, furthers
financial inclusion, preserves and strengthens the financial system, and ensures that
consumers continue to have access to a robust and innovative array of secure banking and
payment options. �As explained in our Principles, if the Federal Reserve determines that the
benefits of a CBDC outweigh the risks, then ETA strongly encourages the adoption of an
“intermediated model,” in which the private sector takes the lead in providing the public with
digital wallets or other technologies that are used to manage the holding and use of CBDCs.
As part of any further consideration of a CBDC, the Federal Reserve should continue to
coordinate with public and private stakeholders to address the practical and legal feasibility of
implementing a CBDC, and how the adoption of different CBDC design choices might impact
operating performance and key policy and economic considerations�
CBDC?
The payments industry has and will continue to drive innovation in the absence of a U.S.
CBDC. The payments industry is innovative, dynamic, and competitive, focused on delivering
cutting edge products with robust security measures to help consumers connect with
merchants, make payments, and move money, including via credit and debit cards, mobile
wallets, ACH payments, and even cryptocurrencies. The industry continues to innovate,
particularly in the area of real-time payments, where the private sector has introduced faster,
real-time bank settlement services, peer-to-peer payments, and the card networks have
developed new push-to-card services. Further, with or without a CBDC, the private industry
continues to develop and explore use cases for private stablecoins, which offer some of the
same potential benefits as a CBDC. �Many of these services are evolving to operate even
more efficiently at the cross-border level, and new technologies are being tested and
developed that may further facilitate efficient cross-border transactions, such as stablecoins
and cryptocurrencies. In this regard, however, cross-border transactions are naturally more
complex. Some of these challenges would apply to a U.S. CBDC in that it would need to be
designed for interoperability with other CBDC systems. �
If the Federal Reserve decides to move forward with a CBDC, the Federal Reserve should
implement a framework of standards and rules that safeguards the privacy and security of
every transaction, protects consumers’ interests, and gives consumers the confidence
necessary for in-person and online transactions. It should also ensure that consumers
understand those protections and how they may differ from those offered by other payment
methods. If the Federal Reserve moves forward with a CBDC, the centralized approach (as
opposed to an intermediary-focused approach) presents a greater risk of potential
surveillance, leading to abuse of user privacy interests. �One of the benefits of a CBDC that
incorporates the private sector is that the financial industry has significant experience in
protecting user privacy while also combatting fraud and other illicit activity. The financial
sector has spent years implementing policies, procedures, and safeguards to protect user
privacy pursuant to various federal, state, and international laws, including, for example, the
Gramm-Leach-Bliley Act, the California Consumer Privacy Act, and the European Union’s
General Data Protection Regulation, among others. At the same time, the financial sector is
on the front lines battling fraud, terrorist financing, and other illegal financial activity through
the implementation of due diligence, monitoring, and reporting systems. While the payments
industry is subject to various legal requirements, such as those under the Bank Secrecy Act,
the industry has voluntarily implemented numerous additional tools and safeguards to combat
potential fraudulent financial transactions. �With the benefit of decades of expertise, ETA
members have developed effective due diligence programs to prevent fraudulent actors from
accessing payment systems, monitor the use of those systems, and terminate access for
network participants that engage in fraud. Working with its members and industry and
government stakeholders, ETA has published various guidelines that provide underwriting
and diligence best practices for merchant and risk underwriting, including the “Guidelines on
Merchant and ISO Underwriting and Risk Monitoring” and “Payment Facilitator Guidelines.”
These documents provide industry with underwriting and diligence guidance, including
information on anti-fraud tools, security, and related issues.�For example, when it comes to
card data protection, the payments industry took the lead in developing the Payment Card
Industry Data Security Standard (“PCI-DSS”) for handling the safety of cardholder data. The
PCI-DSS sets forth requirements designed to ensure companies that process, store, or
transmit credit card information maintain a secure environment for such data. In addition, the
PCI-DSS establishes a framework for implementation of the data security standards, such as
assessment and scanning qualifications for covered entities, self-assessment questionnaires,
training and education, and product certification programs.�And, of course, the payments
industry continues to refine tools for monitoring and analyzing payment data for suspicious
activity. With improvements in machine learning and artificial intelligence, payments
companies are gaining additional tools for identifying suspicious patterns in transaction data.
These are just some of the tools that the payments industry has developed in recent years to
fight fraud, protect consumers, and ensure the integrity of the payments ecosystem. These
efforts have been remarkably successful in reducing fraud while ensuring that consumers
have access to fast, reliable, and safe payment options.�
If the Federal Reserve decides it is necessary to implement a CBDC, ETA encourages a

two-tiered system that relies on banks, and fintechs, to serve as intermediaries with the
primary responsibility for interfacing with consumers and businesses that use the CBDC. �In
line with the Federal Reserve’s expressed views, ETA agrees that any regulations for fintechs
that are given access to serve as an intermediary of a potential CBDC should be tailored to
the activities and risks that they pose and be evaluated on their risk management and
operational capabilities, including a standard set of core protections and requirements such
as considering potential harm to consumers as well as safety, soundness, and financial
stability risks in the ecosystem. Furthermore, the Federal Reserve should provide on-going
oversight to ensure risk profiles have not changed materially, and risk management
structures, and operational capabilities remain adequate. For additional guidance, please
refer to ETA’s comments submitted in Docket No. OP-1747, “Guidelines for Evaluating
Account and Services Requests.”�
sale? If so, how?
If the Federal Reserve decides to move forward with a retail CBDC, the CBDC should be
designed to work efficiently at the point of sale. The key to the successful implementation of a
CBDC is ensuring interoperability, which will facilitate broad adoption, coordination with
existing and alternative payment methods, and ensure the potential for future innovation.
Without interoperability and coordination with legacy systems (or future non-CBDC systems
that may be implemented), there is a risk of both low adoption and fragmentation between
various closed loop systems, all of which would negatively impact user acceptance and
system viability.
CBDC?
benefits of a CBDC?
_________________________________________________________________________
ISO/TC 68/AG 2 - Standards Advisory Group
Industry
Other: International Organization for Standardization
Country
Switzerland
State
Email
matteo.accornero@ecb.europa.eu
The ISO/TC 68 Standards Advisory Group will not provide a response to this question.
inclusion?
stability?
CBDC?
sale? If so, how?
The response is submitted by the Standards Advisory Group (SAG) of Technical Committee
68 (TC 68) of the International Organization for Standardization (ISO). The SAG as a
subgroup of TC 68 (TC68/AG2) acts as an advisory sounding board to support and engage
with regulators on financial services standards requirements, for the effective and efficient
use and development of financial services standards, delivered using a cooperative
relationship approach. In this context, the response will concentrate on the technical
standards that can be leveraged for CBDCs.�There are several technical standards of ISO/TC
68 that can be leveraged for CBDCs as the consistent use of standards is the foundation of
achieving transferability across multiple payment platforms. First, is a standard that has been
in place for some time and is used widely for the identification of fiat currencies. This is the
ISO 4217 standard. This standard has been examined by ISO/TC 68 subject matter experts
with the conclusion that the ISO 4217 standard is fit for purpose for the identification of both
conventional and digital forms of fiat currencies.�Another standard to be leveraged for CBDC
is ISO 17442, the Legal Entity Identifier (LEI), which could be used for the identification of
counterparties in CBDC transactions and to identify holders of CBDC. The LEI the only global
standard for legal entity identification with the identifier connecting to key reference
information that enables clear and unique identification of legal entities participating in
financial transactions and related activities. LEIs data records contain information about an
entity’s ownership structure and thus answers the questions of 'who is who’ and ‘who owns
whom’. Further benefit can be derived from data that accompanies a LEI record which can be
automatically retrieved or verified at no charge from the Global LEI System. �The central
banks will decide which use cases are possible for their CBDC. In case If consumers of the
country involved (or of other countries) are allowed to use the CBDC, the LEI of the issuing
central bank will contribute to further consumer protection (and fraud prevention).�Finally,
there are financial messaging standards used in payments and credit and debit card
transactions.�First, the suite of ISO 20022 standard financial messages for payments and card
transactions is very comprehensive. There is the ability for additional messages to be
created, is required, using the ISO 20022 development and governance processes, to
support any specific needs for CBDCs.�Second, the ISO 8583: 2003 Financial transaction card
originated messages standard support that all ISO 4217 Currency Codes are included in
these messages. If central banks would encourage use cases that their CBDCs (central bank
money) and commercial bank money are both used in card messages a further review of the
standards is would be required.
CBDC?
standards that can be leveraged for CBDCs.�Use of standard identifiers for currency codes
(ISO 4217) and for legal entity identifiers (ISO 17442) are technology agnostic and can
continue to be leveraged with future technological innovations.�The concept of the ISO 20022
is based upon defining a business model to capture the interactions of the
actors/counterparties and information needed to execute specific activities, such as
instructions for CBDC payment or card transactions. As technologies innovate and change,
the business model can be leveraged when implementing to support new technologies used
in financial messaging.�If central banks would encourage use cases that their CBDCs (central
bank money) and commercial bank money are both used in card messages a further review
of the ISO 8583 standard in relation to the ISO 4217 standard is required.
benefits of a CBDC?
standards that can be leveraged for CBDCs.�Given that often firms operate in multiple
jurisdictions and also are connected to more than one RTGS, use of common technical
standards in the CBDC space will allow firms that operate in multiple jurisdictions and/or trade
in multiple currencies (including CBDCs), as well as technology providers (as developers of
RTGS systems), to avoid the complexities that would exist if different standards are used.�In
case Central Banks would encourage that their CBDCs to be used for the payments leg of
securities transactions with financial instruments based on the ISO 6166: 2021 ISIN standard
(wholesale and/or retail), a further review of the design is business process would be
required.
_________________________________________________________________________
Industry
Country
State
New York
Email
Potential Benefits�•�Increased cash flow within the domestic markets makes the US equally or
more competitive on the world markets�•�A tangential benefit may be in the court of public
opinion - as more and more consumers commit their finances to unsecured nonbank
denominations the risk to the general populace grows each day. If an event occurs that
impacts these private organizations some may hold/view the federal government accountable
for not engaging to offer some level of protection for its citizens.�Policy
Considerations�•�Detailed specifics for contingency plans to mitigate the risks of disruption to
operations - this leads to fallback plans based on more mature payment rails solutions in the
event of unforeseen circumstances.�Risks�•�Currency value manipulation could be exposed to a
new set of risks due to the increased speed of payment processing - this includes influence
from other countries for nefarious purposes.�•�Attempts at centralization could have negative
perceptions in light of what is viewed as a decentralization technology development.�•�Any
implementation would rely on the underpinnings of a blockchain technology - Different
blockchains exist and these are further modified by vendor specific blockchain forks and units
- these are maintained without a unified standards body spanning open source and private
sectors - so any implementation would need a foundation and this foundation must be
supported, maintained and standardized for the long term - whichever is chosen.
Thinking outside of the box, the passing of regulations that requires either FDIC insurance or
central bank managed digital deposits for all nonbank cryptocurrencies could achieve
something similar - this may essentially convert many private service providers to a form of
digital commercial banks.�Perhaps the biggest inherent risk in cryptocurrency is price volatility.
Stablecoins were created to address this concern and are centralized, pegging themselves to
fiat currency or commodities. However, stablecoins are privately controlled and are not
currently regulated to the level we are comfortable and currently accustomed. The creation of
a CBDC could possibly offer similar benefits to stablecoins but allow for greater control and
oversight.�A Federal Reserve CBDC should provide arbitrage opportunities vs. US Dollar
(Commercial Bank, Notes), adding stability to the Digital Currency. Because Commercial
bank, Notes and CBDC are all backed by the same credit (Fed) they should trade in tandem.
inclusion?
In some respects, yes - if the consumer model provides the flexibility for inclusion that is
offered by paycards, etc.– it may have a positive effect.�However, access to digital products
requires wide ranging internet access for networks and devices - so any progression to digital
and proposed benefits could also have negative connotations for lower income segments of
the population. There could be a perception that these investments isolate these groups due
to limited internet access, so coupling this with supporting programs for public internet
accessibility may be a required additional commitment and expense.
Our organization cannot comment on this at this time.

stability?
A CBDC has the potential in providing greater financial stability in a myriad of ways: faster
transaction settlements, allowing users to potentially utilize the central bank directly (avoiding
commercial bank fees and risk), real-time rate changes, real-time tax, and a central bank
digital ledger will likely help prevent banking fraud and illicit transactions. Our organization is
especially proud of our strong commitment to financial controls and fraud prevention – and we
would like to see an equivalent level of criminal activity suppression integrated into any
central bank digital currency utilization.
The greatest adverse effects posed by the creation of a CBDC would likely be seen at the
conventional banking level. As consumers shift from their dependency on conventional bank
accounts and payment processors to acquiring digital wallets, it has been implied that
connectivity may be provided directly between consumers and the Federal Reserve. This
structure change would diminish the amount of money financial institutions would receive
through deposits – which would then in turn limit the amount they could loan out – which
could possibly cascade into hurting small businesses, which we support.�Enhanced
disintermediation risk or “flight to quality” risk - out of Commercial Bank money to CBDC,
could lead to an economic crisis. The ripple effects of these systemic changes could have
broad ramifications, not just to the financial sector, but to the entire economy.
A further decline in cash usage has no bearing on the creation of central bank money for the
general public. Currently, 97% of the money in circulation today is handled digitally through
online checking deposits – yet our treasury still prints currency. Multiple rails for servicing
payments can co-exist and offer greater flexibility for the general public. Also, there should be
considerations that the use of cash provides a significant option for non-banked individuals
and areas of limited connectivity or POS access.
CBDC?
FedNow, SWIFT advancements, and private sector innovations would still likely continue
being developed. Decentralized finance and cryptocurrency projects would also likely
continue – as well as partnerships and/or acquisitions between conventional financial
systems and newer blockchain projects. The most prevalent examples are Ripple and the
potential impact on the use of SWIFT - which could help to facilitate large commercial
transactions across borders, especially as more countries develop their own CBDC’s.
As you are aware, the majority of global central banks are either exploring or actively creating
their own central bank digital currencies. The preeminent risk in not pursuing a US CBDC is
the opportunity this may provide other nations to supplant the US dollar as the world’s reserve
currency. A tangential risk also arises from the US falling behind in the global exchange in the
form of a negative impact on the balance of trade.
CBDC’s may provide privacy to consumers by allowing the use of non-custodial wallets
(users holding their own private keys) while simultaneously subjecting the wallets to similar
KYC/AML requirements found in conventional financial institutions today (eg:
recording/reporting sizeable and/or suspicious transactions, etc.). The most important aspect
will be transparency and disclosure of these privacy considerations making consumers aware
of what data is and is not collected and how it will be used.�Our organization is especially
proud of our strong commitment to financial controls and fraud prevention – and if a US
CBDC is ever implemented, we look forward to assisting any way we can in creating and
fostering an equivalent level of criminal activity suppression.
CBDC’s are of course centralized and are therefore subject to attacks and manipulation –
however, so is our current financial system. As mentioned in question #18, there a variety of
cyber defenses (inherent to the blockchain or how the physical network is created) that
should help prevent any cyber-related failure.�Additionally, our current financial system has
consumer protections in place to assure the American public that their assets are safe (FDIC,
NCUA, SIPC, etc.). Similar consumer protections for a central bank digital currency would
help foster adoption and safeguard users from liabilities they are not responsible for. The
platform should have at least an equal level of safeguards with very particular focus on an
isolated network with connectivity controls to restrict any access from unauthorized parties or
actors. Strict auditing must be a required for any institutions with connected access due to
these being the only points of vulnerability in an isolated network.
One of the risks employers face when paying employees in digital assets is wages must be
paid in “cash or negotiable instrument payable at par”. Stablecoins address some of the
concerns with this requirement, but some states specifically require wages to be paid in US
dollars.�For a CBDC to be seamlessly integrated within all facets of our current financial
system and regulatory framework, it is imperative for it to be considered legal tender.
Setting quantity limits would greatly diminish the utility of the currency. As a large payroll
provider, our client’s range in overall size – and setting quantity limits or thresholds may
unjustly prohibit many of our clients from being able to select a CBDC as an option for direct
deposit.�In a pilot or introductory stage, a quantity limit may be leveraged, but we recommend
removing any barriers to entry once a CBDC has been fully created. Additional auditing
measures should be implemented for large CBDC holders to ensure the balance of holdings
is not unfairly held or manipulated.
When examining how the financial system currently works, a CBDC could theoretically
operate the same way. Commercial banks and credit unions are required to be chartered in
order to have an account with the Federal Reserve, which they use to deposit reserves. Any
CBDC intermediary could be required to have a similar account and hold similar reserves for
operational risk purposes. There is also the consideration for FDIC and backing these as
ensured transactions for any participating institutions acting as these intermediaries thus
raising the consumer confidence for adoption.
At the system level, providing “offline” functionality is intriguing, however that could present its
own host of concerns – eg: properly authenticating transactions. Network stability and
resilience are key, though. Creating a balance between inherent protocols within the CBDC
(eg: Byzantine Fault Tolerance) and robust hard infrastructure (eg: several physical locations
which can continue operations in the event one or multiple other locations go down) would
still provide many of the benefits of an “offline” system.�At an individual user level, “offline”
capabilities are already widely-used today with cryptocurrency cold storage wallets,
sidechains, and in many multi-signature transactions – and theoretically, a CBDC could be
crafted with all those applications in mind, too. Using personal CBDC storage as an example
– an offline version could safely store private keys (where transactions would be signed),
while an online version containing public keys may be shared when dealing with others. By
bifurcating the authentication, the individual transactions are more secure. Properly educating
the public on this process will be very important, though. Many novice cryptocurrency users
already commonly believe using cryptocurrency hardware wallets physically moves their
assets to their hardware wallet – when really it is just their private keys pointing to their assets
stored on the blockchain itself.
sale? If so, how?
Yes, many of the widely-used innovations found within current merchant services and point of
sale solutions could theoretically be adapted for usage with a CBDC. QR codes, NFC
technology, etc.�A CBDC would also provide a more inclusive retail market by allowing the
non-banked public an easier way to purchase items and non-banked businesses to more
easily perform retail transactions.�Government assistance programs (like EBT) would also
likely be easier to support.�One obvious concern with forcing an integration of a CBDC at
point-of-sale is where the expense will be levied. Upgrading technology is often expensive,
and we fear that without some financial assistance or incentive – a forced usage or
acceptance could negate many of the desired effects.
Yes, interoperability and integration across multiple payment platforms is important. From a
user standpoint, private key security and management is also directly correlated to facilitating
transfers properly. The public will need to be properly educated on how to use this new
payment system properly and greater accountability will need to be placed on the individual
for transactions. An open standard should be ratified and widely adopted to avoid
fragmentation and promote an environment of equal and fair competition for payment
platforms.
CBDC?
It is hard to predict what the future holds in store for our country, however a CBDC should be
resilient enough to adapt or “upgrade” as our needs change. Using cryptocurrency as an
example, protocol changes are often proposed and implemented in order to improve upon
earlier versions – hardening security/encryption, boosting verification rate, etc.�Similar to many
cryptocurrencies, a system may be created where the public is informed of what changes to
the CBDC are suggested and the public votes on those changes (ie: through their CBDC
wallets).�In addition, the fundamental technology choices should be evaluated for the adoption
of open standards and avoid proprietary technologies wherever possible. This is especially
important to consider any CBDC that requires extensive technology support may result in
long term technical debt and reduced agility.
benefits of a CBDC?
_________________________________________________________________________
International Currency Association
Industry
Trade Organization
Country
State
Email
jutta.buyse@currencyassociation.org
The most important considerations that should characterise a public digital currency in order
for it to be – like cash – a public good, are that it should be a private transaction, easy to use,
widely accessible, with maximum safeguards for security and come at no additional cost to
the users, the holders and the recipients.
For a digital currency to ensure full privacy, acceptance and availability, it must be the central
bank that is the issuer of it. �Central banks are public institutions that the public can trust to
issue a currency that truly guarantees privacy and the universality of acceptance and
availability. Private initiators of currency i.e. cryptocurrencies can rightly never have the full
trust of the public.��The Federal Reserve has clearly stated that the CBDC will complement
cash, not replace it, and the ICA welcomes this clear stance. The ICA also highlights that
central banks have a duty to protect cash and its role in society.
inclusion?
The contribution that a CBDC can make to financial inclusion will in part depend on its design.
Any form of payment that wishes to be a public good should be easy to use. A simple user
interface and non-expensive devices are important. People of all ages should be able to use it
and any barriers to using should be carefully weighed against the need for universal
accessibility. The ICA also hopes that the designers of a digital currency will take inspiration
from the efforts of banknote and coins designers to ensure that persons with a visual disability
can make full use of cash.
stability?
As e-commerce and digital interactions are on the rise, the discussion on a future digital
currency to use for purchases made electronically is becoming increasingly prominent. �The
added value of a CBDC does not lie in being an alternative for cash. A purchase made
electronically does not per se imply that it must also be paid for electronically. Indeed, a
number of merchants and applications have made it possible to pay for electronically-ordered
goods or foods in cash upon delivery. �However, the high charges that consumers and
merchants face to be able to pay for transactions electronically, make it attractive to find a
digital public alternative to these payments; a digital currency issued by the central bank
could make this possible.
CBDC?
We take the opportunity of this question on other large economy nations and their
development of CBDCs to recommend the free-of-cost exchange into a CBDC or physical
currency of another country/trade zone, just as a digital and physical dollar must be mutually
convertible.
�It is essential for a future CBDC to guarantee full privacy to its users. A CBDC will only stand
apart from existing and future private (cryptocurrency) means of electronic payments if that is
what it achieves to do. For example, a CBDC needs to allow e.g. abuse victims to save for
an escape without leaving any digital trail or for people to protest without fear of
repercussions. Without the full privacy of physical cash, future personal freedoms and rights
become threatened. No data should be collected from the user. However, AML/ATF – and
KYC – procedures, where they are applicable to physical cash, need to be applicable to
digital cash as well.
A CBDC should offer maximum safeguards for security and protection against cyber-attacks.
The risk to the economy posed by a cyber-attack as well as to public confidence in a CBDC
could be devastating, particularly if a successful attack went unchecked or were undiscovered
for a period of time. Even an unproven claim that the CBDC had been hacked could
potentially be highly destabilising for the economy. This risk is an order of magnitude higher
than for physical cash, as there is no easy/practical way for the public to authenticate whether
a CBDC is genuine. Developing a public authentication solution for a CBDC should thus also
be a key requirement to ensure that digital cash can be a public good.
While all stakeholders including commercial entities have their role to play in the process
where a digital dollar should be as widely available as possible – and immediately convertible
into physical cash – the end result must also be that a digital dollar is free of charge to use.
Digital cash should be usable also in offline mode, with some restrictions, notably to avoid
multiple use of the “same Dollar”. AML/ATF procedures need to be applicable to digital cash,
just as they are applied to physical cash. Mechanisms should be in place to avoid
overspending by means of artificial friction, just as physical cash provides – it is not common
to mistakenly spend 1000 Dollars instead of 10 Dollars in the physical world, the same should
be ensured for the digital sphere.
sale? If so, how?
While it is likely to always require some electronic application/investment such as a

smartphone, the hurdle for adoption should be kept as low as possible to ensure that the
digital dollar is as straightforward as possible for consumers to use. A simple form factor of a
digital device to store/access value could also be offered by the public authority, e.g. a chip in
a card or wearable, a simple reader/display.
A CBDC and physical cash must be mutually convertible. That means free and flexible
conversion of a digital currency into physical cash and vice versa, in addition to the free
exchange into any physical or digital or physical currency of another country/trade zone. It is
important that exchangeability between its physical and digital forms is available at no cost
and without any system to penalise one or the other, in order to offer a fair and free choice for
consumers. A network allowing users to easily swap cash for their CBDC would contribute to
maintaining the cash infrastructure.��We stress here the need to have a competitive
environment. Paying for goods or services or exchanging money should not cost the user.
Unfortunately, today’s consumers and to a sometimes even larger extent, merchants, are
facing a myriad of charges and hurdles for most transactions, including for bank account fees,
credit card fees and fees to set up an electronic payment service to pay online. A CBDC
should aim to be a counterforce to such costs and fees by demanding no additional cost.�
CBDC?
benefits of a CBDC?
_________________________________________________________________________
Ohio Bankers League
Industry
Trade Organization
Country
State
Ohio
Email
ekleymeyer@ohiobankersleague.com
Thank you to the Federal Reserve for engaging all stakeholders in their research regarding
establishing a central bank digital currency. We submit these comments on behalf of the
membership of the Ohio Bankers League (OBL). The Ohio Bankers League [“OBL”] is a
non-profit trade association that represents the interests of Ohio’s commercial banks, savings
banks, savings associations as well as their holding companies and affiliated organizations.
OBL has over 170 members which represents the overwhelming majority of all FDIC-insured
depository institutions doing business in this state. OBL membership represents the full
spectrum of FDIC=insured depository institutions from small mutual savings associations
owned by their depositors, community banks that are the quintessential locally-owned and
operated businesses, up to large regional and multistate holding companies that have several
bank and non-bank affiliates and conduct business from coast to coast. Ohio depository
institutions directly employ more than 70,000 people in Ohio. We are the only trade
association in Ohio that represents all segments of FDIC-insured depository institutions.
�While the paper at a high level discussed the policy consideration that a CBDC could be a
“near-perfect substitute for commercial bank money”, it does not go further into the
unintended consequences of the creation of a near perfect substitute for commercial bank
deposits. Taking deposits away from independent financial institutions in Ohio will ultimately
increase the cost of credit for Ohio consumers and businesses. Ohio’s small communities
would suffer as local deposits would be sucked out of our communities and sent to
Washington to be held as a Federal Reserve liability. If financial institutions no longer have
the ability to lend local deposits, they will be forced to find other more expensive ways to meet
the credit needs of their communities, thus increasing the cost of credit hurting the very
people the Fed is looking to help with CBDC. �Additionally, there are risks associated with a
stablecoin than the paper does not address. The paper declares that a stablecoin is in fact
stable, and there are not credit or liquidity risks associated with it. However, that is not true.
Just recently, the two stablecoins Terra and Luna pegged to the US dollar became untethered
to the US dollar and completely collapsed, whipping out roughly $60B. If that were to happen
to the CBDC which had achieved widespread adoption it would plunge the US economy into
free fall. �Finally, the paper details many technological improvements the Federal Reserve has
made in the payment space, all of which have been made in conjunction with the US banking
system. The national check clearing system, ACH system, and Real Time Payments system
all have all relied on regulated financial institutions as a partner in the settlement of payments.
That has been a successful model as consumers can rely on the confidence that their
payments have all the protections associated with the US banking system. By bringing the
payment process outside of the banking system and including other third parties that do not
have the same rules and regulations as the banking system, we would be exposing
consumers to additional risk, simply for the sake of speed.�
inclusion?
One of the benefits that is herald by proponents of central bank digital currency is the ability
for a financial inclusion. The banking industry has been working incredibly hard to bring
unbanked and underbanked individuals into the financial system with certified BankOn
accounts. We are pleased to report 90% of all Ohioans now live within 10 miles of a bank
branch that offers a BankOn account specifically designed for previously unbanked
individuals. Instead of the Federal Reserve creating a competing product, which could cause
confusion in the marketplace, the Federal government should endorse the BankOn initiative,
so we are all pushing in the same direction. The BankOn initiative has already been proven to
work. In Ohio these accounts started to gain widespread adoption in 2019 which coincides
with the lowest level of unbanked individuals, 5.4 percent, since the FDIC started surveying in
2009. �That same report includes information on the unbanked population in which they cite
privacy concerns as one of the top reasons for being unbanked. A general-purpose CBDC
would generate data about users’ financial transactions, exposing individual’s private financial
details to the federal government like never before. A CBDC would create significant privacy
concerns which would ultimately render most of the benefits for the unbanked moot. This
means it is unlikely they will adopt a CBDC that exposes more personal financial information
than anything existing in the marketplace. �
stability?
We do not believe there is a full understanding of the impact CBDC would have on financial
stability. Before the Fed decides to do anything in this space there needs to be a detailed
analysis on the possible impact of a CBDC on the Fed’s monetary policy tools and
decision-making. The analysis should evaluate whether a CBDC could result in adverse
unintended consequences for monetary policy implementation; assess whether a CBDC
facilitates the use of unconventional monetary policy tools (including negative interest rates)
that the Fed has previously rejected or require a balance sheet that is politically
unsustainable. It should also examine any implications for financial stability through bank runs
that may result from transfers of commercial bank deposits into CBDC accounts, as
referenced in the paper.
The paper states a CBDC could serve as a near perfect replacement for commercial bank
deposits. A federally subsidized near perfect competition for commercial bank deposits has
the potential to change the American banking system in a profoundly negative way. Banks
compete in a very crowded marketplace already for deposit and loan customers. The
consumer benefits from that competition, which drives down cost for them. When competition
is fair local financial institutions can provide competitive services to their communities.
However, when competing against the government the playing field is uneven. No other entity
has the ability to lose money like the federal government.
Putting limitations on the interest paid for CBDC deposits and holding limits would mitigate
the negative impact on commercial bank deposits.
Based on the most recent Federal Reserve Findings from the Diary of Consumer Payment
Choice, cash usage has declined to the lowest level ever. Cash purchases make up only 19%
of all purchases in 2020. In the same year due to the CARES Act, the largest outflow to the
general public of central bank money in history happened very successfully. The economic
impact payments, which 82% of the American population received directly into their bank
account on the existing payment rails. This was an unprecedented test and showed that in a
mainly cashless society the general public had quick access to central bank money.
CBDC?
The Federal Reserve needs to assess the need for CBDC here irrespective of the decisions
of other nations to implement their own CBDC. We have a very different society with much
broader privacy rights then some of the other nations, and those differences need to be
weighed carefully.
The Federal Reserve would have to build out the most robust BSA/AML workforce in the
nation to fight financial illicit activity if a CBDC were created. Every bank currently monitors
their own customers for illicit activity but if a customer moves from the bank to CBDC they will
not have the ability to see transactions, leaving that work to the Federal Reserve. A CBDC
would give the Federal Reserve unheard of knowledge into the everyday financial
transactions of Americans. We do not see a way for the Federal Reserve to protect the
privacy of individuals which also monitoring their transactions for illicit financial activity.
No, the CBDC should not pay interest. Paying interest will as the paper details, create a near
perfect substitute for bank deposits.
There should be limits to how much an individual or entity can hold in CBDC. With no limits,
depositors would likely shift many of their deposits held in banks to a CBDC accounts,
particularly in moments of financial anxiety. Banks would then be in a position where they
must significantly contract their own loan portfolios or raise additional debt or equity financing.
In uncertain economic times banks need the flexibility to work with struggling customers.
CBDC would such vital resources out of commercial banks at exactly the wrong time
exacerbating poor economic conditions.
sale? If so, how?
CBDC?
benefits of a CBDC?
_________________________________________________________________________
The Committee on Capital Markets Regulation
Industry
Other: 501(c)(3) research organization
Country
State
Massachusetts
Email
jgulliver@capmktsreg.org
We find that the principal benefits advanced in favor of a CBDC are either uncertain or
achievable by other means. Conversely, the potential for a CBDC to diminish the market’s
role in intermediating funds through the private banking sector, and thus increase the
government’s - and particularly the central bank’s - role therein, seems very undesirable. It is
therefore our position that as of the present time the costs associated with the introduction of
a CBDC outweigh its uncertain benefits. While we favor further research and discussion of a
CBDC, we are skeptical that such consideration will change the calculus herein
described.��The major cost, and most substantial issue, with the possible widespread use of a
CBDC would be the threat to the private banking system’s role in intermediating savings and
loans or other forms of assets, a phenomenon referred to as “disintermediation.” �CBDC
holdings, whether in the form of accounts at the Federal Reserve (“Fed”) or tokens in a wallet,
constitute liabilities of the Fed. The increase of the liabilities of the Fed would require the Fed
to increase its assets by purchasing assets or increasing lending, thereby expanding the role
of the government in intermediation, and thus diminishing the role of the private banking
sector. Relying on the government rather than the market to provide credit in this fashion
would be inefficient. It also raises major issues of political economy, since it could significantly
increase the role of the government in the economy. Moreover, this expanded role would be
effectuated through an independent central bank rather than through the elected legislature
and the executive branch.��Measures intended to limit a CBDC’s disintermediating effect, such
as imposing limits on CBDC holdings or negative interest rates, would be difficult to
devise—what would be the amount of such limits or negative interest rate, and when would
these measures be triggered? Limits on CBDC holdings would also affect banks of different
sizes unequally: in particular, a low limit would likely have a greater effect on smaller banks,
since there is evidence that smaller banks tend to have smaller average account sizes. See
Jeffrey A. Clark, Economies of Scale and Scope At Depository Financial Institutions: A
Review of the Literature, 73(8) ECONOMIC REVIEW, FEDERAL RESERVE BANK OF
KANSAS CITY 16, 24 (1988),
https://www.kansascityfed.org/documents/1039/Full_publicationBE64D1A9-46BB-4E6E-A17D
-7C8F25376624.pdf. Moreover, if any of the purported benefits of a CBDC materialize,
capping CBDC holdings would limit the extent of those benefits.��It has been suggested that
the Fed could re-intermediate the funds it attracts through CBDC holdings by returning the
funding it receives in the form of CBDC deposits to the banking system. It is however unclear
how such a measure could be carried out without undesirable side effects. Assuming a bank
depositor could only exchange cash-denominated bank deposits for CBDC through its own
bank, the Fed would execute the transfer by debiting the transferring bank’s account and
crediting the account of the CBDC holder. The Fed could, in theory, then return the CBDC
funds to the transferring bank by making a loan to the transferring bank, thus maintaining the
same level of individual bank funding. See Francesca Carapella & Jean Flemming, Central
Bank Digital Currency: A Literature Review, FEDS NOTES (Nov. 9, 2020),
https://www.federalreserve.gov/econres/notes/feds-notes/central-bank-digital-currency-a-liter
ature-review-20201109.htm. But constant Fed funding to individual banks based on
depositors’ shifts from the deposits of individual banks to CBDC could unduly expose the Fed
to safety and soundness concerns (since faltering banks would get more Fed funding) and
would increase the percentage of the funding available to the banking system that is
government supplied rather than market based. Any significant credit losses the Fed incurs
in connection with these loans would risk political attack on the Fed and thus threaten its
independence on its core function, monetary policy. �The Fed could alternatively return the
CBDC funds it receives to the banking system via an auction to qualifying banks. This
measure could maintain the same level of total funding to the banking system but would alter
the funding available to individual banks (quite apart from their safety and soundness) and
still increase Fed funding overall to the banking sector, and thus its overall role in the
economy. �Additional costs associated with the introduction of a CBDC are identified below,
namely the potential infringement of privacy that would accompany a more trackable digital
currency as compared with cash, and the possible increased risk to the financial system that
arises from the ability of depositors to transfer funds into a CBDC in a financial crisis.�
One set of reasons offered in favor of a CBDC can be characterized as “defensive.” First is
the concern that the rise in use of stablecoins could threaten financial stability (for example, if
coin providers could not meet redemption demands or had operational failures), pose
problems for the conduct of monetary policy, or be used to avoid tax and anti-money
laundering (“AML”), terrorism, or sanction provisions. However, these concerns could be met
by more highly regulating stablecoins, or in the extreme case, prohibiting them. Further, it is
unclear how the creation of a CBDC in and of itself would defend against such dangers if the
use of stablecoins was still permitted. Consumers might still choose to hold stablecoins in
substantial amounts even following the introduction of a CBDC.�A second defensive reason is
to counter the development of a CBDC by other jurisdictions, most particularly China. The
major concern is that the CBDC that China has recently developed, known as e-CNY, could
enhance the reserve currency status of the renminbi. In our view, the reserve status of the
renminbi is undermined by fundamental factors, such as the use of capital controls, concern
with political stability and the unavailability of liquid assets to invest in. It is far from clear how
a Chinese CBDC would override these concerns. �Another purported benefit of a CBDC
relates to the possible programming of a CBDC to permit more efficient asset
transfers/settlements through smart contracts. Such contracts are being used today to a
limited extent in connection with stablecoins and we agree that the combination of
programmable money and smart contracts may contain the potential for substantial benefits.
�For example, the current Automated Clearing House (“ACH”) payment system allows for the
programming of debits/payments from existing bank accounts. See NATIONAL AUTOMATED
CLEARING HOUSE ASSOCIATION, What is ACH?
https://www.nacha.org/content/what-is-ach (last visited May 4, 2022). It could be possible to
program smart contracts to trigger ACH-like transactions once the conditions specified in the
smart contract have been met. See Peter Lone et al., Using Distributed Ledger Technology
for Payment Directories, FEDS NOTES (Feb. 3, 2022),
https://www.federalreserve.gov/econres/notes/feds-notes/using-distributed-ledger-technology
for-payment-directories-20220203.htm. ACH transactions, however, are not immediate and
contain counterparty and settlement risks. See What are ACH Payments and How do ACH
Payments Work?, SQUARE (Jan. 13, 2022),
https://squareup.com/us/en/townsquare/ach-payments. Smart contracts leveraging
programmable money like a CBDC are not subject to these risks and could thus increase the
efficiency of transactions and lower the above mentioned risks associated with the current
systems. See Phillip Sander, Will Blockchain Replace Clearing Houses? A case of DVP
Post-Trade Settlement, FORBES (Dec. 2, 2020),
https://www.forbes.com/sites/philippsandner/2020/12/02/will-blockchain-replace-clearinghous
es-a-case-of-dvp-post-trade-settlement/?sh=72f0bf408fb5.��We would, however, question the
necessity of a CBDC to realize this goal when other forms of digital assets, such as tokenized
commercial bank money, could be developed for use in smart contracts. Converting money
into a programmable form could be a major new step in smart contract evolution, and the
possible benefits could be substantial, but it is unclear that a CBDC is necessary to realize
these benefits. We support further investigation into this question. �
inclusion?
One way that CBDCs could advance financial inclusion is by allowing individuals without bank
accounts to make and receive payments through accounts at the Fed. However, according to
FDIC surveys, the most common reasons why individuals do not hold bank accounts are the
amount and unpredictability of fees and the inability to meet minimum balance requirements.
See FEDERAL DEPOSIT INSURANCE CORPORATION, HOW AMERICA BANKS:
HOUSEHOLD USE OF BANKING AND FINANCIAL SERVICES 2019 FDIC SURVEY 3
(2020), https://www.fdic.gov/analysis/household-survey/2019report.pdf (49% of respondents
among unbanked households indicated that they did not have a bank account because they
did not have enough money to meet minimum balance requirements; 66% of respondents
indicated that bank fees were either too high or too unpredictable). Both fees and minimum
balance requirements arise because the bank must recoup the costs associated with
maintaining a deposit account. Obviously, the provision of payment services through the Fed
would also entail costs. If the Fed did not pass on these costs to consumers in the form of
fees or minimum balance requirements, then its remittances to the Treasury would be
reduced, and so taxpayers in general would be underwriting the provision of such services.
Such fiscal support for the unbanked should require Congressional authorization, and it is
unclear how cost-free Fed accounts could be limited just to those with the inability to pay for
them. �Another related reason advanced for a CBDC is the possibility of using Fed accounts to
distribute federal benefits, such as welfare payments, tax refunds, or most recently COVID
support funds. However, the swift distribution of substantial amounts of federal benefits is
demonstrably feasible without the creation of a CBDC. In particular, the federal government
distributed over $1 trillion in COVID-related benefits without a CBDC, including to persons
without bank accounts through such methods as privately managed pre-paid cards. See
HOWELL JACKSON & TIMOTHY G. MASSAD, THE TREASURY OPTION: HOW THE US
CAN ACHIEVE THE FINANCIAL INCLUSION BENEFITS OF A CBDC NOW (2022),
-inclusion-benefits-of-a-cbdc-now/. Moreover, if the government sought to facilitate the
distribution of government benefits, a CBDC would not be necessary to do so, as the
government could do so through Treasury accounts. See id.�The Consultation Paper notes
the potential existence of a narrower use case for a CBDC designed for “large value
institutional payments . . . not widely available to the public.” We believe that such a use case
warrants further study. Consultation Paper at Note 19.�
It has been suggested that a benefit of a CBDC would be to enhance monetary policy through
the ability to directly pay interest on a CBDC, or to charge interest on CBDCs as part of a
negative interest rate policy, neither of which is practically possible with physical currency
held outside of bank accounts. These features could also be characterized as a “defensive”
rational, insofar as cryptocurrencies or stablecoins could make monetary policy more difficult
to conduct if holdings of cryptocurrencies and stablecoins become sufficiently large. However
once again, if the government believes that cryptocurrencies or stablecoins pose a legitimate
threat to monetary policy, the more direct response would be to prohibit or highly limit the
growth of cryptocurrencies or stablecoins. �One might also consider whether the introduction
of a CBDC would make monetary policy more effective in its own right, setting aside any
concerns with cryptocurrencies or stablecoins. There seems to be little benefit from being
able to pay positive interest on CBDC liabilities, whether held in direct Fed accounts or
through wallets, because paying interest on bank reserves or contracting or expanding the
money supply are sufficient to establish interest rate targets. Moreover, imposing negative
rates on a CBDC could help implement negative rate targets only if such rates could not be
avoided by CBDC holders transferring out of their CBDC holdings into cash or bank deposits,
where such negative rates did not exist. In effect, this would require abolishing or highly
restricting the use of cash. As long as cash plays an important role in the payments system,
this would be difficult to accomplish. Although recent studies indicate that cash use in most
countries, including the United States, is declining (Tanai Khiaonarong, David Humphrey,
Falling Use of Cash and Demand for Retail Central Bank Central Currency (IMF Working
Paper WP/22/27, 2022),
https://www.imf.org/en/Publications/WP/Issues/2022/02/04/Falling-Use-of-Cash-and-Demand
-for-Retail-Central-Bank-Digital-Currency-512766; Gregory Baer, Central Bank Digital
Currencies: Costs, Benefits and Major Implications for the U.S. Economic System 5 (BPI Staff
Working Paper, 2021),
https://bpi.com/wp-content/uploads/2021/04/Central-Bank-Digital-Currencies-Costs-Benefits-a
nd-Major-Implications-for-the-U.S.-Economic-System.pdf?utm_source=media&utm_medium=
email&utm_campaign=cbdcs&utm_content=invite%201), under current conditions such a
prohibition would potentially interfere with the legitimate use of cash for small payments,
particularly by the unbanked.�
stability?
It has also been suggested that a CBDC would increase financial stability by providing its
holders with an asset that, unlike a bank deposit, is “unrunnable” - that is, a CBDC would not
be subject to the risk that a sudden and severe spate of withdrawals would make a
depositor’s CBDC funds unavailable. However, the effect of the availability of such an
“unrunnable” asset, if held in substantial amounts, could be to undermine severely the critical
role of the banking system in allocating capital. Most particularly, in a crisis scenario the
availability of a CBDC may threaten the stability of the banking system by driving bank
account holders to transfer their assets from bank deposits to CBDC (i.e., Fed accounts),
thus spurring a bank run. In this respect, what might appear to be a benefit of a CBDC could
in fact be a significant cost.
CBDC?
One of the main reasons offered in support of a CBDC is that a CBDC could improve the
retail payment system to allow faster payments. However, such payments can already be
efficiently made today through debit and credit cards, or through platforms like Venmo and
Zelle. The private sector is continuing to provide new alternatives and the Fed is nearing the
deployment of its FedNow service. While some have criticized the existing private payment
system, specifically those provided by VISA and Mastercard, as anti-competitive due to the
charging of interchange fees, it is hard to argue that the market would function better with a
further expansion of government, through the Fed, in the payment system. Indeed, various
commentators cast doubt on the utility of a CBDC as an indirect check on interchange fees
and argue that if the government seeks to moderate interchange fees, that objective is better
served by direct regulation. See David Andolfatto, On the Necessity and Desirability of a
CBDC 6 (2021),
https://gceps.princeton.edu/wp-content/uploads/2021/11/21oct_Andolfatto-paper_CBDC4US.
pdf; Gregory Baer, Central Bank Digital Currencies: Costs, Benefits and Major Implications for
the U.S. Economic System 5 (BPI Staff Working Paper, 2021),
https://bpi.com/wp-content/uploads/2021/04/Central-Bank-Digital-Currencies-Costs-Benefits-a
nd-Major-Implications-for-the-U.S.-Economic-System.pdf?utm_source=media&utm_medium=
email&utm_campaign=cbdcs&utm_content=invite%201.The Fed has in fact already
implemented regulations limiting debit card interchange fees: Section 1075 of the Dodd Frank
Act (also known as the Durbin Amendment) requires debit interchange fees charged by
issuers with $10 million or more in assets to be “reasonable and proportional to the cost
incurred by the issuer” and authorizes the Fed to issue implementing regulations. Dodd-Frank
Wall Street Reform and Consumer Protection Act § 1075, 15 U.S.C. § 1693o-2(a)(1). The
regulations issued thereunder limit debit interchange fees received by such issuers to 21
cents plus 0.05% of the transaction value. 12 C.F.R. § 235.3 (2021). Moreover, a CBDC
system would not be without its own unique transaction costs: for example, the intermediaries
and wallet providers necessary for a functioning CBDC payment system would presumably
require monetary compensation for their services. �It is also argued that CBDCs would
facilitate more efficient cross-border payments for retail customers. However, very little
concrete research exists on how a CBDC would remedy the problems with cross-border
payments. One line of argument revolves around the high cost of remittances. It remains
unclear however precisely how as a technical matter a CBDC could reduce such costs.
Further, a major portion of the cost of cross-border payments consists of currency conversion
costs. Indeed, the reduction of currency conversion costs was a major reason for the adoption
of the Euro. It remains to be seen how a U.S. CBDC, possibly in conjunction with CBDCs in
other jurisdictions, could reduce such costs. Moreover, there have been detailed proposals for
the facilitation and optimization of cross-border payments that do not involve CBDCs or other
cryptocurrencies. See Ulrich Bindseil & George Pantelopoulos, Towards the holy grail of
cross-border payments (2022),
https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4057995. Alternatively, if the decision
were made not to charge for the cost of remittances, then that would be a financial inclusion
issue, which is addressed in the paragraph below, and not related to enhanced efficiency of
cross-border payments involving CBDC. �
Another purported benefit of a CBDC would be to limit tax or AML avoidance that can
currently be achieved through the use of cash. This benefit assumes that cash would be
outlawed or substantially limited in conjunction with the creation of a CBDC. Without such a
prohibition or limitation, persons seeking to circumvent tax and AML laws would likely avoid
the CBDC and continue to use cash. No blueprint has been advanced as to how such a
prohibition or limitation could practically be achieved without unduly affecting the legitimate
use of cash for small payments, particularly by the unbanked. Furthermore, there would be a
major concern with the loss of privacy that could follow from mandated use of a trackable
digital currency. While a CBDC system could be designed to limit the ability of the
government to monitor the use of the CBDC, these limits would then conflict with the goal of
curtailing illegal activity.
sale? If so, how?
CBDC?
benefits of a CBDC?
_________________________________________________________________________
Noriko Tanaka (MUFG)
Industry
Country
Japan
State
Email
I think programmability is the biggest potential benefit. By issuing a token-type CBDC using a
blockchain, it will be possible to give attributes to the money itself without having to link and
manage the attribute information separately, and it will be possible to program with only the
information that the money itself has. increase. For example, it is possible to incorporate
processing such as how much interest is set for deposits from a certain company in a
program, and processing such as raising the lending interest rate if a loan is overdue. There
is a possibility of becoming. In addition, even in the individual company analysis of the
balance sheet in the bank, it will be possible to analyze and simulate only the money
information without linking the attribute information from another record. Payment and billing
efficiency can be improved by having transfer and benefits with various conditions and
commercial distribution information.
I think it can be achieved by combining wholesale CBDC and private digital currencies. In
other words, the central bank may issue a wholesale CBDC to private banks, and the private
banks may issue token-type private digital currencies using blockchain in proportion to it.
inclusion?
Yes, I think so. However, I think that the degree of influence on financial inclusion varies from
country to country. I think developing countries are even more effective, but I think the net
effect is also positive in the United States.
I don't think there is a direct impact on employment. In terms of price and price stability, I
think it depends on how the CBDC is supplied. For example, if you send CBDC directly and
the speed of money circulation increases, inflation may occur.
stability?
I think it depends on the issuing method. Even if the issue is issued in a two-tiered structure
without interest, I think that the withdrawal of CBDC to an individual will differ depending on
whether it is a bank deposit match or a cash match. In the case of bank deposit
matchmaking, the credit creation function may be reduced. However, even though the CBDC
has more means of controlling financial measures, I think the net effect of fiscal stability is
rather positive.
I think it depends on the issuing method. If it has a two-layer structure and no interest, it will
not have much effect. Especially when private financial institutions issue private bank digital
currencies in proportion to CBDC, it is possible to provide additional services (services that
utilize the programmability of private bank digital currencies) without negatively affecting the
financial sector.
I think it's important for a certain period of time. I think we will make a decision while looking
at the degree of decrease and trends in usage.
CBDC?
Although payments can still be made without the CBDC, when each country issues digital
currencies and the infrastructure for exchanging the digital currencies of each country is in
place and transactions are activated there, the United States will settle with other countries. I
think there is a possibility that it will be disadvantageous in.
Decisions made by other large economies, especially those with large trade volumes, will
influence the decision to issue in the United States. Also, from a political point of view, I think
that trends in China in particular have a great influence on the judgment of the United States.
One method is to maintain complete anonymity when issued by the central bank, and to
provide additional services after being paid out to a private financial institution, depending on
the business and service characteristics of the user. Originally, I think there is a way to
provide it in a way that does not guarantee complete anonymity.
Cyber risk
is an important point, but there is also a balance between cost and development cost.
I think it needs to be legal tender. (I thought that was also a definition.) If it is not legal tender,
it may not be possible to tell the difference from private digital currency.
I do not think. We believe that paying interest will create a preference and will have a greater
impact on the financial sector, including the shift from private deposits.
Given the outflow of private bank deposits and financial stability, we believe it is necessary to
limit the quantity at least initially. I think you should consider changing the limit value as
necessary while observing the situation after introduction.
I think it is a private financial institution or a non-bank section or a fintech company . I think

we should introduce regulations that set guidelines for a certain line while ensuring a certain
degree of free competition and service provision. On the other hand, it should be avoided that
too different levels of regulation between intermediaries would hinder fair competition.
I don't think it's necessary. I don't think it's worth the cost comparison and the double tracking
of functional design. For the time being, assuming a world where CBDC and cash coexist,
even if electricity is cut off, it is possible to temporarily return to cash payment, so offline
payment will be used from the beginning of the introduction of CBDC. I think there is little
need to prepare a system or system to do this.
sale? If so, how?
I think it is necessary to design for ease of use. I think it should be designed with an
easy-to-use UI for smartphone apps.
It would be nice to be able to design an intervening protocol that standardizes the transfer
method for multiple payment platforms.
CBDC?
It is necessary to provide universal value, and in principle, it should be designed so that it can
be operated continuously even if technological innovation occurs. On the other hand, it is not
always possible to see what kind of technological innovation will occur in the future, so I think
we have to select designs and policies within the range where we can see the current
situation to some extent.
benefits of a CBDC?
_________________________________________________________________________
Dr. Bejoy Das Gupta, eCurrency
Industry
Technology Company
Country
State
California
Email
bejoy.d@ecurrency.net
The paper makes a good case for CBDC as a digital form of fiat money, which would be a
public good for the digital age. It would be a safe, efficient, inclusive, final and instantaneous
means of settlement. Policy considerations and risks are well covered in the paper.��CBDC
created as a cash equivalent in many ways will have trade-offs in benefits and risks very
much like cash has inherent benefits and risks. Hence, it's important to define functional,
security and policy requirement first, before settling in on technology. Technology should then
be applied to meet the challenges of functional, security and policies mandates.
No. Demand for digital payments is growing exponentially. In the absence of CBDCs, private
digital money (cryptos, stablecoins and e-money) will fill the void. However, they are
unregulated, private or even nobody’s liability, with accompanying credit and settlement risk.
They operate within large closed networks, which can limit competition and can be highly
speculative. They could result in monetary and financial instability and, to the extent they are
used for cross-border flows, could be further destabilizing. As such, the appropriate policy
response must be two-fold – regulate private digital money and launch CBDC.��Other solutions
such as faster payments and novel apps are all built upon century-old infrastructure and
half-century-old technology which relies on account (or ledger) based systems. This very
infrastructure that relies on bank accounts, credit cards, debit cards, wire transfers, payment
systems and payment apps have only further reinforced financial exclusion. CBDC is an
opportunity to reimagine the possibilities of a more digitally/financially inclusive future.�
inclusion?
CBDC would be highly beneficial for financial inclusion. An interoperable payments system
using CBDC would ensure that the unbanked can have access through a multitude of access
points and the ability to effectuate efficient, cost-neutral and life-enhancing transactions. The
efficiency gains and the elimination of friction alone will ultimately improve quality of life. A
key consequence would also be more information-based lending by banks and non-banks
and expanding markets to boost financial inclusion. Gains would derive from expanded reach
and commerce, especially for small businesses, as CBDCs are not limited by the
denomination structure of banknotes and, being digital, unlike cash, are not limited by
geographical considerations.
CBDC would help preserve monetary sovereignty. Monetary policy formulation could be
strengthened by the generation of real-time data through the use of CBDCs They could also
be a helpful fiscal tool to ensure that spending on social programs reached their targeted
recipients quickly, at low cost and with minimum leakage.
stability?
CBDC would be positive for financial stability in two ways. First, by using CBDC, the public
could transact using a risk-free instrument, which is a liability of the Fed. Second, to the
extent that the advent of CBDC reduced the use of cryptocurrencies and stablecoins, they
would also be highly beneficial for financial stability.
Concern has been expressed that CBDCs could lead to a reduction in bank lending as a
result of an outflow of bank deposits into CBDC accounts or wallets and banks’ funding costs
could rise. Many also fear that by providing an easy way to convert bank deposits into a safe
government-backed asset, CBDCs could destabilize the financial system by facilitating and
accelerating bank runs during crises. This would a different impact on the financial sector
relative to stablecoins or other nonbank money. �However, these concerns are overstated in a
modern money creation view of banking. Bank also having access to non-deposit funding
sources. Trust in banks is derived from deposit insurance, regulations, and supervision,
backed by their providing value-added services. These do not change in a post-CBDC world.
It should also be noted that retail users can already switch funds out of the banking system
instantaneously, into money market funds or government securities. Meanwhile, the rise of
capital markets over the past few decades has not undermined money creation and credit
expansion by banks, and has been highly positive for the US economy.
The concerns can be mitigated by tools such as limits on CBDC transaction sizes and wallet
holdings as well as non-interest bearing or tiered remuneration structure for CBDC balances
depending on their size. These tools should not diminish the potential benefits of a CBDC.
It is essential to preserve public access to central bank money through a CBDC for reasons
mentioned earlier.
CBDC?
They would evolve utilizing private digital money, with attendant risks and concerns, including
financial stability, loss of monetary sovereignty and potentially destabilizing capital outflows.
The mere introduction of additional private money in domestic and cross-border payments will
only exacerbate counter party, settlement, and macro instability concerns.
The US should be monitoring what other large economy nations are doing. While they are all
engaged in various stages of CBDC exploration, the decision whether to issue a CBDC in the
US should ultimately be driven by whether it makes practical and economic sense to do so.
Other factors such as US technological leadership, role in standards setting, security, and the
US dollar as a widely held settlement instrument have all been discussed elsewhere.
Monetary operations may need adaptation, but CBDC should not affect monetary policy
transmission significantly. Transmission could even strengthen if CBDC spurs greater
financial inclusion. As such, there should be limited monetary policy and inflationary
implications of CBDC as asset prices/collateral values/exchange rates are not altered, while
existing policy-setting arrangements are maintained.
By designing the CBDC as a digital bearer instrument, analogous to physical cash, which is
delinked from the identity of the holder of CBDC wallets, privacy for consumers would be
protected. Moreover, although the CBDC may not provide the same degree of anonymity as
cash, it must adhere to privacy laws, applicable to both the government and payments
intermediaries. To preserve privacy, the central bank should not know the identity of CBDC
users, unless the transaction size is above a certain threshold set by law or as a result of a
legal discovery process, in accordance with existing practices.��It is also important that financial
integrity should be strengthened, while not burdening the central bank with operational
headaches. This could be done by requiring CBDC transactions to be done through payment
intermediaries subject to anti-money laundering (AML), know-your customer (KYC) and
counter-terrorism financing (CTF) regulations. �
Design is key for the success of CBDC for general purpose use. Operational and policy
considerations suggest that an ‘intermediated’ and ‘cash-like’ CBDC model be followed in the
US. The Federal Reserve provides the core CBDC instrument, including issuance,
distribution, and withdrawal from circulation. The CBDC is distributed through bank and
nonbank financial intermediaries for use across all payment rails. The operational
requirements call for achieving required scale, speed, finality of settlement, security, privacy
and interoperability. The design needs to allow flexibility to connect with all payment rails. It
should be highly energy efficient as well to reduce the carbon footprint. The private sector can
build and operate the payment systems and continue to innovate wallets, access channels
and so on. Compliance with anti-money laundering and know-your-customer regulations is
done by the payment service providers, and privacy preserved for small transactions.
Interoperability and competition are assured. For the security and resiliency of the CBDC and
making it quantum resistant, the use of both hardware and software cryptography in line with
the highest national security standards is needed. Financial intermediaries are responsible for
looking after operational and cyber risks for their individual payment rails. This is the
architecture being implemented in Jamaica’s CBDC.��This approach eschews the ‘direct’
model, where the CBDC is operated by the central bank, which keeps a record of balances in
a central ledger and may also handle payment services. While the direct model is a possibility
for a CBDC In the US, operational and policy considerations would rule it out. Building and
operating the payments network would be a challenge for the Federal Reserve and costly. It
would also have the operational headache and cost of managing hundreds of millions of
accounts. The Federal Reserve does not have the legal authority to offer direct accounts to
individuals. Having to handle customer relationships means that privacy may not be assured.�
Yes, to be a true form of public money alongside physical notes and coins.
No, as indicated above to mitigate disintermediation concerns.
Yes, again to mitigate disintermediation concerns.
CBDC intermediaries should be banks and nonbanks (payment service providers, mobile
money operators), appropriately regulated.
Yes. End users will be able to use their CBDC even when they do not have
telecommunication connectivity. This can be achieved by extending the CBDC as a digital
bearer instrument, which can be validated on its own merit, into the secure elements of smart
end user devices which can be feature phone, smart phone, chip cards or other appropriate
user devices. Users with the proper device can continue to transact offline. However, the
Federal Reserve may set limits on offline transactions for policy and monitoring reasons.
sale? If so, how?
Jamaica’s CBDC provides a good example of utilizing the ‘intermediated’ architecture, designed to
maximize ease of use and point of sale acceptance. The Bank of Jamaica is minting, issuing and
distributing the Jam-Dex (CBDC). Banks and payment-service providers interface through standard
APIs. Households, businesses and merchants can access through their CBDC wallet. Jam-Dex is
interoperable across all payment rails, utilizing existing infrastructure, which ensures competition with
universal access and availability in Jamaica. It is integrated with Jamaica’s RTGS system. The core
CBDC instrument is secured by the Bank of Jamaica using hardware and software to make it quantum
resistant. There is another layer of security provided by customer-facing private sector wallet
providers. The design preserves privacy vis-à-vis the authorities by delinking the identity of the holders
of Jam-Dex from the instrument. The architecture calls for private sector wallet providers to innovate
on products and services, using the Jam-Dex.
The digital bearer currency instrument using the ‘intermediated’ model is designed to achieve
transferability across multiple payment plat platforms, while delivering on scale, privacy, and
financial integrity (identity verifiable). The technology breakthroughs and standards to achieve
this have already been done.
CBDC?
The above design is also fool-proofed in terms of future technological innovations, by

separating the digital bearer CBDC instrument from the payment rails. In essence, the
approach is a public-private partnership, where the central bank issues an innovative CBDC
instrument, while the private sector continues to innovate in customer-facing applications.
benefits of a CBDC?
See earlier answers for design principles and tradeoffs.
_________________________________________________________________________
Industry
Technology Company
Country
State
California
Email
Meta strongly supports the development and implementation of a well-designed U.S. Central
Bank Digital Currency (CBDC) consistent with the policy goals outlined in the January 2022
paper, “Money and Payments: The U.S. Dollar in the Age of Transformation.” Specifically,
Meta agrees that a U.S. CBDC should be intermediated, privacy-protected, widely
transferable, supportive of the U.S. Dollar’s international role as the world’s leading reserve
currency, and a means of increasing financial inclusion. �A well-designed U.S. CBDC would
yield at least three important benefits. First, it would support the stability, integrity, and
efficiency of the U.S. monetary, financial, and payment system so as to promote optimal
macroeconomic performance, including promoting an accessible, efficient, and interoperable
payment infrastructure underpinned by a digital U.S. Dollar. Second, it would help preserve
the U.S. Dollar’s role as the world’s leading reserve currency. Third, it would promote the
United States’ leadership role and protect its own interests in advancing technology leveraged
by CBDCs and the changes to the financial markets and industries that CBDCs are likely to
result in.��Meta believes that a well-designed U.S. CBDC should be open and interoperable to
ensure that the greatest number of people and businesses can access the benefits it would
provide. It should be open to a wide variety of intermediaries, including nonbank wallet
providers, subject to appropriate regulation and supervision. It should be interoperable across
different metaverse experiences, and have the ability to work with and support multiple
blockchains, other CBDCs, stablecoins, commercial bank deposits, and other digital assets.
Providing new financial access channels to more people through technological innovation will
promote financial inclusion without adversely affecting the safety, soundness or stability of the
U.S. financial system.��In addition, a U.S. CBDC could build on current efforts–like FedNow–to
improve the speed, integrity and accuracy of the government's delivery of stimulus payments
to Americans in times of economic crisis, such as a recession, financial crisis, or pandemic. A
U.S. CBDC would facilitate the efficient delivery of these payments in a manner that is not
only faster but also more accurate and secure than our current approach of issuing
government checks and making ACH wire transfers. Finally, a U.S. CBDC would allow the
government to provide more targeted relief to distressed households and businesses. For
example, in the case of public benefits programs or conditional cash transfers, a U.S. CBDC
could be designed to be programmable so that when combined with digital accounts, program
administrators could target participants based on a variety of attributes and allow linking
disbursements with federal beneficiaries’ completion of required actions. Programmability
could also allow the government to better manage the consumption and use of these and
other stimulus funds efficiently. �Meta believes that it would be helpful to the U.S. financial
regulatory agencies as well as players in U.S. financial markets if the U.S. Congress adopted
authorizing legislation that also provides guidance for the Executive Branch on whether (and,
if so, within what parameters) the Federal Reserve should develop and implement a U.S.
CBDC, including guidelines on policy goals a U.S. CBDC and its design should support.�
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inclusion?
Meta believes that a U.S. CBDC has the potential to improve financial inclusion and that a
U.S. CBDC should be designed and implemented to promote financial inclusion as a policy
goal.��Payments and access to payment rails in the United States are currently too expensive.
They can be prohibitively expensive for the unbanked, who make up 6.5 percent of U.S.
households, or the underbanked, who comprise an additional 18.7 percent of U.S.
households according to a 2017 Federal Deposit Insurance Corporation (FDIC) survey. Most
of the unbanked and underbanked are low-income individuals and minorities who do not
benefit from the economies of scale that enure to the benefit of those with high balances.
Even for those with bank accounts, payments can be too expensive because of fees on
checking accounts of people who cannot maintain high enough balances. Further, many
unbanked individuals avoid bank accounts because of their distrust of the banking system or
they cannot get access to the banking system because it is difficult for these individuals to
comply with some of the requirements of the banking system, often resulting in their use of
high-cost money transmitters.��A U.S. CBDC could maximize financial inclusion by being open,
interoperable, and widely accessible. To maximize financial inclusion objectives, a U.S.
CBDC must be open to a wide range of intermediaries, including low-cost nonbank wallet
providers that do not engage in maturity or liquidity transformation. It should be interoperable
with multiple blockchains, other national CBDCs, stablecoins, commercial bank deposits, and
other digital assets. Such a U.S. CBDC could give the unbanked, underbanked, and
low-income Americans the ability to hold and transfer U.S. CBDC through the channels that
they have easy access to and consider to be convenient and trustworthy, which may include
digital wallets accessible through smartphone applications. Indeed, we anticipate smartphone
applications will play an increased role in improving financial inclusion: for example, according
to the 2019 FDIC survey, 6 out of 10 unbanked households had access to smartphones (up
from 5 out of 10 unbanked households in 2015). In addition, according to the 2017 FDIC
survey, more than 8 out of 10 underbanked households had access to smartphones. As the
Federal Reserve and governments around the world design CBDC with financial inclusion
objectives in mind, innovative digital ID solutions should be part of the CBDC efforts. Globally,
more than one billion people do not have proof of their identity through traditional means,
creating barriers to access in the formal financial system for many. Leveraging technology to
perform reliable and efficient know-your-customer (KYC) review is essential to bringing these
people into the financial system and bolstering financial inclusion. �
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stability?
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Some researchers investigating the implications of CBDCs have suggested that the
introduction of a U.S. CBDC adds risks to the financial system during times of economic
stress because commercial bank depositors would be able to transfer their money
instantaneously and cheaply from their commercial bank accounts to a U.S. CBDC. Currently,
such depositors are limited to moving cash balances from weak banks to strong banks, or
withdrawing physical cash and putting it under the proverbial mattress. Meta believes that the
risk of such runs on the commercial banking system could be mitigated by design choices
that will make CBDC a medium of exchange rather than a significant store of value. For
example, the federal government could impose limits on the amount of U.S. CBDC that could
be held by an individual, imposing caps on the amount of interest that can be paid on a U.S.
CBDC, or by implementing a “tiered CBDC” regime where the interest rate paid decreases as
the amount of U.S. CBDC an individual holds increases. �
Meta believes that it is important to preserve the general public’s access to a form of central
bank money that can be widely used for payments, especially during times of financial
distress. The general public currently has access to money that is legal tender in the form of
metal coins produced by the U.S. Mint and paper Federal Reserve notes. But the amount of
physical cash used to settle transactions has declined dramatically in recent years and as
more payments activity moves online, it is important to provide consumers and businesses
with a digital public money alternative to physical cash, such as a U.S. CBDC. �Merchants
increasingly prefer credit cards, smartphones and other forms of private payment instruments
over public money in the form of physical cash. They do not distinguish between commercial
bank money and public money when the economy is expanding. But when the economy is
contracting, these merchants may only be willing to accept public money as payment for
goods and services. As a result, Meta believes that developing a U.S. CBDC is essential as
the use of physical cash continues to decline. A U.S. CBDC would be a more efficient and
safer way to preserve the general public’s access to central bank money during times of
financial stress than stockpiling large amounts of physical cash, thereby protecting
consumers and the integrity of the U.S. Dollar.�
CBDC?
In the absence of a U.S. CBDC, domestic and cross-border digital payments are likely to
continue to evolve through private solutions and public sector initiatives, such as FedNow.
Regulatory frameworks are already emerging to support the potential for private sector
solutions to continue to grow. However, one aspect that is central to those regulatory
proposals is the question of reserve composition. So, while private sector solutions could
address some of the existing challenges and inefficiencies in payments, consumer
preferences and risk appetites are not homogenous. One quality that a retail U.S. CBDC has
that other solutions will not have is that there will never be any question about the stability of
a U.S. digital dollar issued by the Federal Reserve, or the reserve composition supporting that
value. �Internationally, work to develop CBDCs is already underway, including at the Bank for
International Settlements, where teams are considering standards for cross-border
interoperability for national CBDCs. Other countries are developing prototypes for
interoperable wholesale CBDCs without input from the United States. The main hurdle these
CBDC prototypes face reportedly relate to technical interoperability. Coordinating technology
and messaging standards is complex and Meta believes the United States should take a
leadership role in the discussions about technical and regulatory harmonization related to
data, privacy, tax and payments laws and capital flow management measures. As outlined in
more detail in response to Q10 below, the participation of the United States in these
discussions would help shape standards, design choices and implement policies that are
consistent with American policy objectives. In the absence of American leadership, other
nations will forge ahead and fill that leadership role in a way that could be detrimental to the
interests of the United States.�
Meta believes that the United States should introduce a well-designed U.S. CBDC without
regard to whether other large economy nations have yet issued their own. The development
and implementation of such a U.S. CBDC would place the United States in a better position to
preserve a leadership role in shaping innovation, as well as the regulations and protections
that are necessary to promote the stability, integrity, and efficiency of the U.S. Dollar and the
United States’ payments system. �If the United States does not assert this leadership role,
several risks could materialize. These include: (1) significant innovations in this area may take
place outside, and independent of, the United States; (2) the United States’ payments
infrastructure may fall behind or be incompatible with new payments rails; (3) other countries’
introduction of a well-designed and widely used CBDC could weaken the U.S. Dollar as the
world’s leading reserve currency, giving rise to national security and economic
competitiveness concerns. Because technological upgrades are progressing at a rapid pace
and are achieving increasing levels of adoption without regard to whether the United States or
other large economy nations, including the United States, have yet issued a CBDC, Meta
believes that U.S. central bank money should be able to interact with these new technologies,
consistent with appropriate regulation. �However, Meta also believes that the United States
should engage with other nations on how best to implement a CBDC. U.S. regulators should
engage with their foreign counterparts and develop a mutually beneficial recognition
framework that permits the U.S. CDBC to be utilized globally as the U.S. Dollar is today. Meta
recognizes the potential complexity of such arrangements, but also notes that the principle of
“substituted compliance” or “equivalence” are well-established methods of international
cooperation and recognition in regards to financial regulation. �
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A U.S. CBDC should be designed to strike an appropriate balance between privacy interests
and preventing illicit financial activity. Consumers and businesses should be provided with the
same option to hold and transfer a U.S. CBDC with appropriate protections on financial and
personally identifiable information, subject to Anti-Money Laundering/Combating the
Financing of Terrorism (AML/CFT) reporting requirements, as in our current system. While
several technologies are either now available or in development that can enhance a CBDC’s
privacy protections while maintaining compliance with anti-financial crimes laws, balancing
privacy concerns depends in large part on a decision regarding who will be responsible for
implementing AML/CFT controls. If this responsibility rests with the Federal Reserve, it would
be difficult to adequately implement AML/CFT controls without government access to more
personal and financial information. A U.S. CBDC need not compromise privacy or security if
the U.S. CBDC is designed with that in mind and privacy considerations are at the forefront of
decisions regarding intermediation and the responsible parties for the implementation of
AML/CFT controls. For example, while there are valid privacy concerns about digital identity
and authentication services, such as facial recognition systems, Meta believes that these
services could be designed to facilitate compliance with financial and legal obligations without
compromising privacy. �Meta believes that the U.S. Congress should determine how to
appropriately balance policy goals and related risks of a U.S. CBDC. Congress should adopt
legislation that provides guidance to executive branch agencies and market innovators as
they develop, implement and regulate these new financial instruments. Meta supports
regulations and policies that encourage development of privacy enhancing technologies and
strong privacy-by-design approaches that also allow for privacy-respecting law enforcement
access.�
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Meta believes that a future U.S. CBDC should be added to the list of payment instruments
that are defined as legal tender in 31 U.S.C. 5103, and therefore required to be accepted in
satisfaction of any tax obligations and for any private obligations that are denominated in U.S.
Dollars. Defining certain payment instruments as legal tender plays an important role in
anchoring the concept of money.��Being legal tender would ensure that a U.S. CBDC would be
more widely used and transferrable, including at the point of sale. By requiring any U.S.
CBDC to be accepted in satisfaction of any tax obligations and for any private obligations that
are denominated in U.S. Dollars, the general public would be more likely to use the U.S.
CBDC in practice, enhancing its credibility and adoption further. Congressional authorizing
legislation or implementing regulations for a U.S. CBDC could include a transition period to
assist businesses and individuals. �
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Meta believes that both depository and non-depository institutions that are subject to
appropriate supervision and regulation should be able to serve as intermediaries, including
nonbank wallet providers, for a U.S. CBDC.��Allowing a broad range of institutions to serve as
intermediaries, including nonbank wallet providers, for a U.S. CBDC would foster competition
among intermediaries and access channels, which would drive innovation, customer service
and customer choices, without in any way compromising the safety, soundness or stability of
the United States’ financial system. Innovation and competition would be expected to drive
down the price of access to the payments system, thereby reducing one of the major
impediments to financial inclusion among low-income individuals. Different types of entities
present different strengths, and competition between a broad range of entities will ensure that
appropriate modes of access and payments channels are developed to meet the needs of the
general public and businesses alike. In furtherance of financial inclusion aims, intermediaries
should commit to demonstrating inclusion as a principle in their business models.
Technologically innovative, robust, and AML/CFT regulation-compliant technology solutions
for customers who may not have access to standard KYC documentation should also be
encouraged. �
Meta believes that only a U.S. CBDC that has offline capabilities would best serve and
promote the stated policy goals, specifically that it be widely transferrable and increase
financial inclusion. �Offline capabilities will promote financial inclusion because certain
segments of the general public do not have access to online payments, and some have no
internet access at all. Meta believes that a U.S. CBDC should have offline capabilities to keep
those without access to online services connected to the payments system. In addition, offline
capabilities promote the policy of wide transferability in periods when there are unexpected
power or internet outages. �
sale? If so, how?
Meta believes that only a U.S. CBDC that is designed to maximize ease of use and
acceptance at the point of sale would best serve and promote an accessible payments
system and an efficient and accessible U.S. Dollar. People are not normally concerned about
using commercial bank or central bank money; they prefer to use money in the form that is
most useful, efficient and inexpensive to transfer. This includes being widely accepted at the
point of sale. A well-designed U.S. CBDC that is open and interoperable, with a wide variety
of intermediaries, and incorporates simple yet strong identification surety, would maximize
ease of use and acceptance at the point of sale. �Moreover, maximizing ease of use and
acceptance at the point of sale would help promote an increase in financial inclusion because
low-income individuals spend proportionally more of their income on necessary goods.
Without the ability to use a U.S. CBDC, whether from earned income or from government
assistance, a U.S. CBDC will offer no assistance to those most in need. Small businesses
rely on a high volume of small value transactions and would benefit from being able to accept
a U.S. CBDC. Similarly, a U.S. CBDC that is not easily used and accepted at the point of sale
would have limited international appeal. Any U.S. CBDC designated as legal tender, as Meta
believes it should be, would be a misnomer if it could not in fact be easily used to discharge
one’s obligations, including at the point of sale. �
Meta believes that the infrastructure necessary to support a U.S. CBDC’s interoperability can
take one of two approaches: (1) formal interlinking connections between intermediaries and
payment systems that permit funds to be transferred from one intermediary or system to
another; and (2) intermediaries offering services in multiple underlying payment systems such
that transfers of balances between payment systems are handled internally by the
intermediary where no formal interconnection exists between the payment systems. For
example, an intermediary that offers (and is licensed to offer) services using multiple
underlying payment systems could process a payment by debiting the sender’s commercial
bank money balance and crediting the recipient’s U.S. CBDC balance.�Meta further believes
that new technical standards may be needed to support such interoperability and that the
U.S. government should support efforts to develop these standards, both through private
sector channels, as well as efforts underway at international standard-setting bodies. These
standards should include technology standards as well as data standards, including
messaging standards such as data fields in payment instructions to identify a recipient’s
wallet address or account number, as applicable, throughout the payment chain, no matter
the intermediary or payment system used by the recipient. Meta notes that private efforts to
create technology and data standards are presently underway in the digital asset ecosystem.
For example, standardization of token specifications has already permitted significant
innovation and interoperability. �Meta believes that the United States should play a significant
role in developing and shaping these standards so that they best serve and promote U.S.
policy goals. These technology standards could include the standardization of anti-money
laundering, criminal or terrorist financing, know-your-customer and sanctions monitoring and
reporting capabilities and requiring that they are built into intermediary’s products and the
payment rails. Moreover, current regulatory requirements and methods for cross-border data
sharing will require a reassessment. If the United States does not play such a role in helping
industry and standard-setting bodies develop these standards, the standards that emerge
may not serve the national security and policy goals of the United States. Worse, if the U.S.
Dollar was incompatible with technology and messaging standards developed and
implemented by other countries, this could put at risk the stability, integrity, and efficiency of
the United States’ monetary, financial, and payment system.�
CBDC?
Meta believes that technological innovations in this space will follow once the Federal
Reserve and the U.S. government provide guidance in the form of design choices that weigh
potentially competing policy prerogatives. Technology should not be considered a limiting
factor to policy choices; instead, policy choices will shape what technological innovations are
required for a U.S. CBDC if they do not yet exist. In a future use case, we can imagine CBDC
serving as a widely accessible digital currency that facilitates access to virtual experiences in
the metaverse for diverse individuals who may not be able or interested in holding other
virtual assets. CBDC could allow these individuals to move their digital dollars from their
virtual wallets to unlock experiences, education tools or digital goods in a virtual environment,
and then to exit or transfer from one virtual world into another through the use of their digital
dollars. �
benefits of a CBDC?
Meta believes that both interoperability and an open system are most vital to best serve and
promote the stated policy goals and the potential benefits of a U.S. CBDC, both with respect
to traditional payment rails and the emerging digital economy. With respect to both, this
means ensuring any U.S. CBDC should be technology neutral and that the system is open to
a range of licensed intermediaries, including nonbank wallet providers, subject to appropriate
supervision and regulation. Meta believes that while certain tradeoffs may exist between
policies, particularly between privacy and national security concerns, these tradeoffs are not
new or specific to a U.S. CBDC and the design of any U.S. CBDC would reflect these
tradeoffs.�
_________________________________________________________________________
Merchant Advisory Group
Industry
Trade Organization
Country
State
Minnesota
Email
beth.provenzano@merchantadvisorygroup.org
A CBDC must address the lack of competition in the domestic U.S. payments system, which
has led to high fees and comparatively low quality. By offering maximum flexibility on who can
participate in the storage and transfer of a reliable, safe, cash-like CBDC, the Board could
meaningfully foster payments competition and thereby lower costs, improve quality, and
increase public access to the U.S. digital payments ecosystem. �Currently, debit and credit
cards comprise the vast majority of digital payment transactions at U.S. merchants.
Merchants and consumers incur high costs for these transactions. When a consumer uses a
credit or debit card to complete a purchase, payment card networks like Visa and Mastercard
and their issuing banks charge the merchant interchange and network fees to process the
payment. Those fees have risen sharply, particularly on digital transactions. Between 2009
and 2025, merchants’ overall costs of acceptance will have doubled, much of it driven by
rising fees and increased use of payment types—such as mobile or virtual card
transactions—which the payment networks charge even higher fees to process. �This
increase in merchant-side fees has occurred despite lower issuing bank costs for card
transactions. The resulting increased disparity between processing costs, interest expenses,
and fees charged to merchants underscores that the payments markets are not functioning
properly in the U.S., where merchants pay some of the highest acceptance fees in the world.
This April, in the midst of continued pandemic disruptions and rising inflation, Visa and
Mastercard implemented rate changes estimated to cause a $1.2 billion increase in
acceptance fees disproportionately affecting digital transactions. Because they operate in
highly competitive, low-margin environments, merchants must pass these fees on to
consumers in the form of higher retail prices. �The current marketplace lacks the competition
necessary for the free market to set appropriate pricing. This lack of competition has harmed
U.S. consumers and the economy. In recently intervening to block Visa’s acquisition of Plaid,
which provides “pay-by-bank” technology that could allow U.S. consumers to pay instantly for
goods and services directly from their bank accounts, the Department of Justice noted that
Visa has a durable 70 percent share of the online debit market, resulting in what the
Department of Justice described as “monopoly power.” The creation of a CBDC should foster
competition by enabling other avenues for value to be transferred when an electronic
transaction occurs. In a functioning payments market, competition leads to innovation, which
includes lower fraud. Today, the majority of card fraud is concentrated in card-not-present
transactions including ecommerce. The Board has an opportunity to build a CBDC with
enhanced security tools and features to prevent and reduce fraud. This in turn would
encourage other market participants to drive efforts to meaningfully reduce fraud in the
system. �A CBDC could bring greater competition to the payments industry to improve
innovation and lower transaction costs. This is in keeping with the president’s recent
Executive Order, which encouraged the Board to analyze how “CBDCs could improve the
efficiency and reduce the costs of existing and future payments systems.” �In keeping with this
Order, it is imperative that the Board implement a CBDC in a way that maximizes competition
and drives down costs in the existing U.S. payments system. A set of CBDC design principles
should be adopted that would fully open the market for CBDC services and maximize users’
ability to freely store and transfer value. By adhering to those design principles, the Board
could modernize the U.S. payments system while addressing high domestic and cross-border
payments fees.�
A CBDC would be the ideal approach to improving and complementing the U.S. payments
ecosystem. A well-designed and implemented CBDC could quickly improve the U.S.
payments system and meet the growing digital payments needs of consumers. This can be
accomplished in a way that complements and enhances the existing financial sector. As a
currency directly issued by the Federal Reserve, a CBDC would address the demand for an
efficient digital currency.��First, CBDCs are well-suited to the digital way that consumers store
and transfer their money, enabling digital transactions to clear instantly and reliably. As
discussed above, the current status quo leaves as the dominant option for paying for goods
existing bank-based payment networks which are relatively slow (taking days for settlement),
inefficient, and costly. Indeed, the growing adoption and use of stablecoins and other
cryptocurrencies demonstrate the demand for more efficient ways to store and transfer digital
value. Notwithstanding implementation of a CBDC, the MAG supports the Board’s and other
agencies’ ongoing work to ensure that stablecoins are properly regulated so that their
advantages to the U.S. payments ecosystem are realized and their risks minimized. �The
ability for a CBDC to effectuate secure and real-time payments could spur competition and
innovation in the financial sector. As the discussion paper states, faster payment alternatives
hold promise to reduce the costs of “lower-value payments,” while noting that “the costs and
fees for certain payment methods (e.g., card transactions) may remain comparatively high for
some parties to the extent that instant payments do not serve as a close substitute for those
methods.” Deployment of a CBDC could address the Board’s perceived limitation of faster
payments, potentially reducing the costs of all transaction values.��Without a CBDC that
promotes competition and innovation in the retail payments sector, including, to the extent the
CBDC is intermediated, allowing more types of commercial entities to serve as
intermediaries, U.S. merchants will continue to pay some of the highest costs of acceptance
in the world while continuing to shoulder some of the highest rates of fraud. As the use of
traditional cash decreases, payment card networks and banks will likely continue to increase
fees for digital purchases, where competition is most limited. But a CBDC that provides a
viable alternative means of transferring legal tender would immediately enhance competition.
�A CBDC that spurs competition and innovation in the payments industry should be
considered complementary to the financial sector and should be pursued by the Board.
Indeed, the Board recognizes that a CBDC could “provide a safe foundation for private-sector
innovations to meet current and future needs and demands for payment services.” Existing
payments entities in the private sector, including processors, banks, and fintech companies,
could benefit from the foundation provided by a CBDC. Users could have the option to store
and transfer their CBDC using existing payments intermediaries. Payments entities would
have to compete for volume by offering cost-effective value-add services, thereby advancing
innovation, driving down system costs, and increasing digital transaction output systemwide.
The competition fostered by a CBDC has the potential to benefit all stakeholders, including
existing financial players, consumers, and merchants.��Moreover, a CBDC can complement
other real-time payments rails that are new to the market or are in development, like FedNow,
the public money transfer alternative set to launch in 2023. While FedNow will provide an
instant, irrevocable, and less expensive payments rail, a CBDC can offer even greater built-in
functionality. Among other things, FedNow balances can be held only by banks, so FedNow
will likely require users to have a bank account. In contrast, a CBDC could be designed to be
held through non-bank intermediaries without the user having a bank account, like cash, and
based on more flexible technology. For example, a CBDC has the potential to support smart
contracts and efficient automation of payments, including government benefit disbursements
and redemption. Moreover, ongoing improvements to FedNow could make it a useful
alternative to a CBDC for certain types of transactions if a central bank prefers to offload the
costs of maintaining the CBDC ledger. A CBDC would be an important complement and
supplement to FedNow and other real-time payments solutions.��The high costs of card-based
transactions have persisted despite decades of attempts to regulate payments markets and
foster competition. A CBDC provides a unique opportunity to address the fundamental lack of
competition and resulting durable market power held by a very few legacy players in the U.S.
payments ecosystem.�
inclusion?
A well-designed CBDC could positively impact financial inclusion. Ensuring open participation
in the CBDC ecosystem would promote financial inclusion and give financial access to the
economically vulnerable, a stated priority of the Board. In 2020, 5% of U.S. households were
unbanked and 13% were underbanked, meaning these households did not have a bank
account or did not have adequate access to financial services. As traditional cash declines,
ensuring open access to a central bank currency becomes even more imperative. Today,
banks’ minimum balance requirements, high fees, distrust for private banks, and privacy
concerns consistently rank as the top reasons given for being unbanked. �A CBDC could
directly address the needs of the unbanked by providing users a means to safely store and
transfer money with a mobile phone or other device. Central banks that are piloting or have
launched CBDCs recognize the value of CBDCs in financial inclusion. �Offline CBDC
functionality would promote financial inclusion, especially as the use of cash declines. To the
extent that a CBDC offers an alternative to more costly payment methods that are lower
quality and less functional, a CBDC could drive down the cost of traditional payments, reduce
the barriers to financial inclusion, and introduce greater functionality throughout the payments
system.��Design elements should incorporate the reasons why certain households remain
unbanked: a CBDC account should be easily accessible and simple to use, protect privacy
(while remaining traceable and auditable), clear at par like cash or checks, and it should not
have minimum balance requirements. Importantly, users should not be limited to holding their
CBDC at banks. Entrusting only financial institutions as CBDC access points would have a
negative impact on financial inclusion because many unbanked consumers do not trust banks
or otherwise do not want to open a bank account. �The MAG supports a CBDC designed to
promote financial inclusion and provide ubiquitous access to the digital financial system.�
stability?
In an era of declining cash usage, ensuring open participation in the CBDC ecosystem also
would promote financial inclusion and give financial access to the economically vulnerable, a
stated priority of the Board. Ensuring open participation in the CBDC ecosystem would
promote financial inclusion and give financial access to the economically vulnerable, a stated
priority of the Board. In 2020, 5% of U.S. households were unbanked and 13% were
underbanked, meaning these households did not have a bank account or did not have
adequate access to financial services. As traditional cash declines, ensuring open access to a
central bank currency becomes even more imperative. Today, banks’ minimum balance
requirements, high fees, distrust for private banks, and privacy concerns consistently rank as
the top reasons given for being unbanked. �A CBDC could directly address the needs of the
unbanked by providing users a means to safely store and transfer money with a mobile phone
or other device. Central banks that are piloting or have launched CBDCs recognize the value
of CBDCs in financial inclusion. �Offline CBDC functionality would promote financial inclusion,
especially as the use of cash declines. To the extent that a CBDC offers an alternative to
more costly payment methods that are lower quality and less functional, a CBDC could drive
down the cost of traditional payments, reduce the barriers to financial inclusion, and introduce
greater functionality throughout the payments system.��Design elements should incorporate the
reasons why certain households remain unbanked: a CBDC account should be easily
accessible and simple to use, protect privacy (while remaining traceable and auditable), clear
at par like cash or checks, and it should not have minimum balance requirements.
Importantly, users should not be limited to holding their CBDC at banks. Entrusting only
financial institutions as CBDC access points would have a negative impact on financial
inclusion because many unbanked consumers do not trust banks or otherwise do not want to
open a bank account. �The MAG supports a CBDC designed to promote financial inclusion
and provide ubiquitous access to the digital financial systems.�
CBDC?
ecosystem, which would otherwise continue to be hampered by a lack of competition and
high fees. A well-designed and implemented CBDC could quickly improve the U.S. payments
system and meet the growing digital payments needs of consumers. This can be
efficient digital currency. �First, CBDCs are well-suited to the digital way that consumers store
payments ecosystem. �
A critical consideration of a CBDC is balancing the public’s interest to transact privately and
anonymously with the necessity to minimize illicit activity. This balance is best achieved if
CBDC transactions can be anonymous to private participants while still subject to the same
laws and regulations that apply to the existing payments space (e.g., AML/KYC). That way, a
CBDC would emulate cash with the ability to transact quickly and privately, while providing
law enforcement the ability to deter, investigate and track criminal activity.��A well-designed
CBDC also could lower U.S. payment fraud. Leveraging the immutable ledger technology
employed by cryptocurrencies, CBDCs can be resilient to payment fraud, especially if existing
authentication and security features are embedded into the transfer process from the outset.
Nonetheless, the Board should address and provide clear guidance as to the allocation of the
risks of fraud. As a starting point, a CBDC should operate like cash, where a transfer is final
upon delivery, and absent fraud, the risk of loss rests with whoever has custody of the money
at the time of loss. Of course, the Board should implement additional CBDC features that
could facilitate recovery of CBDC in the event a user loses or cannot access their CBDC.�
The MAG’s understanding of the implications of defining CBDC as “legal tender” is that CBDC
would have to be accepted for the payment of all debts, public charges, taxes, and dues,
pursuant to 31 U.S.C. 5103. To that extent, a CBDC should be legal tender. For clarity, the
MAG does not support a requirement that would force merchants to accept CBDC as
payment for goods and services.
The Board should not impose a minimum balance requirement on a user’s account or wallet.
A minimum requirement is unnecessary and would be contrary to the Board’s stated goal to
prioritize financial inclusion. And while the MAG does not have a position on whether the
Board should limit the total amount of CBDC an end user or single account could hold, any
limits should take into account that certain types of users may have needs for high limits.
Large merchants, for example, would have to be able to accept substantial amounts of
CBDC, especially if the CBDC becomes widely used by consumers. A limitation that would
have the effect of requiring holders such as merchants to immediately convert CBDC would
reduce the utility of the CBDC or effectively prevent a merchant from accepting CBDC at the
point of sale (so as to avoid the possibility that a consumer’s payment will fail simply because
the merchant temporarily hit its balance limit). Likewise, businesses that hold large cash
reserves should be permitted to hold CBDCs in the same manner.��One option to address the
needs of different users is to provide different limits for different classes of users. The
Bahamas, for example, offers individual and merchant CBDC accounts, each with different
holding and transaction limits. The Board could follow a similar approach to balance its
concerns about capping CBDC holdings with merchants’ needs to conduct their business
effectively.�
Although the Board’s discussion paper suggests that a U.S. CBDC should likely be
intermediated—meaning that consumers cannot interact directly with the Federal Reserve to
open CBDC accounts or transfer their CBDC—the MAG does not believe this should be a
foregone conclusion. There are several advantages to issuing CBDCs directly to users. Such
a CBDC would most closely resemble the treatment of cash while also adding the superior
transferability of digital money. A direct CBDC also would be the least complex to implement
and the easiest for the Board to regulate because it would involve fewer private
intermediaries, which increase system costs. At the same time, it could create a foundation
for private-sector competition and innovation. �A direct CBDC or intermediated CBDC with
separate accounts for each user would enable the government to easily distribute payments
right to consumers. For example, the government could seamlessly transfer stimulus
payments directly into users’ CBDC wallets rather than mailing paper checks or payment
cards issued by financial intermediaries. During the COVID-19 pandemic, the Treasury
Department provided nearly $25 billion in stimulus payments via Visa prepaid debit cards
issued by Metabank, an issuing bank exempt from regulated debit fee caps. Without a better
way to transfer stimulus funds, merchants paid hundreds of millions in fees to Metabank, as
these prepaid debit cards cleared at credit-like unregulated rates. A direct-to-consumer
CBDC—one that also could be programmed for certain uses—could correct this problem.��If
the Board determines that a U.S. CBDC should be intermediated such that only private sector
entities may offer digital wallets to facilitate CBDC holdings and payments, the MAG believes
that it is critical that the system be designed to ensure maximum participation. As the Board
notes, potential players in an intermediated CBDC system would have to operate in an “open
market for CBDC services.” The current digital payments system is dominated by a few
players—i.e., banks—which have a legal monopoly over access to Federal Reserve master
accounts through which existing USD payment systems operate, as well as a monopoly over
issuing bank status in card schemes. The current payments system is thus marked by high
fees and comparatively low quality and has led to unnecessary costs imposed on the storage
and transfer of money. A CBDC implementation should not replicate the same paradigm. To
avoid this outcome, nonbanks should be permitted to serve as CBDC intermediaries (subject
to obtaining necessary licenses and satisfying proportionate, risk-based
requirements).��Accordingly, a CBDC should create the ability for value to be stored and
transferred between parties in a seamless manner. Importantly, a CBDC design should not
unnecessarily restrict how users can store or transfer their CBDC. Likewise, the Board should
not unnecessarily restrict which intermediaries can participate in effectuating CBDC
payments, and the Board should take care not to limit participation to traditional banks. The
MAG believes the goals of a CBDC can best be achieved if there exists a healthy, competitive
marketplace with many participants innovating and competing to offer CBDC users the best
functionality for the lowest price.�
To maximize CBDC’s value as a ubiquitous payment method, a CBDC should ideally have
both online and offline functionality. When users are online (i.e., connected to the internet),
the transfer of CBDC is communicated to the network and can be memorialized virtually
instantly, resulting in seamless and automated processing and clearing. Because these online
transactions are cleared instantly, they are final and irrevocable. Limiting the potential use of
a CBDC to online environments, however, would reduce its utility and ubiquity. Indeed,
businesses of all sizes commonly experience periodic network outages, and history has
shown through natural disasters that there will be moments when online connectivity is not
available but access to currency is imperative. The Board should therefore ensure that a
CBDC remains functional when users are offline. �Implementing offline CBDC functionality
may introduce complexity and fraud concerns. Because the network is unaware of the offline
transaction, it cannot verify that the user has sufficient CBDC for a transaction, nor can it
prevent a user from double-spending CBDC. While this risk does not exist with cash, which
by its nature operates offline, such an event would reduce consumer confidence in the
CBDC.��Although these added risks make offline CBDC implementation more complex than
online implementation, there are existing security protocols designed to solve for the risks of
offline CBDC. EMV technology is adopted throughout the world (except in the U.S.) to provide
offline as well as online authentication; a common offline implementation is transit, where
transactions are stored and forwarded by batch later. Some central banks are in various
stages of implementing CBDC that can operate in both online and offline environments.
Because a secure offline CBDC solution is considerably more challenging to achieve, the
Board could implement a two-phased approach and launch an online CBDC while continuing
to develop and pilot offline functionality. The MAG’s ultimate goal is for a reliable and safe
CBDC that can be used in both online and offline environments.�
sale? If so, how?
A CBDC should facilitate seamless payments by maximizing ease of use at any point of
interaction or transfer. One of the potential advantages of a CBDC is the ability for it to be
easily used by consumers. If implemented with simple technology, a well-designed CBDC
could enable users to transfer CBDC without more than a low-end mobile phone. Accordingly,
it is crucial that merchants not be required to implement major infrastructure changes to
accept CBDC. To ensure that CBDCs have maximum applicability to different users and use
cases, CBDC architecture should be flexible to easily allow technological upgrades or
value-added services to be layered on top. �Additionally, the Board should ensure that the
CBDC is easily interoperable with current (and future) payment methods. For example, a
consumer (at their discretion) should be able to effectuate the transfer of CBDC to a merchant
using a variety of payment methods, including payment cards, digital wallets, or simply direct
transfers between CBDC wallets. Likewise, users should be permitted maximum flexibility to
store their CBDCs. Currently, cash deposits can be transferred using a variety of payment
rails, and CBDC should allow for users to replicate that environment. In fact, the ability to use
CBDC ubiquitously across payment forms would foster innovation in the payments system
because private actors would compete for CBDC transaction volume and deposits.�
CBDC?
benefits of a CBDC?
The implementation of a CBDC has the potential to substantially alter the U.S. payments
landscape. Done well, it marks a generational opportunity to modernize the payments system,
empower consumers, promote competition, and foster innovation. However, if a CBDC does
not include carefully considered policy and design elements, inefficiencies in the current
payments system—marked as it is by dominant players with durable market power—will be
extended into the future, and a valuable, once-in-a-generation opportunity will have been
lost.��To ensure the best design, it is imperative that the Board solicit and reflect the demands
of consumers and incorporate the voices of key stakeholders when implementing a CBDC.
Merchants, who are particularly impacted by changes to the payments landscape, should be
involved early and often throughout the process. Merchants will need to understand and
provide feedback on proposed fraud and security measures, and they will need detailed
specifications for reconciliation with their existing payments processes. A lack of merchant
buy-in and readiness could jeopardize the CBDC’s viability and widespread
adoption.��Accordingly, the MAG strongly encourages the Board to continue holding forums
and establish workgroups that include merchants to weigh in on the design and
implementation of a CBDC, and to help merchants understand what to expect throughout all
stages of development. Incorporating the feedback of key stakeholders like merchants will
increase public support and adoption and will better ensure that a U.S. CBDC ecosystem
works efficiently, competitively, and fairly. �The MAG appreciates the opportunity to provide its
comments to the Board regarding the creation of a potential U.S. CBDC. Ultimately, a
well-designed CBDC has the potential to modernize the U.S. payments system to meet
consumers’ need to transact digitally, while also injecting needed competition to spur
innovation, greater functionality, and reduced costs that will benefit consumers and the
economy as a whole.�
_________________________________________________________________________
Catalyst Corporate FCU
Industry
Credit Union
Country
State
Texas
Email
keelingm@catalystcorp.org
The structure of a new CBDC needs to be reconsidered from the outline in the RFC. First,
treasury coined, dollar-based bank-issued digital currency (if technologically possible) or
Fed-backed stablecoins would allow for a new type of account that is held on a bank’s
balance sheet. Second, this could allow for deposits to be FDIC insured as opposed to a Fed
liability that creates a risk-free advantaged deposit account outside the private sector; thus,
the ability for the private sector to continue to use the new digital deposits to lend back to the
market and make investments.
The above referenced structure could give non-bank providers a place in the services market
much as they have today. They must still go through a regulated FI and follow MSB-type
procedures. These entities could potentially have lower KYC requirements within AML limits
for those that find it difficult to open an account at an FI, allowing for inclusion to those outside
of the current financial services marketplace.
inclusion?
As presented, there is concern that this could be negative for inclusion as it further separates
the unbanked from a relationship with an FI for loans, investments and other products that
help them to build a successful financial condition.
While we support the Fed’s stated goals, we do not believe a Fed-issued liability will positively
accomplish the ends. With a Fed liability taking funds out of the private sector, new and
unproven monetary policy methods would need to be developed. These new tools might
include expiration dates for digital currency or even impose a negative rate applied during
market stress. �With a bank-issued digital currency, the Fed’s current toolset would be the
same. �
stability?
As referenced in the RFC, there is concern that a CBDC could destabilize the market in
several ways. One of the worries is the potential disruption of deposits flowing from the
private sector to the Fed’s balance sheet. Many smaller FI’s and their communities would be
negatively affected by the resulting loss of funds to lend and invest. The potential outflow
could be significant across the financial sector upsetting markets. Potential remedies to
replace those deposits of well-regulated and well-capitalized institutions would necessarily
raise cost of funds.
Please see #5. With the loss of deposits to lend, the public may be forced to go to riskier
lending alternatives. This is neither inclusive or positive.
No comment
Yes, as there will always be consumers that trust cash preeminently. The downside is that
there are currently more places that won’t accept cash and this has been exacerbated by the
effects of our collective Covid experience.�
CBDC?
Today, non-bank issued digital currencies are speculative and mainly used for investment
purposes, and understandably do not have the confidence of the general public. The concept
of the US dollar as the world’s reserve would be diminished if there are safer, secure and
pseudo-anonymous options. So, yes, we need to be competitive.
As stated above, this is a serious consideration. The main reasons that the world holds US
dollars have to do with the breadth and stability of our markets, confidence and faith in our
government, and the rule of law in the US over other alternatives. Cash is still available until
a US dollar based, Fed-backed digital currency is rolled out. While other countries are trying
to solve the same issues we have some time, but we need to make sure our plan is properly
vetted and not rush too quickly.
No comment.
Once again, a bank-issued, Fed-backed stablecoin could satisfy consumer privacy concerns
within the FI’s KYC and AML policies and procedures. �Many consumers would be skeptical
using a CBDC for anonymity with “the government” that has oversight over daily transactions.
�
No comment.
Yes, if it is a CBDC as defined in the RFC. Otherwise, it doesn’t matter.
This could be decided by the fair market with competition for deposits. If this were a Fed
liability, the answer should be no, as it would already be an advantaged risk-free deposit
product to the rest of the market. Additionally, to minimize the opportunity for arbitrage the
CBDC should be on par to the US Dollar.
This should probably be answered within regulatory guidelines just as cash is limited and
monitored. FI’s KYC and internal systems would be able to oversee activity, flag suspected
activity and continue to file SAR’s.��If the CBDC existed as proposed in the RFC, then there
would need to be limits to how much an individual could possess, so as to limit the runoff from
the private sector. Additionally, this would leave all responsibility to the Fed for monitoring the
balances and transactions of individual users. How would the Fed manage these individual
accounts for overages? Would the Fed limit this to a single FI or non-bank wallet as opposed
to a consumer that might have multiple relationships and wants to maximize each one?�
Any chartered, regulated FI should be the initial entrance point to the digital currency. The
non-bank providers will then fall under normal KYC, AML and other oversight necessary to
ensure safety and soundness.�
This would be best, and there are technologies available that could help make this work with
proper oversight. �
sale? If so, how?
Yes. This will also encourage the use of the digital currency. Just another reason to make
sure it is bank-issued and regulated. These POS dollars need to be monitored as merchant
activity is today. FI’s and their non-bank providers are in the best position to effectively do
this.
A wholesale CBDC would be most effective for this type of deployment and should only be
used by the central bank or other chartered FI’s. �
CBDC?
No comment.
benefits of a CBDC?
No comment.
_________________________________________________________________________
Stellar Development Foundation
Industry
Technology Company
Country
State
California
Email
gabriel@stellar.org
inclusion?
A well-designed CBDC could provide a positive effect to inclusion and the economy by
expanding access to and usage of affordable financial services. A CBDC could also
contribute to green inclusive sustainable growth.��Expand modes of payments beyond financial
institutions��Today in the United States, 6.9% of individuals are unbanked and account
ownership is slightly lower than in other high income countries. The top two reasons cited for
this are that adults do not have sufficient funds to maintain account balances at banks and
their mistrust of banks.��The development of a CBDC could support financial inclusion through
the design of low-cost solutions for consumers and MSMEs, specifically merchants accepting
payments. A CBDC issued on the appropriate infrastructure could lead to the development of
a real-time payments system, allowing for transactions to settle and finalize in seconds.
�Reduce merchant acceptance costs of digital payments��One of the main friction points for the
adoption of digital payments by merchants is acceptance costs and fees.��Costs remain high
for merchants accepting retail payments due to the need for multiple intermediaries to
complete a transaction. In recent years, innovation brought more affordable tools for retailers
such as QR payments and mobile money. However, fees to accept a digital payment made
by a consumer through a debit and/or credit card are still high for merchants. �A CBDC built
using blockchain would reduce merchants' acceptance costs due to the efficiency to move
value and the removal of intermediaries required to process a transaction. �Transition
individuals and MSMEs from the informal to the formal economy��According to data from the
World Bank, the informal economy in the United States amounts to 8.1 percent of the GDP. A
CBDC could be the entry point to individuals and MSMEs to the formal financial system and
economy. A CBDC could help those operating in the informal economy to start building a
credit history based on their payments behavior. This would allow them to access new
financial products, from lending and savings to investments and insurance. �Develop an
innovative and competitive local ecosystem �The United States has one of the most innovative
financial markets in the world. Having a CBDC could be an opportunity for the financial sector
to enhance further innovative services for the unbanked and underbanked. �In a two-tier
distribution model, the Federal Reserve would issue a CBDC and remain in control of
monetary policy and financial entities would distribute a CBDC to consumers and MSMEs,
minimizing the risk of banking disintermediation that affects the cost of credit and financial
stability. If the CBDC were issued on an open blockchain, such as on the Stellar network, the
Federal Reserve would also ensure that trusted financial entities selected by the Federal
Reserve can validate and process payments, which enables competition. �This architecture
would in turn incentivize the development of innovative solutions by financial entities in a
competitive and secure environment as consumer needs evolve. A clear example of this
could be offline products, specifically in rural regions or for vulnerable groups with a low rate
of digital and financial literacy. � �Reduce the cost of cross-border payments �The global
average cost of cross-border payments remains high at 6.04 percent of the amount sent. This
is more than double the United Nations’ Sustainable Development Goal target of 3 percent.
The high costs of remittances have real-world impacts on individuals and businesses. High
costs affect, for example, migrants seeking to send money home to their families, MSMEs
importing products from foreign suppliers. �A CBDC built on an open network would enable
cross-border payments including remittances and business-to-business payments that finalize
in seconds and cost fractions of a cent, mainly due to the reduction of intermediation. For
example, the total cost for senders in the United States to receivers in Colombia amounts to
1.6% on the Stellar network. This is far less than the average cost of sending funds using the
centralized payments system, which amounts to 5.3% according to data from the World Bank
Group.��Foster interoperability��A CBDC built on an open system could provide instant real-time
payments in central bank money, so payees could receive funds instantly. The core ledger
could be built with relatively simple functionality, so that it would be as efficient and
cost-effective as possible. �An effective design model should prioritize interoperability,
permitting that any CBDC account would be able to pay any other CBDC account, whether
this is a commercial bank, a digital wallet provider, or other financial entity. These solutions
and products can be built on an open system to enable a CBDC to meet payment needs as
they evolve. A CBDC should also be interoperable with cash and electronic money at a
domestic and retail level.
stability?
CBDC?
sale? If so, how?
CBDC?
benefits of a CBDC?
_________________________________________________________________________
PayPal
Industry
Country
State
California
Email
amykim@paypal.com
[Please see our more fulsome letter sent separately, which also contains citations.] �Across
the globe, governments are actively studying the merits of CBDCs, with 87 countries
(representing over 90 percent of global GDP) noting active exploration. We believe the United
States should take a leadership role in this space. � �The U.S. Dollar plays a critical role not just
domestically, but across the globe. As the primary global reserve currency, the dollar is used
to conduct international transactions based on the availability and prevalence of financial
instruments denominated in dollars as well as the depth and integrity of U.S. financial
markets. The relative stability of the dollar against other currencies instills trust and
confidence that dollars will serve as an effective medium of exchange and store of value. The
importance of dollars in international transactions makes the Federal Reserve one of the
leading central banks that can provide international liquidity.� �The importance of the U.S. dollar
and its ubiquity in international payments is based on many factors, including the country’s
underlying economic infrastructure, governmental and financial stability, rule of law, and
global trust. While several countries aim for their currencies to play a greater role
internationally to reduce dependence on the dollar, the persistent strength of the dollar
indicates the formidable advantages it enjoys.� �If the U.S. dollar is to remain the world’s
primary reserve currency in the unfolding century, then being at the forefront of technological
innovation that reduces friction in payments should be an area of focus. Accordingly, the U.S.
government and the Board should actively explore and consider new digital forms of money
that can most effectively operate in an increasingly digital world. PayPal believes that a digital
dollar could be a logical next iteration to futureproof the U.S. dollar. A properly designed
digital dollar could promote diversification of the payment system and spur financial
innovation, inclusion, and global currency interoperability.� �To maximize the benefits of a
CBDC, the private sector should play a key role in developing new technologies, partnering
with the Fed on implementation and distribution, and expanding digital dollar access to the un
- and underbanked to drive financial health. � �Underpinning our response is a belief in certain
core tenets of a digital dollar. To that end, PayPal agrees with the Board that “a potential U.S.
CBDC, if one were created, would best serve the needs of the United States by being
privacy-protected, intermediated, widely transferable, and identity-verified.” � �Building on these
principles, we believe a future digital dollar should:�- Operate alongside existing and future
payment options and innovations, including but not limited to ACH, wire, credit, and private
digital currency payment solutions;�- Be offered to retail and wholesale users ;�- Be facilitated
and distributed through accounts and digital wallets at regulated banks and financial services
companies, such as trust companies and money transmitters; �- Ensure individual privacy,
while satisfying law enforcement requirements;�- Promote global digital currency and network
interoperability;�- Be flexible in its design, so as to account for future technology, policy, or
economic changes; and �- Encourage private sector innovation and collaboration.
[Please see our more fulsome letter sent separately, which also contains citations.] �We
believe that financial inclusion and access are key prerequisites to achieving and maintaining
the broader goal of “Financial Health.” Financial Health is a framework for assessing how well
a person’s daily financial systems help people cope, build resilience, and create opportunities
to pursue one’s goals. Whether rural or urban, in countries both developed and developing,
people share a common aspiration for financial health. �Being financially healthy is both a
feeling and a metric. It’s the sense of security gained by knowing you have enough money to
pay the bills and have a cushion for a rainy day or unexpected event. It’s the ability to develop
and stick to a plan and achieve a goal. Helping people to accomplish and/or maintain strong
financial health is at the heart of PayPal’s mission to democratize the movement and
management of money. � �We firmly believe that how we pay for goods and services is
fundamental to financial health, meaning that consumers must have choice in payment
methods, understanding of payment options, visibility into their financial standing, financial
options to achieve their goals, and the ability to exercise those needs in the coming digital
age. Central bank digital currencies are an integral part of that overall framework.��As a
financial technology platform bringing together consumers and merchants for over 20 years,
we have played an instrumental role in fostering the growth of digital finance. PayPal helped
enable the digital evolution of payments with the onset of online commerce. We believe that
digital assets will help to enable the next generation of payments. In furtherance of that vision,
we now enable our customers to buy, sell, hold, and check out with 4 select cryptocurrencies.
The advent of stablecoins presents another option that could be widely used, as it is pegged
to fiat currency and could enable faster cheaper financial transactions in the digital and
coming web3 environment. And, we would want to develop the ability to hold and transfer
CBDC through PayPal as well. �Depending on how a CBDC is designed, it could potentially
fulfill currently unmet and future payments needs. For example:�- Further digitization of the
small business sector, which makes up 99% of all businesses in the US, can be facilitated by
a retail CBDC. �- Sending international remittances to loved ones overseas may incur lower
fees and take fewer days in a more efficient infrastructure. �- The disbursement of
government-to-person (G2P) payments could take place quickly at scale, which can provide
critical relief in times of disaster and crisis. �These are tremendous opportunities, and they
would be dependent on the design choices of CBDCs, which are complex and need to be
carefully researched.
inclusion?
[Please see our more fulsome letter sent separately, which also contains citations.] �The
Board’s paper identifies the potential for greater financial inclusion and access as among a
CBDC’s greatest potential benefits. We agree. It is well documented that nearly 7.1 million
households in America remain unbanked, with the majority of such households being Black
and Hispanic. Despite some evidence of progress, roughly 13.8% of Black households and
12.2% of Hispanic households were unbanked according to a 2019 FDIC survey. Notably, a
separate 2021 survey found that one of the primary reasons individuals remain unbanked is
due to distrust of banks given experience with surprise punitive fees, such as overdraft. That
is why facilitating access through different regulated financial intermediaries is important to
the distribution of a U.S.CBDC.� �The underbanked represent an additional subsegment of the
U.S.population that is currently underserved by the financial system. Approximately 20% of
U.S.households are considered underbanked, meaning that they used alternative financial
products outside the banking system. 30% of Americans worry daily about the amount of debt
they carry and 32% have difficulty paying for basic household expenses including food. A
further 67% of Americans are not financially healthy, meaning they have little financial
cushion if economic conditions worsen. 69% of Americans are living paycheck-to-paycheck,
meaning they would experience financial difficulty if paychecks were delayed for a week. And,
77% of Americans report feeling anxious about their financial situation.� �Concurrently, there is
growing global evidence of gradual decreases in the use of physical cash. Though likely
impacted by the COVID-19 pandemic, a recent survey found that cash only accounted for
19% of transactions by individuals in 2020, marking a decline of seven percentage points
from 2019. An early 2021 survey conducted by PayPal found that 26% of consumers in the
United States hoped to use less cash during the year and 58% liked the idea of not having to
carry cash or coins. Additionally, 73% of those surveyed in the United States stated they
would be likely to use a secure U.S. CBDC that is usable online and everywhere cash is
accepted. That percentage was even higher with younger demographics, including
millennials.� �Against this backdrop, the potential appeal and inclusionary benefits of a digital
dollar begin to crystallize. � �If a U.S. CBDC were made available through a digital wallet
service offered by regulated financial services firms, it is likely that a meaningful percentage
of currently un- and underbanked individuals would find benefits from a digital dollar.. There
are numerous and complex causes that contribute to unbanked and underbanked
populations. We need to study these and address them individually – there will be no one
solution to this global problem. It is a problem that deserves thought and action, which may
need to come in small doses to test solutions for effectiveness, or recalibrate to achieve the
desired results. While a U.S. CBDC may not succeed in converting all unbanked and
underbanked persons into those that fully utilize the needed financial services, even
impacting a small percentage of the 20% of U.S.households that are underbanked is
worthwhile and should be fully considered.� �Non-bank financial services providers like PayPal
and Venmo typically offer free onboarding and carry no minimum balance. Additionally,
PayPal’s two-sided platform connects both consumers and merchants in a seamless manner.
Our services provide a favorable experience for the consumer and entree into a digital
marketplace that does not typically accept cash or checks.� �Digital wallets could be tailored to
offer access to digital dollars, custody, and related payments services. These offerings would
be in parallel with other payments services, providing competition and consumer choice.
Once onboarded through a digital wallet service, a previously unbanked or underbanked
individual would find herself connected to the global financial system and e-commerce
platforms.
[No comment]
stability?
[No comment]
[No comment]
[No comment]
[Please see our more fulsome letter sent separately, which also contains citations.] �PayPal
has long been at the forefront of financial services and technological innovation. By
leveraging the Internet and mobile technologies, PayPal has focused on expanding access to
financial services, reducing consumer friction and cost, as well as increasing transaction
speed. We view this next generation of digital asset technology as part of this evolution and
one, if properly harnessed, that can unlock benefits for consumers and small businesses
alike.� �By facilitating greater automation, digital asset technology holds the promise to drive
key benefits across the payments system including increased speed and efficiency; greater
security; innovative new functionality; interoperability; and, programmability. As the Board and
Reserve Banks consider design choices and related technology solutions for a digital dollar, it
is important to ensure satisfaction of these elements. We unpack each element below.� �One of
the central benefits of digitized modern payments rails that leverage some of the innovations
in blockchain and cryptography is the ability to automate the settlement of payments and
maintenance of the ledger. It is this automation that can eliminate costly, time-consuming,
and sometimes manual processes associated with legacy infrastructure. This advantage can
reduce transaction times and costs. It can further simplify the payments system by removing
siloed databases and providing access to consumers and businesses to previously closed
networks.� �These features can result in a dramatically more efficient and speedy financial
system. This in turn could result in reduced costs compared to the current system. The use
of a digital dollar that transacts on more efficient rails should include regulated digital wallet
providers who can process payments on the designated rails (and help manage or ensure
proper governance of the rails) and the central bank operator of the CBDC system.
Settlement times that today take days can be reduced to minutes, and errors that can be
introduced due to the many intermediaries and systems through which a payment typically
flows can be significantly reduced. As a result, financial system participants will not only have
greater transparency into the movement of funds but will also enjoy greater liquidity and
improved cash flow, further stimulating the economy. � �A properly designed CBDC can also
serve as a foundation for a safer and more secure payments network. Because digital
currencies can employ multi-layer security in addition to strong authentication and
authorization assurances, they can be subject to secure processes like multiparty
authentication or enhanced transaction verification. Additional features embedded in a digital
currency can facilitate compliance with reporting requirements, support AML and anti-terrorist
financing efforts, and assist law enforcement in the prosecution of financial crimes. Notably,
emerging encryption technologies can provide these benefits while preserving consumer
privacy and control in how their data is used and shared.� �Another feature of CBDC
technologies is the ability to spur additional innovations across the financial sector. At
PayPal, we have seen firsthand the impact that digitization has had on the economy and
society. The ability to perform many different kinds of financial transactions directly on a
mobile device has improved accessibility, particularly in rural locations and banking deserts.
Giving small businesses the ability to accept payments digitally has enabled them to compete
on a national or global scale. With more aspects of our lives taking place online, it’s easy to
see that a secure and open digital dollar could power use cases that we couldn’t even
conceive of today.
CBDC?
[Please see our more fulsome letter sent separately, which also contains citations.] �A digital
dollar could render cross-border remittance transactions more efficient and cost effective.
Many individuals face high fees sending money across borders due, in part, to numerous
intermediaries; an interoperable digital dollar that could be readily exchanged across borders
and converted into another digital fiat currency holds promise in connecting funds more
directly, quickly, and efficiently to those who need them.� �PayPal has long worked to
expand financial inclusion and health in the digital realm. We frequently work in partnership
with banks and traditional financial institutions as a regulated financial services provider. We
believe that a U.S.CBDC holds particular promise in advancing inclusion and financial health
if it recognizes the benefits of open systems and broad distribution of digital dollars by
regulated entities beyond traditional banks.� �More specifically, as our response notes ,
the traditional banking system has faced challenges in reaching all segments of the
population, especially historically disadvantaged, minority, and low-income groups. Recent
research underscores this dynamic by noting that non-bank fintech providers were far more
effective in reaching minority-owned businesses during the COVID-19 pandemic to offer them
Paycheck Protection Program (PPP) relief. For example, PayPal’s PPP loan program is
over-indexed in the majority of the top 30 counties that have the highest density of Black
business activity and heightened incidence of Covid-19. More specifically, the coverage rate
for PayPal-facilitated PPP loans is above average in 23 out of these 30 counties, in sharp
contrast to the overall PPP, in which the coverage rate is below average in 22 out of these 30
counties. � �Indeed, there is clear evidence that non-bank financial technology providers are
increasingly providing key services for underserved women and minority consumers. For
example, PayPal Working Capital (PPWC) loans are distributed to areas with greater
concentrations of minority populations, helping to close the gap in access for minority
entrepreneurs. The percentage of total PPWC loans going to census tracts with greater than
25% African American population share is slightly higher than traditional SMB loans (13% vs.
11%). Also, this same group of borrowers are growing more quickly than the average SMB
(22% vs. 9%). � �Given the ability of non-bank fintechs to reach broader populations, it is critical
that a U.S.CBDC be offered and distributed through both regulated banks and non-banks,
including state-regulated money transmitters and trust-companies. As highlighted elsewhere
in our response , distribution would likely occur through digital wallet services, which would
offer tailored custodial and payments services. Such offerings are ideal products for fintechs,
which specialize in nimble, consumer-friendly applications, as well as connectivity with other
service providers. A U.S.CBDC offers a unique opportunity to leverage a broader set of
regulated entities to help expand access to digital financial services.
[Please see our more fulsome letter sent separately, which also contains citations.] �A key
feature of CBDC-related technology is the potential for enhanced interoperability.
Domestically, this means operating alongside, and easily convertible to, other forms of digital
currency, such as privately issued digital currencies like bitcoin and stablecoins, as well as
digital representations of fiat currency. The system should facilitate consumer and business
optionality and choice. The breaking down of silos provides an opportunity to connect digital
economic systems, including other global CBDCs and financial networks. Interoperability,
however, is predicated on careful coordination between the central bank issuers of CBDCs
and related stakeholders, along with the development of standards. For this reason, we urge
the Board to assume a global leadership role in developing interoperability standards for
CBDCs , including with respect to privacy and security.
impact of a CBDC on G2P payments could be immense. Far too many Americans waited
months to receive stimulus checks at the onset of the COVID-19 pandemic. A combination of
a CBDC and digital identity could enable these individuals to receive their money through
direct deposit in a far more timely manner. G2P payments provide a lifeline to millions of
Americans and can be made far more efficient through a CBDC. � �The pandemic underscored
the importance of access to accurate, timely, safe, efficient, and affordable payments for all
Americans and the high cost associated with being unbanked and underbanked. While the
large percentage of pandemic relief payments moved via direct deposits to bank accounts, it
took weeks to distribute relief payments in the form of prepaid debit cards and checks to
households that did not have up-to-date bank account information with the Internal Revenue
Service. Approximately 35 million individuals had to wait for months to receive their stimulus
checks, if they received them at all. � �PayPal was honored to participate in the disbursement
of stimulus checks. In the first round alone, 100,000 Direct Deposits were made via PayPal
and Venmo. In the second round, 117,000 direct deposits were made via PayPal and Venmo.
Instead of waiting for physical checks to be printed and mailed and later cashed and
deposited, individuals and households could submit their PayPal account details directly to
the IRS website and elect to receive their stimulus payment through Direct Deposit into a
PayPal CashPlus account. The challenges of getting relief payments to these households
highlighted the benefits of delivering payments more quickly, cheaply, and seamlessly
through new digital infrastructure, and CBDCs can be a means of increasing financial
inclusion and improving financial health. � �Given the likely speed, efficiency, and cost benefits
of a digital dollar, low-income individuals should be able to shift certain financial activity away
from high-cost legacy providers, including check-cashers and payday lenders, that often
come with significantly higher fees.� �Additionally, a digital dollar could support small business
merchants by providing them (and customers) with a new form of payment, especially given
reduced physical cash dealings and the trend toward reduced cash usage. Indeed, as
economies move away from physical money, it is prudent to offer the public access to a
modern, digital form of cash. A digital dollar can offer important competition against other
forms of payment and allow participants access to central bank money through regulated
intermediaries. � �Finally, a digital dollar would be responsive to clearly shifting preferences
among consumers. Younger generations are increasingly reliant on mobile access to digital
services, and a digital dollar meets them where they are. Offering public money in a digital
format would appear to be the next step in the natural evolution of the dollar.
[Please see our more fulsome letter sent separately, which also contains citations.] �One of
the most important elements of a U.S. CBDC is ensuring user privacy while satisfying
legitimate law enforcement requirements. Many have expressed concern that CBDCs could
allow for government surveillance of citizen payment transactions, especially to the extent
that the digital currency transacts upon highly centralized government rails. On the other
hand, some worry that treating a CBDC as a pure analog to cash along with its anonymity
features will facilitate illicit activity and threaten national security.� �Given these important
considerations, it is imperative that the United States gets privacy right when it comes to a
digital dollar. With thoughtful design and implementation, the digital dollar could enjoy
competitive advantages relative to other national CBDCs that permit unchecked surveillance.
One advantage the United States already enjoys is existing legal due process and protections
when it comes to individual financial information. These protections, which include those
under the 4th Amendment of the U.S.Constitution, should be embedded within the design of a
digital dollar and associated authorizing legislation.� �Notwithstanding the importance of
privacy, it is also important that a CBDC system be capable of meeting key law enforcement
requirements and objectives. A CBDC design that relies on regulated entities to serve as
digital wallet service providers can ensure implementation of key KYC/AML requirements.
Additionally, we encourage the Board to actively explore leading-edge privacy technologies
that can help satisfy privacy and law enforcement objectives simultaneously. For example,
zero-knowledge proofs are an area of development that allows network participants to
validate certain information without having direct access to underlying, sensitive information.
In the context of KYC/AML, this might mean verifying that an individual is not on a sanctions
list without revealing the identity of the individual to the entity seeking verification.
[Please see our more fulsome letter sent separately, which also contains citations.] �A key
feature of CBDC-related technology is the potential for enhanced interoperability.
Domestically, this means operating alongside, and easily convertible to, other forms of digital
currency, such as privately issued digital currencies like bitcoin and stablecoins, as well as
digital representations of fiat currency. The system should facilitate consumer and business
optionality and choice. The breaking down of silos provides an opportunity to connect digital
economic systems, including other global CBDCs and financial networks. Interoperability,
however, is predicated on careful coordination between the central bank issuers of CBDCs
and related stakeholders, along with the development of standards. For this reason, we urge
the Board to assume a global leadership role in developing interoperability standards for
CBDCs , including with respect to privacy and security.� �Another technological benefit of a
CBDC is its programmable nature. This refers to “smart contracts” which enable tokens or
currencies to be “programmed” to perform specific functions, like paying a mortgage on a
certain date. Programmable money could help to reduce money laundering and terrorist
financing by embedding eKYC and sanctions screening functionality. Tied to the concept of
automation, digitized money can be wrapped in smart contracts and coded to include certain
features and behave in determinable ways. The programmable nature of digital money means
that regulation and compliance requirements can be embedded in money itself, and that
business logic can drive desired outcomes. For example, a digital dollar could be
programmed for humanitarian distribution in a disaster zone and only usable for the purchase
of essential food and medical supplies in the first instance. In the context of financial markets,
digital dollars could be programmed to facilitate clearing and settlement of transactions at
efficient intervals. Programmability ultimately relies on interoperability, as noted above, to
ensure that a digital dollar is usable across a range of digital economic spheres and use
cases.
[No comment]
[No comment]
[No comment]
[Please see our more fulsome letter sent separately, which also contains citations.] �PayPal
has long worked to expand financial inclusion and health in the digital realm. We frequently
work in partnership with banks and traditional financial institutions as a regulated financial
services provider. We believe that a U.S.CBDC holds particular promise in advancing
inclusion and financial health if it recognizes the benefits of open systems and broad
distribution of digital dollars by regulated entities beyond traditional banks.� �More specifically,
as our response notes, the traditional banking system has faced challenges in reaching all
segments of the population, especially historically disadvantaged, minority, and low-income
groups. Recent research underscores this dynamic by noting that non-bank fintech providers
were far more effective in reaching minority-owned businesses during the COVID-19
pandemic to offer them Paycheck Protection Program (PPP) relief. For example, PayPal’s
PPP loan program is over-indexed in the majority of the top 30 counties that have the highest
density of Black business activity and heightened incidence of Covid-19. More specifically,
the coverage rate for PayPal-facilitated PPP loans is above average in 23 out of these 30
counties, in sharp contrast to the overall PPP, in which the coverage rate is below average in
22 out of these 30 counties. � �Indeed, there is clear evidence that non-bank financial
technology providers are increasingly providing key services for underserved women and
minority consumers. For example, PayPal Working Capital (PPWC) loans are distributed to
areas with greater concentrations of minority populations, helping to close the gap in access
for minority entrepreneurs. The percentage of total PPWC loans going to census tracts with
greater than 25% African American population share is slightly higher than traditional SMB
loans (13% vs. 11%). Also, this same group of borrowers are growing more quickly than the
average SMB (22% vs. 9%). � �Given the ability of non-bank fintechs to reach broader
populations, it is critical that a U.S.CBDC be offered and distributed through both regulated
banks and non-banks, including state-regulated money transmitters and trust-companies. As
previously noted, distribution would likely occur through digital wallet services, which would
offer tailored custodial and payments services. Such offerings are ideal products for fintechs,
which specialize in nimble, consumer-friendly applications, as well as connectivity with other
service providers. A U.S. CBDC offers a unique opportunity to leverage a broader set of
regulated entities to help expand access to digital financial services. � �In addition, the
Consultation refers broadly to three categories of money: Central Bank Money, Commercial
Bank Money, and Nonbank Money. “Nonbank money” is a newly defined concept for the Fed,
which “are broadly defined as institutions other than banks that offer financial services.” Thus,
within this category of “nonbank money” are a range of financial products, from prepaid
access and gift cards to money market mutual funds (MMFs) to stablecoins. This is a large
category of numerous financial services providers, some of which are considered Commercial
Bank Money, and each carry different levels of risk that should not be grouped together. � �To
be clear, when a customer holds a balance at a nonbank financial service provider, the funds
underlying that balance are fully supported by permissible investments meeting outstanding
customer liabilities, as defined by state banking law. For example, permissible investments
include categories such as cash, bank deposits, and U.S. government securities. These are
bankruptcy remote reserves that are available in the event of default by the service provider.
This is just one category of non-bank money that is subject to rigorous state banking laws and
examinations. By stating that Nonbank Money as a category contributed to the financial crisis,
the Consultation casts a bold shadow across a significant segment of regulated financial
service providers, most of whom were not contributors to those crises.� �As a result, we urge
the Fed to discuss these various forms of financial products and services as distinct, each
with varying levels of associated risk. Many of these firms have been helpful in supporting
and connecting the global economy in a responsible way. As a bottom line, through these
labels, the Consultation implies that providers of “Nonbank Money” may not be appropriate for
holding and facilitating access to CBDC on behalf of customers which, in our view, would
eliminate a significant benefit that can be achieved from a digital dollar.
[No comment]
sale? If so, how?
[No comment]
[No comment]
CBDC?
[Please see our more fulsome letter sent separately, which also contains citations.] �As it
stands today, the current payment rails are inconvenient and expensive, taking days to settle
transactions, providing limited visibility to businesses conducting international payments, and
charging high fees – especially to lower-income and underbanked segments of the population
that are forced into costly check cashing, money order, payday lending, and remittance
services. � �Technology and regulation provide an opportunity to reshape the financial system
to benefit the underserved; to support businesses, professionals, and creators with faster,
lower cost payments as well as access to credit; and, to relieve financial stress for the general
public. Responsible innovation in payment systems, lending, digital currencies, digitized
protocols, digital identity and in the fight against fraud and financial crime can bring a new era
of equitable, low cost, and accessible financial services. The time is ripe to modernize and
upgrade the technological infrastructure of the financial system – and we want to help
businesses and consumers adapt and engage. � �The combination of public research funding,
private innovation, global attraction of talent, and appropriate regulation cemented the role of
the United States at the center of the digitization of communications, media, commerce, and
financial services in the form of web 1.0 and web 2.0. Achieving the same leadership position
in web3 is possible but should not be taken for granted. � �Advances in technology, including
the use of digital assets and smart contracts, have the potential to fundamentally change the
way in which payment activities are conducted and the roles of financial infrastructures. The
introduction of a CBDC may provide an important foundation for beneficial innovation and
competition in retail payments in the United States, giving people choices that feel meaningful
to them and their financial health. � �Interest in CBDCs has accelerated over the past year and
half because of the digitization of all economic activities, in part due to the COVID-19
pandemic. At PayPal, we have seen the digitization of verticals that have traditionally been
brick and mortar, such as groceries and meals. We have also seen the growing importance of
omni-channel capabilities for commerce, which is especially important as we support
economic recovery by supporting the integration of small businesses into the digital economy.
� �We have been learning a great deal about CBDCs through our collaborations with
institutions. This includes supporting MIT’s Digital Currency Initiative (DCI) to advance its
independent central bank digital currency research and development as well as participation
in the Atlantic Council’s CBDC Private Roundtable Series with the goal of making the
technology more accessible and understood by the public. Additionally, in early 2022, we
established a cross-disciplinary advisory council for our Blockchain, Crypto and Digital
Currencies unit comprised of some of the world’s leading experts in cryptography, distributed
technology, regulation, economics and capital markets. We also have staff serving on the
Digital Dollar Project’s Advisory Board. We’re committed to working with central banks and
regulators to help responsibly shape the future of digital financial services. We believe
CBDCs could be a great addition to the payment options available to businesses and
consumers and complement the current retail payments system.
benefits of a CBDC?
Consultation refers broadly to three categories of money: Central Bank Money, Commercial
Bank Money, and Nonbank Money. “Nonbank money” is a newly defined concept for the
Fed, which “are broadly defined as institutions other than banks that offer financial services.”
Thus, within this category of “nonbank money” are a range of financial products, from prepaid
access and gift cards to money market mutual funds (MMFs) to stablecoins. This is a large
category of numerous financial services providers, some of which are considered Commercial
Bank Money, and each carry different levels of risk that should not be grouped together. � �To
be clear, when a customer holds a balance at a nonbank financial service provider, the funds
underlying that balance are fully supported by permissible investments meeting outstanding
customer liabilities, as defined by state banking law. For example, permissible investments
include categories such as cash, bank deposits, and U.S. government securities. These are
bankruptcy remote reserves that are available in the event of default by the service provider.
This is just one category of non-bank money that is subject to rigorous state banking laws and
examinations. By stating that Nonbank Money as a category contributed to the financial crisis,
the Consultation casts a bold shadow across a significant segment of regulated financial
service providers, most of whom were not contributors to those crises.� �As a result, we urge
the Fed to discuss these various forms of financial products and services as distinct, each
with varying levels of associated risk. Many of these firms have been helpful in supporting
and connecting the global economy in a responsible way. As a bottom line, through these
labels, the Consultation implies that providers of “Nonbank Money” may not be appropriate for
holding and facilitating access to CBDC on behalf of customers which, in our view, would
eliminate a significant benefit that can be achieved from a digital dollar.
_________________________________________________________________________
Circle Internet Financial LLC
Industry
Technology Company
Country
State
Massachusetts
Email
caroline.hill@circle.com
The Federal Reserve’s discussion paper on a potential U.S. CBDC raises many of the
challenges that exist in the current domestic financial system: a lack of access to the formal
financial system for low-income, unbanked, and under-banked individuals; slow and inefficient
payment rails; and high transaction costs for cross-border payments and remittances. The
discussion paper posits several possible designs of a CBDC that could solve these problems
and the related benefits of solving them, including preserving the dominant role of the U.S.
dollar in the global financial system. Financial technology can improve upon these conditions,
but a CBDC is not superior to other private-sector led innovations.��Many of the potential
benefits of a CBDC detailed in the discussion paper are already being met by existing
blockchain-based payment system innovations. This is particularly true as public blockchain
technology reaches scale and begins to integrate as a settlement option among global
payment providers, banks, and financial technology (“fintech”) companies. Similarly,
improvements to real time payment systems and wholesale payment integrations can satisfy
policy goals for how people send, spend, save and secure their money – including in an
internet-native form. Bringing stablecoins like Circle’s USD Coin (“USDC”) under
common-sense regulatory guidelines would ensure proper supervision over an asset that is
already achieving many of the Federal Reserve’s objectives in a potential CBDC. In the
longer term, the ability for existing blockchain-based payment system innovations to meet
their maximum potential will be greatly enhanced once Congress passes a federal framework
for regulating all digital assets. �Circle agrees with the risks detailed in the discussion paper,
but wants to highlight several others. Because the discussion paper focuses on an
intermediated model for a CBDC that would preserve the two-tiered banking system, these
comments will focus on the risks presented by an intermediated model. �First, the discussion
paper does not address the costs associated with researching, designing, implementing and
maintaining a CBDC. A CBDC would require new technologies, additional human capital and
a significant public educational campaign. These costs merit thorough analysis because,
while the Federal Reserve is self-funded and does not receive Congressional appropriations,
future Federal Reserve expenditures related to a CBDC will ultimately affect taxpayers.
�Second, the discussion paper notes how a CBDC might support innovation. However, Circle
is concerned that it would instead stifle U.S. innovation, particularly for new market entrants.
Already, a host of companies, including Circle, have leveraged blockchain technology to
support trillions of dollars of economic activity with fiat-referenced stablecoins. The
introduction of a CBDC by the Federal Reserve could have a chilling effect on new
innovations that could otherwise make the U.S. economy and financial sector more
competitive both domestically and abroad. �Finally, as detailed in response to question three
below, Circle is concerned that a CBDC could in fact worsen issues related to financial
inclusion and access. The implementation and deployment of a CBDC could further strain
public trust in government and raise concerns about the level of control exercised by
government over public money and the financial system. There are legitimate questions about
whether a CBDC would remedy existing issues of trust and access for unbanked and
underbanked individuals.
Many of the benefits of a CBDC are already being met by private-sector innovations, like USDC,
through blockchain-based payment systems. USDC is a regulated, fully-reserved U.S. dollar digital
currency that is backed by cash and short-duration U.S. government obligations so that it enjoys price
parity with the U.S. dollar. The reserves are held in the care, custody and control of the U.S.-regulated
banking system and issued in compliance with money transmitter requirements. Each month, Circle
publishes attestation reports by a global accounting firm regarding the reserve balances backing USDC
in circulation.USDC does not detract from, but in fact supports, the dollar’s role as the world’s
reserve currency. USDC has supported over $4.3 trillion in on-blockchain transfers as of May 12,
2022, and over 70,369 active wallet addresses have conducted transactions with USDC in the last 28
days. These data demonstrate how USDC is generating novel economic activity based on the U.S.
dollar. Private sector-driven activity using blockchain-based payment system innovations offer an
alternative pathway to a resilient, dominant dollar in the face of centralized challenges from China and
other countries proceeding with CBDC versions of their currencies. USDC has gained widespread
market adoption and brought digital versions of the dollar to international markets in the global digital
asset economy. The network effects of this widespread market adoption will continue to advance the
cause of the U.S. dollar in digital form.USDC will continue to play a growing role in lowering the
costs and increasing the speed of cross-border payments. In partnership with MoneyGram and the
Stellar Development Foundation, USDC can now be used to efficiently send payments internationally
at a fraction of the cost of traditional cross-border payments in fiat. Circle is also working to
advance financial inclusion, starting in the United States. Circle’s mission of raising global economic
prosperity through the frictionless exchange of financial value is part of Circle Impact. Circle has
allocated a meaningful share of USDC dollar reserves to community banks and Minority-owned
Depository Institutions across the United States, strengthening their balance sheets and therefore
communities. An additional pillar of Circle Impact is to drive digital financial literacy and
entrepreneurial efforts in collaboration with leading academic institutions and other partners, including
historically black colleges and universities; the first partnership is with Bowie State University in
Maryland and Rhodes University in South Africa. Circle has established key partnerships to help
combine some of the best practices of well-regulated, traditional financial and payments institutions
with the inherent benefits of open, public blockchains; collaborations with BlackRock, Visa,
Mastercard and Worldpay are just a few examples. Circle is also opening up new corridors to
provide humanitarian relief in the U.S. and globally. For example, Circle has helped the legitimate,
elected government of Venezuela distribute millions of dollars in desperately needed aid to the nation’s
front-line medical workers as they battled the COVID-19 pandemic under horrendous conditions.
Circle partnered with the Bolivarian Republic of Venezuela (led by President-elect Juan Guaidó),
U.S.-based fintech Airtm and the U.S. government to send the relief funds in USDC. The joint
initiative established a disbursement pipeline that leveraged USDC to bypass the controls that Nicolás
Maduro’s authoritarian government placed on Venezuela’s financial system.Circle’s deep expertise
operating USDC has also led to innovations that have the potential to address problems that have
plagued society, in particular the challenge of verifying digital identity. About one billion people
globally face challenges proving who they are, limiting their ability to access basic services and
economic opportunity. In recent months, Circle has worked with Block, Coinbase and the Centre
Consortium to develop Verite, a set of free, open source decentralized identity protocols and data
models that allow people and institutions to cryptographically prove claims about their identities.
Verite has the potential to reduce friction, protect privacy and increase compliance with Know Your
Customer (KYC) and anti-money laundering and countering the financing of terrorism (AML/CFT)
controls.
inclusion?
The Federal Reserve should more clearly articulate how a CBDC would improve financial
inclusion in the United States. A CBDC with financial institutions or nonbank financial service
providers acting as intermediaries could simply replicate the current challenges for financial
inclusion that exist. According to a 2019 FDIC study, one-half of unbanked Americans do not
have a bank account because they cannot meet minimum balance requirements. This poses
questions about whether the Federal Reserve would require financial institutions to waive
these fees if an individual held CBDCs. Another one-third of unbanked Americans noted a
lack of trust in financial institutions, which may not be allayed in an intermediated CBDC
system. It is possible that because the public’s confidence in government institutions and
banks has been declining, a CBDC could make the unbanked or underbanked even less
likely to engage with financial institutions. Other design choices could also harm financial
inclusion; as noted, an interest-bearing CBDC could cause negative impacts to the two-tiered
banking system and hurt consumer access to credit and/or raise the cost of credit, potentially
increasing the number of Americans who are underbanked.��Additionally, in a scenario where
the Federal Reserve issues an interest-bearing or non-interest-bearing CBDC, individuals
would presumably have two choices when holding their money at a financial institution or
regulated non-bank financial service provider. Such an arrangement would add another layer
of complexity to what many unbanked and underbanked individuals see as an
already-confusing financial system and could negatively affect one of the key stated goals of
a CBDC, namely promoting financial inclusion. Even the financially-literate may not
understand the full implications of holding their money in CBDC versus commercial bank
deposits. It seems likely that should the Federal Reserve issue a CBDC, a significant public
education campaign would be needed to overcome confusion about the new system and
possible distrust in a government-supplied solution.
Monetary policy, conveyed through the two-tiered banking system, should remain a public
sector sovereign activity under the independent oversight of central bankers. The introduction
of CBDCs, which could have potentially corrosive pressure on bank deposits and increase
consumer distrust in which forms of money are presumed to be the safest, could diminish the
transmission chain of monetary policy.��It is possible to promote fair, responsible free market
competition for the movement of money within the oversight of central banks and inside the
U.S. regulatory perimeter. One way to achieve this standard is to review the possibility of
granting digital legal tender status to various forms of privately issued electronic money and
digital currencies, where the underlying reserve assets are in the care, custody and control of
the U.S. regulated banking system (and possibly even held directly with the Federal
Reserve).
stability?
A CBDC, both in interest bearing and non-interest bearing forms, creates potential domestic
flight-to-quality or flight-to-safety problems which could destabilize the two-tiered banking
system. The potential systemic effects of a CBDC could pose serious and detrimental effects
to the banking system and the wider economy.� �It is not clear from the Federal Reserve’s
discussion paper that a CBDC would avert run risk or other financial stability concerns. The
report notes “[t]he ability to quickly convert other forms of money—including deposits at
commercial banks—into CBDC could make runs on financial firms more likely or more
severe. Traditional measures such as prudential supervision, government deposit insurance,
and access to central bank liquidity may be insufficient to stave off large outflows of
commercial bank deposits into CBDC in the event of financial panic.” In discussing solutions
to such a problem, the Federal Reserve’s discussion paper proposes limitations on the overall
amount of CBDC that an end user could hold, or hold at a given time. Such limitations raise
serious questions about the usefulness of a CBDC as money.� �The scenarios contemplated by
the Federal Reserve could create more confusion for end users of a CBDC and raise the
possibility of negative consequences for the broader financial system. The creation of a
non-interest bearing CBDC to reduce flight-to-quality effects could cause confusion about the
different “types” of money offered at an individual’s bank or that individuals could hold. If a
non-interest bearing CBDC were issued by the Federal Reserve, it is difficult to say how an
end user might evaluate the choice of whether to hold their funds in a CBDC rather than a
commercial bank deposit. Absent more information about end user choice and attitudes
toward the use of a CBDC, the risks of a non-interest bearing CBDC versus commercial bank
deposits remain unclear. The current model offered by privately-issued digital currencies
provides an important “air gap” between reference assets – such as cash, cash equivalents
and high quality assets inside the banking system – and tokenized assets on public
blockchains that results in no new money creation and preserves the two-tiered banking
system. Importantly, the transmission of monetary policy is also preserved. � �As
cryptocurrencies, digital assets, and public blockchains have developed over the past
decade, entrepreneurs in this space have built a $2 trillion dollar sector. This period has seen
risks, death spirals and failures, lessons learned and growing regulatory understanding and
clarity on how to responsibly harness these innovations. These risks should remain within the
free market. The United States should espouse and practice activity-based,
technology-neutral regulations, and regulate the economic behavior of digital assets rather
than a catch-all approach. Not all digital assets behave in the same way or perform similar
functions. If a digital asset behaves like a currency or payment system, it should be afforded
the benefits of digital legal tender status or conformity with well-laid money transmission,
e-money, financial markets infrastructure and prudential rules.
Early evidence suggests the introduction of CBDCs could put domestic capital flight pressure
on the two-tiered banking system because the presumption could emerge that a CBDC
represents a lower-risk currency when compared to fractional reserve banking or other forms
of money and payments in circulation. Additionally, depending on which form of CBDC is
adopted, CBDCs could also disrupt other forms of payment and money circulation such as
e-money and debit/credit card networks, among others. While a non-interest-bearing CBDC
might limit the shift away from commercial bank deposits compared to an interest-bearing
CBDC, a non-interest-bearing CBDC could still pose risks to the two-tier banking system by
introducing a “risk free” form of money that end users may prefer to hold and transact with. In
this case, a non-interest-bearing CBDC arrangement would put pressure on the two-tier
banking system by curtailing liquidity and the flow of funds through traditional payments
processors, thereby shifting that activity directly within the scope of the central bank.��Ironically,
the advent of the digital assets industry and blockchain-based payment systems, which were
originally framed as threats to traditional banks and financial services firms, have created and
protected wholesale industries in both the analog and digital financial markets. Continuing to
harness this private sector innovation, while attracting the billions in investor capital and
entrepreneurial talent into the world’s important financial centers – particularly those in the
United States – can ensure an always-on internet economy exists amid global regulatory
competition. �Another challenge in the financial sector is that a CBDC could obligate banks,
e-money issuers, card networks and financial technology firms, among others, to adopt a
government-issued or mandated technology standard. This might weaken economic
competitiveness and growth, potentially limiting payment system and money movement
optionality in both domestic and cross-border settings. Finally, CBDCs could potentially
diffuse critical financial crime compliance, anti-money laundering and other shared
responsibilities in the financial sector for combating illicit finance. This is another area in
which the advent of competitive blockchain-based payment systems is producing exponential
gains in financial integrity and forensics.
The use of cash in the United States has been declining steadily over the last several years,
in large part due to the advancements made by the private sector to improve the custody and
payments of dollars. For instance, Worldpay found the use of cash declined by over twenty
percent from 2018 to 2020 and will only account for ten percent of point-of-sale transactions
in the United States by 2024. It is Circle’s view that the Federal Reserve should allow the
private sector to continue to responsibly innovate to support consumer-driven trends away
from cash as a means of payment. A CBDC would not be a substitute to the physical dollar; it
would be more akin to a substitute for the privately-issued electronic money that individuals
use today.
CBDC?
The market and technological infrastructure for domestic and cross-border payments has
changed significantly and quickly over the past three decades. USDC brings the benefits of
digital currency – fast, lower-cost, highly secure, global and interoperable – without the
drawbacks of extreme volatility that has plagued other cryptocurrencies. Fiat-backed
stablecoins with transparent reserves have provided an efficient “digital dollar” settlement
layer for digital asset trading markets. Through robust competition and growth in the digital
asset space, stablecoins are now used in a wide-variety of applications. Other financial
market participants, such as major credit card companies, small businesses, remittance
companies and others are making USDC a native settlement option for their businesses. This
increases market competition and choice for consumers for payments, while building a bridge
between digitally-native financial services and real-world use cases.��As mentioned in the
response to question two, Circle is innovating in payments by partnering with Worldpay and
Moneygram, and piloting new uses of stablecoins and digital assets to lower transaction costs
and facilitate the efficient movement of money across borders using USDC.
Over 80 countries are in some stage of researching, developing, piloting or launching a

CBDC to establish the dominant currencies of the internet. This is a high-stakes competition
that will shape the political and economic value systems of this century’s digitally-native
global economy. By nearly every measure, the United States and the U.S. dollar are already
winning this digital currency race because of private sector innovation that uses open-source
technology and open standards and protocols. While the United States considers ideas for a
CBDC, a prospect that will likely take many years to develop and pose significant risks,
private sector innovation is solving many of the intended goals of a CBDC.��One reaction to the
developing digital asset industry is to seek to heavily regulate and curtail free market
activities, to nationalize the technology and infrastructure, and to launch and administer
government-controlled digital currencies. Some countries, such as China, have already taken
this approach. The introduction of a CBDC might seem like the only logical U.S. policy
response to compete in the digital currency space race. However, it is the values of
openness, the preservation of privacy, free-market competition, and open intellectual property
that have powered U.S. economic growth and made the dollar the world’s reserve currency.
These principles have helped the United States lead in internet technology standards and
industries and are the same values that have led to the flourishing market for digital currency
and blockchain technology today. Other countries are closely watching how the U.S.
government proceeds with a CBDC, and so the United States should serve as a model for
how to balance public sector oversight and private sector innovation. While the Federal
Reserve may develop a CBDC with the proper guardrails to protect consumers, the U.S.
cannot guarantee that other countries would do so responsibly and the U.S. should be
cautious to endorse a system that could be easily abused by autocratic governments.
The Federal Reserve’s discussion paper does not expand on the potential adaptation costs
associated with the implementation of a CBDC, including for businesses and individuals that
would need to accommodate transactions involving a CBDC. These costs could range from
new back-end settlement processes to customer-facing point-of-sale (POS) systems, and
they could affect millions of businesses and individuals transacting with a potential CBDC.
Additionally, financial institutions such as banks, credit providers, lenders and others could
bear associated costs with absorbing a new asset class in the form of a CBDC, and
integrating that asset within their existing systems – including determining how to offer novel
products and services in a CBDC. �Additionally, the paper does not discuss in detail how a
Federal Reserve-issued CBDC would manage existing financial crime compliance programs
used by financial institutions pursuant to the Bank Secrecy Act. Given the complexity and
difference in approaches taken by regulated entities, the Federal Reserve should have more
specificity for how the public sector might manage the risks, versus the current model that is
dependent on the private sector. �Privately-issued stablecoins represent a clear alternative to
manage the risks and challenges of a CBDC that the Federal Reserve has outlined in its
discussion paper, and to those mentioned above that have not yet been contemplated. The
United States must still fully regulate the private issuance of digital currencies, like
stablecoins, at the federal level. A well-designed federal regulatory regime for private
stablecoin issuance would likely make a Federal Reserve-issued CBDC redundant. The
timing of the deployment and implementation of a CBDC is also an important factor. As U.S
Treasury Secretary Janet Yellen said in an April 2022 speech, “ [W]e must be clear that
issuing a CBDC would likely present a major design and engineering challenge that would
require years of development, not months.” The Federal Reserve’s plan to launch the
FedNow Service, a new instant payment system, provides an instructive example of the time
that may be required to deploy a CBDC. �It could be challenging for the Federal Reserve to
issue a CBDC on a technology standard that does not quickly become obsolete, given the
pace of technological advancements. In the meantime, trusted, regulated stablecoins like
USDC are building on the latest technology – such as open, public blockchains, and
blockchain-based payment systems – and meeting the market’s demands for speed, lower
costs and efficiency in a manner that is safe, transparent and compliant with existing
regulations.
The presumption of privacy and the universally free and lawful use of money is an important
principle and human right. CBDCs and centralized payment system innovations, particularly
those that are government-led or developed by potentially repressive countries, pose serious
potential breaches of this public trust. The prospect of social credit scoring, deplatforming
individuals from public money or creating financial redlines, among other risks, are real public
policy challenges that should be considered when contemplating a CBDC.��In the
intermediated system described by the Federal Reserve, it seems likely that the Federal
Reserve would, technically, be able to have access to an individual’s interaction with a CBDC
depending on the design structure. In this scenario, the transaction records, geolocation, and
spending habits of end users might be viewable by the Federal Reserve and potentially
stored in vulnerable “honeypot” databases. �While digital assets in the past have been
synonymous with anonymity and illicit activity, the industry is now moving toward standards
that preserve an individual’s right to privacy while allowing for the prevention and detection of
illicit financial flows. This duality is critical for digital assets to be part of the domestic and
international financial systems. Circle has, with other partners in the industry, developed
Verite, a digital identity model that would provide a verifiable and proven identification that is
scalable, usable by anyone, and interoperable across systems, while also providing
individuals with the certainty that only the minimal amount of information is shared (to protect
their own privacy).
The centralized technological frameworks that are being proposed and evaluated to issue a
CBDC could amplify existing cybersecurity vulnerabilities in the U.S. financial system,
potentially exposing the Federal Reserve to new and worsening cyber attacks. The
cyberattacks against Equifax, Solar Winds and the Colonial gas pipeline are just three
examples of attacks that have had widespread, damaging implications for the economy in
recent memory. However, the development of public blockchains continues to leverage the
inherent cyber resilience of distributed systems. Just as the failure of any one bank erodes
confidence in banking, a CBDC would also transition this risk to central banks, possibly
negating the benefits of strategic risk-sharing structures and operational “air gaps” between
participants in the financial system.
In May 2021, the Federal Reserve issued a public statement that said:��“As the Federal
Reserve explores the potential benefits and risks of CBDCs, the key focus is on whether and
how a CBDC could improve on an already safe, effective, dynamic, and efficient U.S.
domestic payments system in its ability to serve the needs of households and businesses.
‘We think it is important that any potential CBDC could serve as a complement to, and not a
replacement of, cash and current private-sector digital forms of the dollar, such as deposits at
commercial banks,’ [Federal Reserve Board Chair Jerome H.] Powell said. ‘The design of a
CBDC would raise important monetary policy, financial stability, consumer protection, legal,
and privacy considerations and will require careful thought and analysis—including input from
the public and elected officials.’”��As mentioned in previous answers, it is possible to promote
fair, responsible free market competition for the movement of money within the oversight of
central banks and inside the U.S. regulatory perimeter. One way to achieve this standard is to
review the possibility of granting digital legal tender status to various forms of privately issued
electronic money and digital currencies, where the underlying reserve assets are in the care,
custody and control of the U.S. regulated banking system – possibly even held directly with
the Federal Reserve. �In his January 2022 testimony before the Senate Banking, Housing and
Urban Affairs Committee, Chair Powell said that a CBDC could coexist with well-regulated,
privately issued stablecoins. If the Federal Reserve issues a CBDC, it should be designed to
ensure fair competition with private stablecoins like USDC.��The Federal Reserve’s discussion
paper contemplates both interest-bearing and non-interest bearing forms of a CBDC. The
paper’s analysis of an interest-bearing CBDC indicates that an interest-bearing CBDC would
likely replace cash and deposits at a commercial bank, contradicting the Federal Reserve’s
desire for a CBDC to be complementary to cash and commercial bank deposits. While an
interest-bearing CBDC might prove attractive to individual end users, such an arrangement
raises intermediation concerns mentioned in previous answers. Further, as mentioned
previously, if a CBDC is not designated legal tender, it would compel the Federal Reserve to
communicate what incentive programs the private sector and other market participants would
have to absorb a CBDC.
sale? If so, how?
CBDC?
Additional time should be spent investigating the costs associated with the maintenance of
the technology associated with a CBDC. It is conceivable that the costs to maintain and
update a Federal Reserve-issued CBDC that incorporates the latest technology stacks and
network infrastructure would be substantial beyond the initial implementation and deployment
stages. To manage these cost risks, it is possible that Congressional action in the form of
new legislation and appropriations may be necessary. Additionally, there remain undiscussed
adoption risks related to the centralized model for a CBDC. It is unclear from the discussion
paper whether the Federal Reserve would implement an incentive structure for market
participants to operate with a potential CBDC (including for businesses) and use it. And, if a
CBDC were designated as legal tender, would market participants be compelled to use and
accept it? As discussed in above responses, the introduction of a CBDC would necessitate
robust public education around its purpose and use, not only for end users, but also for
businesses and other financial service providers.
benefits of a CBDC?
_________________________________________________________________________
Anis Taylor
Industry
Country
State
Pennsylvania
Email
anis.taylor@snaprefund.net
First off i'd like to say the paper was thorough and covered a great deal of explanation in to
how a CBDC would work. �I believe there are a lot of potential benefits to having a CBDC. But
one thing that was not explained is how small businesses that want to participate in being a
distributor of CBDC, can participate in being a distributor of a US CBDC.��It is very important
that policy consideration think about supplier diversity in terms of distribution of CBDC.�
I like the direction of the potential benefits that you have laid out in this paper. It is important
to know also that as time and society moves forward there will be features and functionality of
CBDC that is unforeseen. It is very important however, that a full roll out plan for how SMB,
underserved, and underbanked communities will be educated on the CBDC.�
inclusion?
Yes, a CBDC could indeed affect financial inclusion in a positive and negative way. The
execution of the roll out is the most important. Underserved communities need to feel trust
from the federal reserve. There has to be a positive strategy when it comes to the education
of CBDC in communities where financial literacy may not be taught, and financial inclusion is
null.
I actually think that a U.S. CBDC will actually make it easier for the Federal Reserve to
implement monetary policy because they will be able to raise and decrease digitally in real
time the supply of digital currencies. This will help with price stability based on the amount of
currency in the economy. With a physical dollar you don’t know how much is still in good use,
or being stashed away. With a CBDC you can keep up with all that information in real time.��In
addition, receiving payments with a CBDC would make it easier for people without bank
accounts to get paid. This will maximize employment.
stability?
A CBDC could affect financial stability in communities that need it the most because of their
ability to use it online and not have a bank account or credit card. My thought is that it would
be a net positive. Some people don’t have bank accounts and want to purchase things online,
a CBDC would give people with smartphones the opportunity to shop online and get involved
in the digital world. �This brings us one step closer to being a frictionless economy. However it
is very important that strategy is put in place to make sure that underserved communities
have access to CBDC and the information they need to use it.�
A CBDC could affect the financial sector in a positive or negative way. It all depends on the
exploiter. Just like money markets operate. When people want to use money they for good
they will, and when they want to use money for bad they will. CBDC does not affect the
thinking of the user. However, I believe that a CBDC is way more useful than a stablecoin
because the technological advantage of having a stablecoin will be obsolete when a US
CBDC is introduced. Our CBDC will be the ultimate stablecoin.�
Having a real time data and strategy towards the distribution of the CBDC will mitigate any
adverse impact of a CBDC. The goal cannot be to let the financial sector hoard all the CBDC
and not provide equity to our citizens. It’s very important that there is a full non biased
approach to the creation and the distribution of CBDC. In addition, making sure that tools you
can track and provide metrics are constantly adjusting to support the entire nation would be
very beneficial.�
Yes, absolutely. However, as older generations fade out, the new generation will be more
digitally literate. And they aren't looking for cash as past generations hav. Generation Z and
Generation Alpha do everything online, and they want their money instantly.��However, cash is
still helpful in so many ways. Like if the power in the world was to ever go off, cash will be the
king. The main principles we want to follow in terms of money for payments is can it be used
as medium of exchange, unit of account, and store of value.�
CBDC?
As our country grows and we become a more diverse nation, cross border digital payments
will evolve. Right now a huge demographic of people in our country work hard in America,
and then send money to their family back home. Services such a western union to send
money charges astronomical fees that really affect the sender and receiver. Without a U.S.
CBDC to send to families in other nations, cross border payment providers will continue to be
a predatory business for companies charging high fees.
Well it’s very important that we look at what other large nations are doing to see what works,
and what doesn’t work for their citizens, markets, and economy. With a growing power like
China, we have to be diligent in our approach so that the Digi Yuan does not take over as the
world strongest currency. There are so many variables that go into play. However the key
metric we need to concise about is how secure, fast, and simple our CBDC is. In addition, we
have to lead the world in our currency strength, so it’s very important that our markets move
smoothly with CBDC, and everyone in our economy is buying, selling, and receiving their
money with simplicity through a U.S. CBDC. �
Security is important, but my bigger concern is that the CBDC will be released into the ethos
and the people who need access to it the most won’t have access to it. It is very important to
me to make sure that risk is mitigated. Because there are a lot of sharks in wall street that will
see this as an opportunity for them to get more CBDC even easier.�
By using hash functions, and private keys to give to consumers instead of SS#. In the event
of illegal activity you can still track down that individual. �
It’s important that a transaction id is attached to every transaction. There should also be a
digital footprint that will connect every transaction. Two issues I see are the problem of a
double spend, and hackers trying to hack. We have to be diligent in how to mitigate these
risks. Security and constant observation is very important!�
Yes, absolutely. If it’s not a legal tender then what is the point? That is what separates our US
CBDC from other stablecoins, or cryptocurrency. The U.S. CBDC should be a legal tender for
all debts public, and private.�
That is a great question. Whoever has the most of it will be able to gain the most interest, but
what about the everyday worker who does not have the ability to save their CBDC like
someone rich. �Someone who is rich will have two methods of gaining interest. One in the
money market, the other in his wallet.��If we do this then it is important that we at least grant
every US citizen with a base amount of CBDC, that they will be able to keep to gain interest. �
Yes, there should be a cap of $1 billion. This allows scarcity, thus increasing the value of the
U.S. CBDC. �
It is very important to have firms that have a focus on serving underserved communities, not
only big financial institutions. Banks, digital payments processors, and non bank
intermediaries can serve the role as intermediaries. However, it’s important to know who is
serving who, and how they provide the support and information needed to use CBDC. The
role of the regulators should be to have full transparency with the intermediaries and the
distribution of the fund as well as the equity that the CBDC is being distributed.��SnapRefund is
a great example of an intermediary that is focused on serving SMBs, underbanked, and
underserved communities. It’s important to have the right stakeholders that are doing things
to help our community and nation. �
Yes, all CBDC should have offline capabilities. This can be achieved through satellite and
solar usage. We can develop a satellite that stores multiple servers that can connect to any
wallet on earth offline. We can use solar energy to power the satellite, so long as the sun is
shining and the satellite with the server is rotating in space. We will always be able to directly
communicate with our U.S. CBDC digital wallet.�
sale? If so, how?
Yes, it should be. The whole point of a CBDC should be ease of use and acceptance through
point of sale. Users will have a digital wallet with their balance of CBDC. When you purchase
something, you can use a QR code, or just send it to a wallet address through
email.��Eventually we will have brain tech and the possibilities with brain technology matched
with speed of payment, will be the foundation to a payment system that will be unmatched by
any other nation.��Imagine just thinking about making a payment with your brain and the you
make a payment. These are a few of the possibilities once we maximize the ease of use and
acceptance.�
The key is that no matter what payment platform one uses, that payment platform should be
able to tap into the feds API, this will make sure all payment applications will be able to
program through the feds interface. This will connect the U.S. CBDC to different payment
platforms. �In addition, new technology will have to be introduced that will build on top of the
technical standard in today's platforms. As Web3 continues to grow with NFTs and the
Metaverse a CBDC that is interoperable will be very important.�
CBDC?
We can never predict the future, we can only prepare for it. As Web3 moves incredibly fast
and society looks at different use cases for value. It will be very important for the U.S. CBDC
be proactive in jumping ahead of the curve with the policy choices related to digital spending.
�For example, with the growth of DeFi, how will policy make sure that people aren’t being
taken advantage of now that they have a CBDC and don’t know what to do with it. What
about education in CBDC? Policy should also include financial literacy with the distribution
and reception of CBDC.��Overall, I believe the future is bright based on the demographic of
users that will find new, fun, and creative ways to maximize the use of CBDC.�
benefits of a CBDC?
I really enjoyed reading the research and analysis on Money and Payments: The U.S. Dollar
in the Age of Digital Transformation. The paper was very thorough in its approach and
explanation of each point's design principles. �My main concern is making sure that a CBDC is
accessible and beneficial to all Americans, not just a few. This is the most important part. I
have no doubt that the Federal Reserve will create a wonderful immutable CBDC, but the
question is will everyone have access to it and who will distribute the CBDC. That is very
important. In order to achieve the most beneficial potential of a CBDC we must make sure
everyone knows what it is, how to use it, and where to find it.��Thank you for allowing me to
provide my feedback and being a part of this historical moment in our countries financial
history.��
_________________________________________________________________________
Industry
Country
State
California
Email
Governments and central banks around the world are focused on mechanisms for
jumpstarting growth and digitizing their economies. In this context, interest in Central Bank
Digital Currency, or CBDC, has accelerated. To the extent a decision is made to launch a
CBDC in the United States, Visa believes that it should (1) be consumer friendly and
accessible through a competitive ecosystem of digital wallets operated by commercial banks
and fintechs, and (2) be able to be easily accepted at every merchant. We're eager to work
with central banks at this important moment in time to create secure, convenient, and reliable
CBDC that can seamlessly integrate with the existing payments ecosystem. There are many
important considerations when governments are evaluating the development and
implementation of a CBDC. We don’t take a view on whether or not the United States should
develop a CBDC, nor do we take the view that there is a single method or process for
implementing a CBDC; however, we believe we have the experience in the digital currency
space as well as the capabilities to help central banks explore and potentially implement
CBDC. We share further details on Visa’s position, experience, and capabilities in responses
to the questions that follow.
CBDC should be designed to address a specific problem or set of problems, as there are
current payments mechanisms and systems that are already serving consumers well in the
U.S., such as in the domestic retail market. As such, there is no “silver bullet” way to reap any
such benefits of a CBDC. A CBDC should be seen as an extension of choice for consumers,
further enhancing and evolving a competitive, dynamic, and innovative digital payments
sector that is already delivering for varied consumer needs in many ways. For cross-border
payments, there are several considerations. We agree with the Federal Reserve’s analysis
that while a CBDC may ultimately enable new ways to make cross-border payments, this
activity is significantly more complex than the domestic payment scenarios described in the
paper. We also agree with the Federal Reserve that improving cross-border payments
through new technologies would require significant international coordination to address
different standards, infrastructures, licensing, and regulations. Cross-border payments also
bring with them higher compliance requirements in order to meet global anti-money
laundering and terrorist financing (“AML/CFT”) demands, as well as to ensure compliance
with international economic sanctions. Depending on the design, a CBDC will not be immune
from these frictions. As cross-border payment flows increase and new competitors enter the
space, ecosystem participants have incentives to ensure that the system is as efficient as
possible. For Visa, that means investing in new technologies and solutions that enhance our
cross-border capabilities and make it easier for people and businesses to pay and get paid,
such that they will choose Visa as the network of choice for any type of payment from anyone
to anywhere, including person to person (“P2P”), business to consumer (“B2C”), business to
business (“B2B”) and government to consumer (“G2C”).
inclusion?
CBDCs have the potential to extend the value of digital payments to a greater number of
people and places. New forms of digital money offer the potential to unlock innovation and
enable new applications while meeting the Federal Reserve’s objectives for inclusion,
resilience, competition, and enhancing confidence in the U.S. financial ecosystem. The
creation of a CBDC, however, in and of itself does not solve financial inclusion, and it is not
obviously clear that a CBDC would be any more advantageous for financial inclusion than
existing financial products and solutions. The effectiveness of a CBDC in improving financial
inclusion will in part depend on how the Federal Reserve and the U.S. Government designs
and markets a CBDC to encourage and enable widespread adoption. The Federal Reserve
will have to ensure broad public approval for a CBDC, which will likely entail educating the
U.S. public on the benefits of digital payments and providing or directing people to digital
wallets or other applications to access a CBDC. Also, depending on the design, a CBDC
could allow for application programming interface (“API”) integration for digital tools to provide
individuals access to additional financial services. This could conceivably make it easier for a
regulated financial institution to conduct normal customer due diligence and
know-your-customer (“KYC”) procedures. Finally, depending on the design, a CBDC could
ensure no minimum balance requirements, which could be important to attracting unbanked
consumers to CBDC accounts.
stability?
Consistent with the G7’s recently published principles for retail CBDC, it will be important for
any CBDC to operate in an open, transparent, and competitive environment that promotes
choice for consumers and competition between different parts of the ecosystem. We note that
a vertically integrated system has the potential to stifle innovation and private sector
engagement, which would be a risk to the U.S. financial system. Notably, the strong and
dynamic competition in U.S. payments today has largely driven the highly innovative and
tailored customer experience that consumers and businesses currently enjoy. In our view, the
foundational elements when considering the components of a robust and well-functioning
electronic currency are operational resilience, cybersecurity, and certainty of acceptance. A
CBDC would be a new technology that will require sophisticated and complex interoperability
for the entire U.S. Its issuance would require the employment of sophisticated and advanced
risk management capabilities and investment, spanning fraud, AML and KYC controls,
operational resilience and cybersecurity, which should not be underestimated by regulated
entities facilitating CBDC transactions. Working with private sector entities that have expertise
in these areas could be cost effective and also shield the Federal Reserve from execution
risks, thereby preserving the Federal Reserve’s ability to carry out its essential role of
maintaining financial stability. A safe and secure payment ecosystem is critical for all
currencies, whether it is fiat, stablecoin, CBDC or other form of digital currency. Importantly,
for a digital currency to be trusted, reliable, and stable, it’s critical that there are appropriate
safeguards and standards for how underlying reserves are managed, so that consumers and
businesses are able to redeem at par. Furthermore, it should be clear to consumers what
rights they have when they hold a digital currency, including how to exercise available
redemption rights if applicable. We believe that an integrated approach to fraud prevention,
cybersecurity and cyber risk management is needed to enable optimal data sharing to
mitigate and defend against increasingly sophisticated attacks from nation-states and
transnational organized criminal and terrorist organizations. International payment networks,
for example, offer the highest levels of cybersecurity and rely on global data for cyber threat
and fraud analysis, which is vital to combating transnational malicious actors and reacting
quickly to threats originating outside of the US. We also consider that the technical
implementation of any CBDC environment may introduce additional systemic risk, including
cyber risk, arising from the Federal Reserve’s role. The architecture of a CBDC should
consider the permissions for transfers enabled by the underlying CBDC infrastructure, any
automation that could be introduced and the ability of account holders to trade CBDC
balances between other CBDCs, international accounts or, through other clearing and
settlement mechanisms, to conventional forms of money. With respect to certainty of
acceptance, the most important factors for merchant acceptance are user base and the
customer experience. In this regard, it will be important that consumers do not have to obtain
or adopt new devices or technology in order to use a CBDC. Through working with the private
sector, the Federal Reserve can leverage the infrastructure and expertise available in
delivering the best service to consumers.
We are unsure whether the further decline of cash should be a material driver for a retail
CBDC. It is possible (and worth further analysis) that a token-based CBDC could address
some of the consumer needs of cash – but in a more secure way. Nevertheless, we believe
that if a CBDC is developed, it should be accessible to every U.S. citizen and business.
Further, a CBDC must still be well integrated and interoperable with the existing payments
system to ensure that it can be easily accepted. An open and technology-neutral approach is
essential to foster competition and innovation.
CBDC?
Even in the current environment, we observe there is significant investment and innovation in
addressing pain points in domestic and cross-border digital payments, including the
development of faster payments systems by central banks and the private sector as well as
private sector efforts to achieve greater interoperability, in order to connect endpoints using
all available payment rails, whether they are ACH, card, or RTP-based. That said, as
discussed in question 2, it is important for a CBDC ecosystem to support, and not complicate,
an already robust cross-border payment system. While many of the CBDCs from other
countries will likely implement some form of a digital ledger, it is unlikely that they all adopt
the same stack of technologies and protocols due to, for example, different governance,
market requirements, technology providers, and levels of monitoring and compliance
standards required by central banks. This set of circumstances will likely occur whether or not
the Federal Reserve pursues its own CBDC. At the same time, other types of non-sovereign
digital payments, such as stablecoins, are also evolving. Today, most stablecoins are used to
enable investment trading, but we anticipate that in time stablecoin usage as a means of
payment will increase, provided that there are appropriate safeguards and standards for how
underlying reserves are managed. In the absence of a Federal Reserve CBDC, we expect
demand for stablecoins – that are redeemable at par to the U.S. dollar – may continue to
increase. Absent efforts at ensuring interoperability among CBDCs, cross-border payments
will be a natural challenge for any central bank pursuing CBDC. Individuals will expect to be
able to use their CBDC for cross-border payments, just like they can with other digital
payments, and may be frustrated with the friction that comes from different local systems or
compliance requirements. This is why many central banks are taking a cautious approach
toward enabling cross-border payments for CBDC. According to a survey by the Bank of
International Settlements (“BIS”), only four central banks out of fifty respondents envisage
permitting the use of their CBDC by nonresidents beyond their borders. In order to achieve
cross-border interoperability for CBDCs, close coordination among central banks will be
needed.
The decision on whether to introduce a CBDC rests with the Federal Reserve and the U.S.
Government, and should reflect the Fed’s objectives, priorities, planning, and resources and
the specific use cases that the Fed is looking to address. Critically, we appreciate that the
Federal Reserve has provided this opportunity for a public comment period on a U.S. CBCD.
As discussed in question 3, a CBDC could have the potential to extend the value of digital
payments to a greater number of people and places. Any CBDC undertaking, however, must
be fully evaluated and the decision to pursue a CBDC should be based on clearly defined
objectives. As the global leader among central banks, and as a thought leader, the Fed is in a
position to influence the direction of CBDC exploration through international bodies such as
the BIS, the International Monetary Fund (“IMF”), and the G7 and G20. We agree with past
Federal Reserve statements that the U.S. does not need to be first and can gain from
observing the successes and failures of other central banks exploring a CBDC.
We agree with the consultation paper that a CBDC would need to be designed to comply with
robust rules that combat money laundering and the financing of terrorism. Therefore,
anonymity for CBDC transactions will likely have to be ruled out in order to comply with the
Bank Secrecy Act (“BSA”) and sanctions laws. The same requirements that apply to
electronic payments using traditional payment products involving fiat currency should equally
apply to transactions involving any CBDC. As mentioned earlier, it is also important to put the
creation of a CBDC in the context of not complicating cross-border payments. Today, the
global AML/CFT regime, as championed by the Financial Action Task Force (“FATF”) and
other international organizations, is a success story for international cooperation, standards
setting and enforcement. We agree with an argument made in the October 2020 European
Central Bank’s discussion paper that an ill-designed digital Euro (or any CBDC), “could
constitute an attractive instrument for terrorist financing, money laundering and other
cross-border criminal activities.” We strongly recommend working with the FATF, and other
international organizations, on how to ensure that a U.S. CBDC does not impact the integrity
of the global AML/CFT regime and norms. We appreciate this is a complex and nuanced
question and will require a set of data values to guide the design, covering areas such as
security, fairness and accountability, but believe it is important to get this question right.
A CBDC poses two main cybersecurity risks: (1) the risk to the central bank’s new
CBDC-supporting infrastructure, and (2) the risks to the private institutions supporting the
distribution of CBDCs. Recent high-profile cyber attacks against central banks—for example,
the attack on the Bank of Bangladesh in 2016 or the SolarWinds attacks in 2020—have
demonstrated that government agencies such as central banks are not immune from
nation-state cyber attacks, and may in fact provide attractive targets for such attacks. Once a
CBDC is active, it will be a rich target for cyber criminals, or nation-states that want to infiltrate
a nation’s critical infrastructures. A CBDC that provides a single source of transaction
information is also at a risk of cyber espionage. As noted earlier, CBDCs may come under
cyber attack even before they become fully functional, as cyber actors will seek to infiltrate
the system’s architecture, hardware, and software supply chains. To defend against these
cyber intrusion attempts from nation states and other sophisticated cyber actors, we
recommend that central banks adopt two complementary mindsets that mitigate cyber risks.
First, working closely with private sector partners, central banks should develop a robust
cybersecurity risk management program to secure the part of the CBDC that are outside of
the central bank’s direct control or the payments tier. Second, central banks should also
develop a comprehensive cybersecurity risk management program for those parts of the
CBDC infrastructure that are within the bank’s control, or in the infrastructure tier. While there
are cybersecurity risks, such as double spend attacks that can occur at the user level, it is the
cyber risks to the CBDC’s infrastructure that require the greatest attention. In order to mitigate
these cyber risks, we would recommend the Federal Reserve CBDC design team adhere to
the National Institute of Standards (“NIST”) Cybersecurity Framework. Moreover, given that a
CBDC will also depend on external enterprises to help build and then ultimately distribute or
issue a CBDC, we would also recommend the Federal Reserve leverage NIST’s
Cybersecurity Supply Chain Risk Management Practices for Systems and Organizations, and
apply a Zero Trust Architecture mindset. Both of these practices are consistent with the
President’s Executive Orders of May 12, 2021 and January 26, 2022.
We recommend that a U.S. CBDC has the same legal properties as physical cash, and thus
support that CBDC be legal tender. Relatedly, legal tender, even in digital forms, could be
counterfeited. Therefore, Congress should conduct an analysis of how the U.S. Criminal code
needs to be amended to prepare for the proper enforcement, and protection, of this new
digital currency. For our part, we have provided a technical solution (see Visa’s answer to
question 18) to prevent double spend attacks and other types of cyber exploitation.
Banks and credit unions have a natural role to play as CBDC intermediaries because of their
experience in risk management (fraud, AML/KYC controls and cybersecurity) as well as with
customer relationships. The Federal Reserve may wish to explore whether similarly
well-regulated nonbank entities have useful technology offerings that would benefit the
Federal Reserve’s vision of CBDC, including providing CBDC “wallets” to the public. It is
important that the CBDC is implemented as a “platform” so that developers and other
participants can build products that offer new access services, distribution methods, and
related services to the public. Interoperability is a critical part of a functioning payment
ecosystem. Currently, central bank money (i.e. cash) and commercial bank money trade at
par and are fully interoperable. The Federal Reserve should consider how a CBDC will
interoperate with cash, commercial bank money, and potentially stablecoins. One potential
solution is the use of a CBDC intermediary that can operate as liquidity hubs, which help
consumers convert between commercial bank money and CBDC. We note that Visa is well
positioned to operate as a liquidity hub CBDC intermediary that enables interoperability
among currencies and payment rails.
Visa believes that offline capabilities are an important consideration for a CBDC. In our
opinion, offline capabilities would be most helpful in situations where the consumer is offline,
but the business is online. This is analogous to the existing card present environment, where
the card itself is intrinsically offline. A technical solution is possible for offline payments, i.e.,
an “offline” capability to create secure point-to-point offline payments using authorized
hardware. An offline payment solution can be coupled with periodic online updates and
syncing, which would enable: i. Regulators to periodically review and vet digital wallets for
AML/CFT compliance, through periodic re-issuance of the digital certificates given to devices
for offline enablement through the online server; and ii. The payment receiver to validate that
all transactions are compliant. Periodic online syncing could support recoverability for an
offline U.S. CBDC. A combination of additional factors such as biometrics, geolocation, and
other factors used to authenticate transactions can also assist in authorizing transactions. A
CBDC with controlled offline capabilities could enable both the Federal Reserve’s aims of
replicating key features of cash (when needed) and managing AML/CFT risk and compliance.
Visa has published the following technical paper, available at
https://arxiv.org/abs/2012.08003, on how to ensure secure point-to-point digital payments for
a CBDC in an offline environment.
sale? If so, how?
A retail CBDC should be well integrated and interoperable with the existing payments system
to ensure it can be easily accepted. An open and technology-neutral approach is essential to
fostering competition and innovation. Common and interoperable standards are a key enabler
to creating the right environment for making a payment system based on CBDC a success,
and for driving consumer and business adoption. Ecosystem participants rely on standards to
set rules and best practices. A common approach at the physical and technical levels can
spur innovation through a developer-friendly ecosystem, drive seamless merchant
acceptance and interoperability with existing payment systems, provide flexibility to preserve
vigorous competition, and pave the way for cross-border use cases. Visa is in the process of
exploring and developing new infrastructure that can help central banks and traditional
financial institutions come together and build simple user-friendly services that can enable
secure and efficient acceptance process. Our technical solution to enable acceptance, also
known as the CBDC Payments Module, aims to provide an on-ramp for CBDC to existing
payment networks in order for CBDC networks to easily connect to traditional financial service
providers. For banks and issuer-processors, they will be able to connect into the module and
integrate their existing infrastructure and be enabled to conduct critical activities such as
issue CBDC-linked payment cards or wallet credentials for consumers to use.
With respect to domestic payments, a CBDC could cause a fragmentation of the payments
system if it is not interoperable with commercial bank money and private sector stablecoins.
For example, there may be cases where the consumer wants to use a stablecoin for
payment, but the merchant wants to receive payment in CBDC. A “liquidity hub” that can
process currency conversions between CBDC, commercial bank money, and private
stablecoins may help support interoperability. When it comes to international payments, it is
critically important for a CBDC ecosystem to support, and not complicate, an already robust
cross-border payment system that markets have come to depend upon. While most CBDCs
will likely implement some form of a digital ledger, it is unlikely that they all adopt the same
stack of technologies and protocols due to, for example, different governance, market
requirements, technology providers, and levels of monitoring and compliance standards
required by central banks. This would, unfortunately, limit the interoperability of CBDC
networks which is a crucial requirement for implementing frictionless, cross-border CBDC
payments. Adding a novel technology and type of money, such as a CBDC, could further
complicate these challenges for banks that are moving these transactions. The scope for
innovation would be further strengthened by adoption of international standards, which
promote interoperability though a common approach at the physical and technical level yet
provide enough flexibility in implementation that preserves vigorous competition and the
ability for differentiation across payment systems. This would enable both bank and nonbank
payment providers to thrive and scale, and for consumers to have access to the cutting edge
of global innovation. In contrast, a centralized model where central banks create unique
standards and specifications could involve significant cost while excluding the developer
ecosystem, undermine the role of international standards organizations currently working on
standards for CBDC and blockchain technology, and inhibit potential interoperability and
competition with other digital currencies (including CBDCs).
CBDC?
We believe that appropriately regulated private sector stablecoins are likely to grow in
consumer adoption, especially as technological advancements develop with the underlying
distributed ledger technology, and might achieve a significant percentage of the digital
payments market. We also believe that there will be multiple stablecoins, which could lead to
a fragmentation of the payments ecosystem. Currently, we see stablecoins existing on
different blockchains, each with different features and functionalities. This potential
fragmentation is concerning for two reasons. • The regulatory framework of stablecoins is
currently still developing and not fit-for-purpose for payments, which could result in systemic
risk to the financial system. For example, a stablecoin issuer could become insolvent if the
reserves backing the stablecoin are of low quality or suffer a sudden drop in price. This raises
the question of how stablecoin issuers should be safely regulated. Visa welcomes the healthy
ongoing debate on the appropriate regulation of stablecoins and supports a regulatory
framework that results in a robust stablecoin for payments that protects consumers. • As
discussed above, a fragmented payments ecosystem may require an “interoperability layer”
to allow easy conversions between different forms of digital currency (i.e. between
commercial bank money, stablecoins, and CBDC). This interoperability layer does not
currently exist. Who will handle currency conversions if a particular stablecoin becomes
popular with consumers, but merchants continue to request settlement in commercial bank
money, or a CBDC? With respect to a CBDC, this is a topic that the Federal Reserve should
carefully consider, as consumers will expect a CBDC to be highly interoperable with
commercial bank money and, in all likelihood, multiple dollar-pegged stablecoins.
benefits of a CBDC?
A tokenized CBDC would seem to be best placed to address the consultation paper’s
objectives of expanding accessibility, including for the unbanked. For instance, a tokenized
CBDC could make it easier to validate offline payments (Visa’s recent technical paper also
includes further detail on this topic) and therefore also more easily replicate – and enhance –
the attributes of cash. Finally, a tokenized currency is more flexible and conducive to building
innovative products and solutions.
_________________________________________________________________________
MassMutual
Industry
Other: Insurance
Country
State
Massachusetts
Email
mjoconnor@massmutual.com
A balance must be struck in terms of consumer privacy while acknowledging that preventing
and tracking illicit activity is an important aspect of our financial system. Financial transaction
data is sensitive and private, and this sensitivity and privacy needs to be maintained.
However, as the financial world further digitizes, we must safeguard the ability to transact
freely in transactions that do not involve illegal activity. To the extent that privacy data is not
protected, or that there is even an appearance that it is not protected, the likely success of a
Digital Dollar with consumers would be reduced. Smart contract technology has the potential
to improve both operational efficiency in the life insurance industry and the
customer/policyholder experience through lower costs, greater access, and faster claims and
payments processing. To further increase the benefits of a Federal Reserve issued CBDC
and encourage innovation in the finance industry, the CBDC should be designed in such a
way as to be interoperable across leading smart contract technology platforms. Having a
trusted, widely accepted method of payment in the smart contract ecosystem is a key element
to furthering the adoption of smart contract technology in the insurance industry. The
involvement of private sector institutions in the design of payment rails is of paramount
importance, acknowledging that this potentially introduces additional risks to the design and
security process.
Some of the benefits could be achieved via the use of private sector “stablecoins”. This might
allow the technological risks to sit with the private sector but would require a new regulatory
framework given the lack of transparency in stablecoin reserves and other risks. In addition,
private currencies are unlikely to garner the trust of a Fed backed digital currency and would
be less likely to be used by institutions. The Fed’s real time settlement protocol will help from
an institutional perspective, but is unlikely to satisfy consumers looking for faster, simpler, and
more secure ways of interacting on a peer-to-peer basis and with businesses.
inclusion?
To the extent that ease of use is high and the burden to sign on is low, the impact on financial
inclusion would be positive. A digital wallet has the potential to give the unbanked a simpler,
and potentially better way, to create an income history, pay bills, access credit, access
insurance, transact cross border, and lessen onboarding and ongoing fees paid to existing
financial institutions. However, the existing barriers to entry need to be understood to
maximize the benefit for financial inclusion. Implementation details around KYC, who provides
wallets, how wallets are accessed, minimum balances (if any), and where CDBC can be used
are important and will impact overall success. Acknowledging that some citizens do not
participate based on personal choice, the ease of use, ease of access, and ease of
onboarding are paramount. Allowing interest on a small deposit or providing other incentives
for the currently unbanked to open a wallet would positively impact inclusion. In addition,
financial institutions may not operate in certain geographies because it is not profitable to do
so. A CDBC may help to lower those costs and, depending on how it is utilized, may very well
eliminate them. However, it is important to understand the reasons for financial exclusion, and
any exercise to increase inclusion will necessarily include a broader set of reforms—not just a
CBDC.
A CBDC coupled with a well-designed distribution and custody ecosystem could allow the
Fed to distribute stimulus, tax refunds, and relief payments more quickly. If wallets are
appropriately KYC’d, and technology is shared with states, it may also allow unemployment
and other state-based payments to be transacted rapidly. A CBDC design that maintains the
structure of the current fractional banking system should not disrupt the transmission of
monetary policy. The ability to pay or charge interest on a CBDC could enhance the
transmission impact. The COVID pandemic highlighted limitations of the Fed’s ability to
distribute stimulus broadly and rapidly.
stability?
It is unlikely there would be an impact on financial stability, if a CDBC is introduced gradually

and transparently. However, it would be a net positive to liquidity if transaction costs,
issuance costs, and transfer costs are reduced.
Stablecoins are at a significantly different risk level than a Fed backed CDBC. Users of
stablecoins should understand that their holding is backed by at least a portion of credit risky
assets, creating a different risk profile. A stablecoin may have similar characteristics to a
CDBC, but it ultimately looks like a money market mutual fund with risks of runs in times of
stress. If there is no upper limit on consumer CBDC holdings, it is certainly possible that
consumers would rather hold CDBC directly than commercial bank money. For example, if
consumers can move from commercial bank money to a digital coin in times of banking
stress, liquidity could be drained from the banking system quickly. However, means can be
built into the system to overcome a potential reduction in commercial bank deposits such as
paying no interest on CDBCs, or paying interest on only a limited amount.
The primary tool that a CDBC may use to mitigate negative impact should revolve around
depository interest rates. These considerations would include whether a CBDC yields a
positive or negative interest rate. A CBDC may pay 0% interest (no different than paper
money) while commercial banks can and should pay something more. In such a case
consumers would still be incentivized to hold much of their wealth in commercial banks and/or
investments rather than in CBDC units.
Yes. Central bank money should not be the only kind of money, but it serves an important
role as the most reliable alternative in a competitive marketplace of digital currencies.
Additionally, a CBDC should have the ability to process offline transactions between wallets
and other devices. It is prudent to not couple the ability to transact in CBDC with internet
access. Maintaining central bank money, whether cash or digital, is paramount to financial
stability. It is likely that the use of cash would decline given that the transaction costs
(particularly in terms of time) are high for moving from digital money to cash money and vice
versa.
CBDC?
Lack of a US CDBC has the potential to put the US at a disadvantage, particularly in

cross-border digital payments as well as potentially putting at risk the long-term nature of the
dollar as the largest reserve currency. Certain European and Asian countries are currently in
the prototyping or use-case stage. In addition, non-regulated non-fiat cryptocurrencies may
step into the space for both domestic and cross-border payments to the extent a regulated
digital coin is not developed. This has the potential to introduce risks to the overall system
that are not currently regulated. The use of institutional digital payments is unlikely to move to
a non-CDBC, although use of non-USD sovereign digital coins will grow. A prudent step
would be to focus on the domestic market first before expanding to cross-border payments,
whether individual or institutional.
The United States benefits in many ways from the US Dollar being the world’s leading
reserve currency. To maintain that position, the US Dollar must stay competitive as the global
economy continues to digitize. The issuance of CDBCs by other large economies should not
be viewed as a threat, but as an opportunity. More importantly, any US CDBC needs to be
well thought out and not being first to market gives the US the chance to learn from other
nations.
Thinking of a CBDC in terms of an alternative among many likely well-regulated private digital
currencies should allow the CBDC to adjust its own design, learning from the mistakes and
flaws of others as the preferences of economic actors become more clear over time. An
important decision is whether a blockchain is used and, if so, whether that blockchain is
centralized or decentralized. Security concerns will change based on that fundamental
decision.
Access to a CBDC eligible wallet could follow similar KYC rules today to open a bank
account. The wallet provider (eg. financial institution) could perform initial KYC checks before
granting access to a CBDC wallet. It would then be clear, to other institutions, that the wallet
is owned by someone who has been KYC-verified without sharing that person’s identity. In
this communication, the original wallet provider would not necessarily need to share sensitive
PII but simply verify that the client is in good standing or share a limited set of PII as needed.
This would reduce the instances of sensitive PII being shared for financial transactions which
could improve client privacy and protections. That wallet can then be used to receive wages,
transact, gain credit access, gain access to insurance products and other investments by
interacting with other KYC-verified wallets. Wallet providers could then perform transaction
monitoring, as financial institutions do today, to track any potential illicit activity. Additionally,
CBDC transaction data shared outside the wallet provider (for example with government
authorities) should be decoupled from the identities of the persons or entities completing
those transactions. Similar to existing processes relating to warrants and subpoenas, CBDC
wallet providers should only be required to disclose the identity of the owners of certain
CBDC wallets if a government agency has received the necessary approvals to perform an
investigation. Controls could be established in regulated wallets where transactions over a
certain amount could be flagged.
The risk of unauthorized access (hacking) will always exist. One should expect that non-US
actors targeting US financial infrastructure will similarly target CDBC infrastructure. The risk is
unavoidable but should be mitigated to the extent possible. Multiple copies of a “ledger” are
likely necessary to decrease the risk of illicit transfers or spending, where transactions can be
rejected in near real-time if multiple ledgers disagree. This may lead to a design where
payments are delayed long enough for transactions that are illegitimate to be caught. Multiple
ledgers could be used depending on transaction size that allow faster seeds for small
payments while decreasing the speed of larger payments, with a true-up occurring at certain
intervals.
Yes.
Interest, including negative interest, offers the chance to fine tune monetary policy. Moreover,
the ability to control interest rates on CBDC could more quickly and more directly allow the
Federal Reserve to implement its monetary policy strategies. In addition, CBDC balances up
to a certain amount might pay interest as a means of bringing the unbanked into the financial
system. However, the intention should not be to disintermediate the current financial system
where interest is paid for risk. A CDBC should be designed such that interest rates can be
increased or decreased as necessary for policy implementation.
A balance needs to be struck between allowing freedom of movement of capital while

acknowledging that unrestricted movement may exacerbate bank runs in times of stress. A
reasonable bank account and wallet holder may be incentivized to transfer their bank
holdings to a direct obligation of the Fed when banks are most in need of that capital.
However, with FDIC insurance on consumer bank accounts (effectively making those
balances direct obligations) and the bank resolution framework to protect creditors, that risk is
infrequent in the current state. It is possible that the frequency could increase as transaction
costs are lowered and speed of transfer is increased. There should be limits on unrestricted
transfers, with differentiation between end consumers and institutions in terms of limits.
Initially, banks that accept and issue physical cash should serve essentially the same function
with digital currencies. A starting point would be to utilize institutions that already have
access to the Fed window. However, the market should evolve to allow other financial
institutions to act as intermediaries. To the extent that those institutions are willing to satisfy
the regulatory and compliance burden, they should be allowed to participate. The regulatory
structure should be similar to structures already in place for banking institutions, with a robust
audit process to create confidence.
Offline capabilities should be included, up to a certain limit. This would be crucial for rural and
remote areas, or in the case of natural disaster. A design could leverage technologies like
NFC to facilitate offline transactions between wallets. Once those wallets regained internet
access, an asynchronous “true up” of transactions and balances could be performed to
appropriately ledger those offline transactions. In addition, offline wallet balances need to be
coded such that there is a minimum balance of $0 and have balances that are calculated in
real time, to avoid a double spend. Time limits and maximum spend limits should also be
considered when operating offline.
sale? If so, how?
Yes. Similar to physical cash, it should be a design objective of a CBDC to facilitate broad,
fast, and simple transactions throughout the economy. As to how to achieve this objective,
there are several strong examples in the digital payments industry today that could be used
as inspiration. APIs need to be designed to provide quick and robust communication between
consumers, the goods supplier, and the government or financial institution.
There are likely multiple different designs that could achieve this goal. Technological history
suggests standardized protocols such as HTTP and email protocols have been successful in
facilitating adoption across multiple platforms. A similar set of standards could facilitate wide
adoption and transferability of a CBDC while also leaving room for innovation and
development in the private sector. There are many projects operating in the digital asset
ecosystem that are focused on portability across blockchains. A government working group or
entity would need to lay out the rules around transferability, although the technology likely
exists in the private sector.
CBDC?
benefits of a CBDC?
There are substantial tradeoffs in each of the design principles discussed in the paper, many
of which we have discussed above. The benefits of a CDBC should be focused on the speed
and ease of transactions for consumers and institutions, maintaining the dollar as the primary
reserve currency, financial inclusion, and allowing policymakers to quickly provide payments
to citizens in a targeted manner. 1. Anonymity versus criminal activity 2. Interest paying versus
financial stability 3. Portability of KYC versus centralized control 4. Processing speed versus
security 5. Offline and peer to peer payments versus risk of fraud 6. Centralized versus
decentralized ledger 7. Smart contract complexity versus massive payment capacity
_________________________________________________________________________
National Consumer Law Center (on behalf of its low income clients)
Industry
Country
State
Email
lsaunders@nclc.org
a. Misuse of CBDC technology to monitor or control spending by public benefits recipients. A

CBDC could be used to make benefits payments. As one blog notes: "A government-issued
CBDC would allow the government to dictate how, where, and when currency holders spend
their funds. As an example, consider unemployment money issued in the form of a CBDC.
The government could restrict the funds to not work at businesses categorized as liquor
stores or bars." TANF recipients are already prohibited from using their cards at liquor stores,
42 U.S.C. § 608(12), even though for those without transportation or in neighborhoods
without convenient grocery stores, the corner store holding a liquor license is also the place to
buy milk and bread and use the ATM. Lawmakers have intruded on the privacy of poor
people and restricted where they can use or access their money to undermine support for
public benefit programs. Even if monitoring or restrictions were initially prohibited, a future
Congress could authorize them. b. Fraud at greater scale and velocity with no protection. The
paper mentions the risk of money laundering and the financing of terrorism but does not
address the potential explosion of other financial crimes like fraudulent inducement scams. A
CBDC would “need to be final and completed in real time,” leading to the same fraud
problems that have plagued Zelle and Venmo. Problems could be more widespread with the
ubiquity of a CBDC. While Zelle and Venmo – as the middlemen between the sender and
receiver – play a role in fraud prevention and error resolution, what role would the Fed play?
Moreover, the EFTA lacks adequate fraud protection for instant push-payment systems like
CBDC transactions. See more in our digital wallets hearing statement. Fraud problems would
be compounded if nonbanks were allowed to be intermediaries (see below). c. Reduction in
access to credit. Banks would have less capital and less money to lend, and perhaps would
be less inclined to lend money to people who keep their funds in CBDC. d. Cost of accounts.
Intermediaries would likely charge for accounts to access CBDCs, as they would bear costs
in administering them and providing access devices. The accounts could be costly for
low-income consumers given that banks would not benefit from the use of the funds or
interchange fees. Any CBDC legislation should guarantee free or very low-cost ($5/month)
access to accounts with no overdraft or NSF fees. e. Unclear coverage and application of the
EFTA. The EFTA provides the core protections for accounts and payments but only for
transfers that authorize a “financial institution” to debit or credit an “account.” Legislation must
ensure that CBDC is covered. But adapting the EFTA to CBDC would raise many knotty
problems. Error resolution could be complicated – who is responsible, the federal government
or the intermediary? Will they work together? f. Unclear application or preemption of other
important state and federal consumer protection laws. Federal and state laws have important
consumer protections for bank accounts and money transfers, and it is unclear whether they
would apply to the federal government or to CBDCs. Particular laws might have definitions or
a scope that do not contemplate CBDCs or funds held by the federal government. Critical
laws include state laws that limit bank account garnishment by judgment creditors, federal
rules that financial institutions must follow before allowing garnishment of Social Security, the
FCRA (which applies to account screening agencies), and bankruptcy laws. The government
does not have processes in place to ensure compliance with many of those laws. Courts
might find that the federal government is not subject to states laws or might erroneously treat
private intermediaries as exempt agents of the government. See Starr Int’l Co. v Federal
Reserve Bank of NY, 742 F.3d 37 (2d Cir. 2014). Any rules should explicitly subject CBDCs
and CDBC accounts and payments to all applicable state and federal laws. g. Easier for
garnishment by debt collectors and the government, including for the wrong amount or
against the wrong person. Debt collectors could have an easy, central place to go to serve
garnishment orders, evading state protections against wage garnishment by garnishing
wages after they are in a CBDC account. It is unclear if state garnishment protections would
apply to the federal government, and the government may not be equipped to comply with 50
state laws. Collectors routinely pursue debts not owed or fail to serve consumers with notice.
The government could also much more easily empty out accounts without court process,
similar to what is currently done with tax refund offsets, but with more dire effects on regular
income needed for necessities. h. Reduction of community reinvestment activities. The
Community Reinvestment Act only applies to insured depository institutions. Funds in CBDC
accounts might reduce bank CRA obligation
To promote financial inclusion, financial institutions should be required to offer Bank On

accounts with low monthly fees and without overdraft or NSF fees. The CFPB should adopt
rules to prevent abusive use of overdraft fees that push people out of accounts. The rules
governing international remittances should be improved to address hidden costs. See CFPB
junk fees comments. From the consumer perspective, it is hard to understand any significant
benefits of a CBDC; any benefits seem far outweighed by the potential risks and uncertainties
described above. The paper identifies five potential benefits but does not really explain how a
CBDC would provide any benefits to consumers beyond what FedNow will provide. The
potential benefits of a CBDC should be more clearly explained. Even for the benefits already
stated in the paper, many can be better achieved in other ways. The discussion paper
identifies four potential benefits: (1) “Safely meet future needs and demands for payment
services.” What needs and demands would a CBDC serve that today’s money, coupled with
FedNow capability, will not? Digital money in the form of commercial bank money is widely
available and deposit insurance makes that money safe. For individuals with accounts under
$250,000, the risk of a bank failure is both remote and, even if it occurs, results in little
disruption. Many new payment mechanisms have emerged using today’s digital money. To
the extent that a CBDC is aimed at more safely serving the audience that is using stablecoins
and cryptocurrencies, a CBDC will not be an alternative for those who are interested in
investment speculation or a payment system outside of government control. (2)
“Improvements to cross-border payments.” How would a CBDC improve cross-border
payments? The major problems today are due to inflated and hidden costs imposed by
remittance providers, and the costs of and delays posed by the sending and receiving
infrastructure. See CFPB junk fees comments. It is unclear how putting a CBDC in the middle
would change anything significantly. Stronger rules to make remittance fees transparent and
protect consumers from errors and liability would do more to improve cross-border payments.
Moreover, faster, final CBDC payments to international locations could increase payment
fraud and make it harder to reach scammers. (3) “Support the dollar’s international role.” That
may be a benefit on the macro level, but it does not impact consumers individually. (3) “Extend
public access to safe central bank money”. Why is commercial bank money with deposit
insurance not good enough for consumers with less than $250,000 in one account? What
would the public gain from such access? Additionally, many immigrant communities are
fearful of central bank control over currency, preferring to remain unbanked or bank with
smaller community banks. See more below. (4) “Financial inclusion.” Any benefit is not
explained and is better addressed through other measures. See below.
inclusion?
It is difficult to see how a CBDC could help financial inclusion, especially in an intermediated
model. A CBDC would pose the same issues that keep people out of banks today: Mistrust of
banks, not enough money, cost of accounts, KYC and checking account screening agencies.
Mistrust of the federal government and privacy concerns could compound those reasons. A
CBDC could hurt financial inclusion if (1) it became the de facto preferred payment system
but many consumers were shut out of or distrustful of it, or (2) it deprived banks of the capital
and funding used to support low-balance accounts.
stability?
It is more important to prevent impediments to the acceptance of cash and the ability to use
cash than it is to create a new form of central bank money. It is important to preserve a form
of money that (a) can be used by those shut out of bank accounts either because they don’t
trust them, can’t afford them, or are improperly blocked by fraud/account screening controls,
and (b) can be used anonymously. But CBDC would not achieve this.
CBDC?
The discussion paper understates the challenges of ensuring privacy, dismissing those
concerns quickly by stating that a CBDC would be “privacy protected” and that, in an
intermediated model, “intermediaries would address privacy concerns by leveraging existing
tools.” But our national privacy laws are woefully inadequate. CBDC must not enable the
federal government – or intermediaries – to have more personal information about individuals
than they do today. To the extent that privacy laws do apply, they do not address the issues
posed by the federal government’s access to data generated by use of CBDCs, even in an
intermediated model. CBDCs may also enable collection of more detailed information about
spending and payments than today’s forms of money do. Moreover, even if legislation
establishing a CBDC had additional privacy protections, those protections are likely to be a
compromise and less robust than state protections – and yet there will be a push to preempt
state protections. Data uses also change making it difficult for legislation and regulations to
keep up with the growing use and commercialization of data. But it is also critical not to
facilitate illicit financial activity— not just money laundering and the funding of terrorism, but
also scams. Much more robust KYC controls and monitoring than we have today are
necessary to ensure that accounts do not provide a vehicle for scammers to receive funds.
Will the Fed or intermediaries monitor CBDC accounts to ensure that they are not being used
for illegal activities or to pass funds onto scammers, even if the threshold is less than the
$10,000 for mandatory SARs? With a fast and final payment system like CBDC, robust fraud
monitoring of receiving accounts is essential.
Yes.
Only insured depositories whose parent companies are subject to the Bank Holding Company
Act should be allowed to serve as intermediaries. Nonbank entities and ILCs that do not have
the same full oversight and obligations of insured institutions should not be allowed, as
explained in our comments on the Fed’s proposed guidance on access to master accounts.
Allowing nonbank intermediaries would be especially problematic given the lack of federal
supervision and the bigger problems they have had appropriately handling KYC issues.
Nonbanks have both permitted widespread opening of fraudulent accounts (not only for
stimulus money but also as vehicles for receiving money from payment scams) while at the
same time overreacting to fraud concerns and shutting down or freezing legitimate accounts
and preventing people from accessing their money.
If possible, any CBDC should have offline capabilities that sync up once the user is back
online. To the extent a CBDC is a cash replacement as cash usage and acceptance
decreases, it is still helpful to have a form of payment usable by those who do not have
smartphones and for use when there is no internet connectivity, including in rural areas and
during times of power outages and natural disasters. Moreover, even if a CBDC has offline
capabilities – and especially if it does not – it is still important to preserve access to and
acceptance of cash.
sale? If so, how?
A CBDC should be designed to be usable at the point-of-sale. Money management is more

difficult if funds are siloed into different assets that can be spent in limited ways. POS use
emphasizes the need for EFTA protection and the chargeback rights that credit cards have
under TILA. A CBDC used at point-of-sale without chargeback rights would be less safe than
a credit card, and less safe than a debit card if there are issues regarding EFTA coverage or
enforcement (see above).
Interoperability is essential. Funds must be easily convertible, at no cost, between CDBC and
bank deposits. Otherwise, if funds are siloed between two types of money, both are less
useful, as families living paycheck to paycheck will face more challenges in trying to access
and spend their funds on day-to-day obligations.
CBDC?
benefits of a CBDC?
_________________________________________________________________________
The Digital Dollar Project
Industry
Other: Non-profit
Country
State
Virginia
Email
jlassiter@digitaldollarproject.org
The Digital Dollar Project (DDP) is a non-profit organization with a mission to encourage
research and public discussion on the potential advantages of a digital dollar, convene private
sector thought leaders and actors, and help inform national policy. The DDP looks forward to
the Federal Reserve Board's (FRB) planned deeper studies into financial inclusion and
programmability as key benefits of a Digital Dollar. Although the FRB paper discusses various
applications and use cases for CBDC, the paper doesn't discuss interoperability in detail, a
feature that will be critical for widespread adoption and utility. By acting as a base layer for
digital economic activity, CBDC could facilitate interoperability globally across digital asset
networks. Designing a CBDC that enables intelligent interoperability to connect with current
and future financial infrastructure systems domestically and abroad would advance the
dollar's role in global transactions such as trade or remittances. In the FRB discussion paper,
there is also an absence of the potential benefits that CBDC could provide to wholesale
settlements and capital market infrastructure. As tokenized economies emerge, a natively
tokenized US central bank currency could complement the account-based Fedwire and
FedNow systems and provide a modernized payment system. CBDC settlement for clearing
and settlements could reduce counterparty risk and trapped liquidity, increase capital
efficiencies, provide a more efficient, automated workflow, guarantee that cash and securities
are delivered, and provide added transparency to regulators. While these benefits have been
proven in other pilots globally, the DDP is pleased to explore further and quantify the benefits
of CBDC settlement to support the US post-trade infrastructure during the Lithium Pilot
Program with the DTCC (1). The data and outcome of this pilot will be made broadly available
to the public and the Federal Reserve Board members in their consideration of a CBDC. (1)
Learn more about the Lithium Pilot Program with the DTCC,
www.dtcc.com/news/2022/april/12/dtcc-building-industrys-first-prototype-to-supports-digital-us
-currency
Although there are diverse payment solutions in the US, a Digital Dollar is the only medium
that could provide a digital and cash-like bearer token issued by the central bank. It is
possible that the benefits of CBDC can be idiosyncratically addressed by other solutions;
however, they likely would be point solutions, whereas a tokenized CBDC offers the potential
for an extensible system that could be built upon and enable a new ecosystem of services.
Furthermore, a CBDC is the only instrument that could provide the transactional benefits of
digital currency with the stability, trust, and risk weighting of central bank money. A CBDC is
not antithetical to the development of other digital assets, and rather provides consumers
greater optionality across payment types and digital asset activities. The DDP envisions
CBDC as an underlying asset network upon which industry participants could provide unique
and customized services (e.g., digital wallets, banking capabilities, stablecoins, and
automated payment information).
inclusion?
Depending on design choices, CBDC could provide financial institutions and financial
technology companies – in partnership with community outreach efforts -- with the underlying
CBDC technology upon which to build inclusive payment and banking services. Regulated
institutions can develop digital wallets that provide unique services and cater to distinct user
bases. The DDP believes that lower operational, technology, and regulatory costs related to
offering digital wallet solutions for the custody of tokenized digital dollars may hold
advantages over traditional bank accounts in terms of expanding access to underserved
populations. For example, if designed with assured privacy and manageable onboarding,
CBDC could provide a more accessible and less expensive option for traditionally
underbanked communities who pay high fees to access the digital payment ecosystem.
Financial inclusion benefits will also depend on design considerations such as maintaining a
cash-like model that provides offline payment abilities, privacy, potentially tiered identity
verification requirements, and distribution through the two-tier banking system, inclusive of
regulated fintech companies. The BIS has recently posited that although not a panacea,
central banks could use CBDC as a tool to promote financial inclusion in "promoting
innovation in the two-tiered payment system, offering a robust and low-cost public sector
technological basis and novel interfaces, facilitating enrolment and education on CBDC, and
fostering interoperability among multiple dimensions”. (2) Privacy will be critical to realizing
the potential inclusion benefits of CBDC. Some portion of the unbanked prefer not to place
their money in banks due to privacy concerns, and these people seem unlikely to transact
heavily in a CBDC unless they are confident that privacy is assured. Similarly, while it is vital
to ensure robust KYC and other financial crime protections akin to what banks and other
money services businesses have in place today, it will be critical to assure that these
processes do not come at the cost of preventing people from accessing CBDC. Given how
challenging it is to accurately verify identities, a better system for digital identity, or at least
standards for such a system, could facilitate broad access to financial services when linked
with CBDC distribution. In cases of disaster relief, such as distributing COVID relief funds, the
US found challenges mainly in identifying the proper recipients, rather than a function of the
speed in the payments systems. (2) BIS, “Central bank digital currencies: a new tool in the
financial inclusion toolkit?” https://www.bis.org/fsi/publ/insights41.htm
The Federal Reserve should view a US CBDC as a policy tool, not as a policy expression.
Implementation of a digital dollar should be monetary policy neutral, without a view on issues
of money supply. It is reasonable to expect that the Federal Reserve will be no less prudent in
deploying and managing CBDC than it is in respect to the existing money supply.
stability?
The impact of CBDC on financial stability will depend on how a CBDC is designed and
deployed. The DDP recommends that the Federal Reserve continue its approach of engaging
with the private sector to understand design requirements and build public confidence. If
appropriately designed and distributed through banks and regulated intermediaries, with
programmable money features, the negative effect of CBDC on financial stability could be
negligible. A CBDC should not include features that would hinder the US Dollar as a store of
value and safe-haven asset. There are appropriate concerns that a US CBDC might decrease
money held in commercial banks. But without empirical data to gauge user habits, there is a
lack of evidence to support any assumption of a change in commercial bank usage. There is
also the potential that CBDC increases the flow of money into the banking sector, especially if
previously un-or-under-banked communities shift US CBDC into bank accounts because of
the ease of doing so. Only pilot projects of CBDC usage conducted under real-world
conditions can generate the empirical data to know whether mobile devices and digital wallets
provide attractive on-ramps for underbanked populations to move US CBDC to banking
services offering interest on deposits and government insurance. Only real-world testing can
answer whether the greater ease in converting commercial bank money into digital dollars
would make people more or less likely to do so in a panic. More specifically, it is very possible
that if consumers know they can readily convert commercial bank money (or FDIC insurance
payouts) into a digital dollar, then there would be less reason to run on a bank.
Concern has been raised that introducing a CBDC could lead to a disintermediation of the
banking sector. However, the magnitude of potential impact is unclear and will depend on the
design of a CBDC and how attractive it is to hold and use, compared to commercial bank
money. The desire for consumers to hold and use CBDC tokens will depend on design
considerations such as privacy, programmability, interoperability, and public confidence. To
get these considerations right, the Federal Reserve should engage with the public to
understand preferences and design trade-offs. Higher levels of disintermediation could have
implications for the efficiency of credit provision in the economy – specifically, leading to more
expensive credit and tighter lending criteria (already a challenge for the underserved
communities). It is arguable that without safeguards or system assurances on convertibility,
CBDCs could exacerbate financial instability during periods of economic stress as people
would likely seek to substitute bank deposits with CBDCs. The same set of trade-offs that
exist today between cash and account-based funds, such as immediate access, security,
interest on account, and access to other financial services, will also apply to greater or lesser
degrees in a future of CBDC and online banking. If consumers are confident in their ability to
exchange CBDCs for FDIC insured commercial bank money, the banking relationship should
mirror the current cash model.
The impact of CBDC on the financial sector will largely depend on the design and deployment
of the network. Decisions such as issuing a non-interest bearing CBDC, and not providing
FDIC insurance over CBDC tokens should mitigate any adverse impacts of CBDC and
maintain the existing cash usage model. To understand and mitigate any potential adverse
impact(s), the Digital Dollar Project (DDP) encourages the Federal Reserve to work with
private institutions and participants to understand how they would use a CBDC. Regulators
can learn more about the implications of a CBDC issuance by performing gaming simulations,
pilot programs, and research studies with broad stakeholder involvement. To this end, the
DDP intends to facilitate exploratory pilot programs with industry participants to further inform
the Federal Reserve and the public on the implications of various CBDC use cases. (3) (3)
“Digital Dollar Project to Launch Pilot Programs to Explore Designs and Uses of a U.S.
Central Bank Digital Currency”
newsroom.accenture.com/news/digital-dollar-project-to-launch-pilot-programs-to-explore-desi
gns-and-uses-of-a-us-central-bank-digital-currency.htm
As economies and people become increasingly digitally connected, the government should consider
offering an alternative to central bank issued physical cash that is natively digital and prepared for
ongoing migration of economic activity to a digital environment. A CBDC that resembles cash could
maintain the existing usage of money while capturing the consumer preference for electronic,
non-account-based payments. A CBDC could co-exist as a viable, third format of US currency,
alongside cash and reserve accounts. A well-designed, intermediated CBDC with programmable
money features could enable low- or zero-cost transfers through new models of custody and transaction
rails, to be determined through experimentation.
CBDC?
In the past decade, there has been substantial advancement in digital payments. In some
cases, private and public sector actors are developing scale payment platforms that can
serve billions of users. These platforms are usually accounts-based and centralized, which
raises privacy, resiliency, and security concerns. If countries like the U.S. do not actively
explore payment system design, it is likely that foreign centralized, scale platforms will gain
further market share. Robust discussion around privacy expectations and practices may also
be neglected. Domestically, retail and wholesale stablecoin payment solutions are testing
traditional account and message-based payment networks. Programmable money is a
powerful tool that will continue to provide automation benefits from smart contracts, such as
reoccurring and fractional payments across open economic systems. Stablecoin solutions are
growing and evolving rapidly, though would benefit from clear and coherent regulatory
frameworks. In March 2022, the transaction volume of stablecoins backed by dollars was
worth $500 Billion. (4) Although the leading stablecoins are denominated in dollars, the US
should further solidify dollar-denominated digital networks. These payment networks are
typically underpinned by the Dollar, which still requires the movement of dollars at the end of
the transaction. A CBDC could make stablecoin transactions more efficient by connecting
stablecoin networks to CBDC networks. In the absence of a US CBDC, foreign CBDCs and
scale payments networks will increasingly provide modernized payment rails across
wholesale and retail users. (4) In March 2022, the transaction volume of stablecoins backed
by dollars was worth $500 Billion,
www.theblockcrypto.com/data/decentralized-finance/stablecoins/adjusted-on-chain-volume-of
-stablecoins-monthly
The decision of other large economy nations to issue CBDC will have a meaningful impact on
global finance and America's economy. Preserving the dollar's central role in the global
economy is an appropriate and correct objective of US policy. Foreign countries are
developing CBDC capabilities to replace traditional payment rails and provide CBDC as a
service to global financial participants. The global leaders of CBDC exploration will dictate the
technology and standards in CBDC development. The DDP hopes that the US will take a
leadership role and design a CBDC that upholds our democratic values of freedom, economic
stability, and personal privacy. In a CBDC future, the US should be engaged and lead
discussions regarding governance, interoperability, security, privacy, and scalability
standards, rather than reacting to foreign CBDC decisions. CBDC usage for wholesale
transactions will be critically important to facilitate the continued role of the dollar as an
international trade settlement currency. Recent work internationally has demonstrated the
utility of a wholesale CBDC. The Banque de France demonstrated the ability to settle in a
foreign currency outside of the issuing nation while still providing transaction data to the
issuing central bank. (5) The BIS has been exploring the requirements to link wholesale
infrastructure to CBDC networks. This work portrays an important ability for global nations to
use central bank money. Overall, while technology is but one factor underpinning global
currency use and adoption, it is an important one – the US must future-proof the role of the
Dollar in an increasingly digital world. In early 2021, the Hoover Institute convened a working
group of distinguished experts in national security, finance, economics, central banking,
technology policy, and computer science to study the global implications of the digital yuan
(e-CNY) China's central bank digital currency. During the period of study, over 250 million
Chinese people have opted into the e-CNY. In March 2022, the working group issued its
analysis (6), which detailed the degree to which China has established first-mover advantage
in, not only the deployment, but the technical underpinnings of CBDC. The study notes that
e-CNY will be a digital substitute for paper money, grant more Chinese people access to the
banking system, and provide Beijing with greater oversight and control of business and
individual financial transactions. It warns that the e-CNY enhances Beijing's ability to
exercise political control over Chinese society and provides a significant opportunity for
China to cement its international leadership of payment technology innovation and adoption,
set economic norms and technical standards that align with its authoritarian governance
system, and increase its ability to undercut the traditional dominance of the US dollar as a
source of geo-economic and strategic influence. The Hoover study warns that the spread of
the e-CNY might diminish the role of the dollar as the world's reserve currency and undermine
the ability of the US to deploy financial sanctions against rogue international actors. The
Hoover study proposes a pathway toward revitalizing US financial leadership on the
international stage in the digital age. It calls on the US to respond to a spectrum of key policy
concerns raised by the e-CNY and improve incentives for innovation and competition in its
own payment systems. It advocates expediting development of technology and standards for
a possible digital dollar affirmatively committed to democratic norms of privacy, accountability,
transparency, and security in shaping the global rules surrounding central bank digital
currencies. The Hoover study offers three broad recommendations for a US response to the
emergence of non-USD CBDC: The US should launch a well-resourced CBDC research and
development effort drawing on the talent of US government, private sector, and university
actors to ensure privacy, prevent illegal payments, and provide for a competitive and
innovative payment landscape. The US should establish a strategic plan for payment systems
in the US digital economy that provides for the development of data privacy standards and
the integration of CBDCs, fast-payment systems, and private payment arrangements, such as
stablecoins. The US should step up to lead the development of an international regulatory
framework around digital currencies, including CBDCs, that prioritizes consumer protection,
privacy, financial anti-crime compliance, financial stability, and the protection of monetary
sovereignty. (5)
www.banque-france.fr/en/communique-de-presse/banque-de-france-bank-international-settle
ments-and-swiss-national-bank-conclude-successful-cross (6)
https://www.hoover.org/sites/default/files/research/docs/duffie-economy_digitalcurrencies_we
b_revised.pdf
The Federal Reserve should continue CBDC experimentation with the private sector on
diverse use cases to understand potential risks associated with CBDC. Real-world testing
and engagement is necessary to uncover CBDC implications on markets and users.
The geo-political and economic challenge of China's e-CNY is significant and should not be
ignored. Yet, it should also not be overstated or feared. The goal of a free society should not
be to emulate a closed one. The US did not vanquish the Soviet Union by emulating the
USSR's failed centrally controlled economy. Rather, the US out-performed and better served
its citizenry though the efficiency and dynamism of its free market, incentive-based private
sector economy and the endurance of its aspirational ideals of individual liberty. The
challenge of the e-CNY calls for a similar return to free society fundamentals. If the US is to
assert a leading role in setting global standards for CBDC, just as it was a leader in setting
the standards for the first wave of the Internet, then it must expand its exploration of CBDC
itself. But it must do so in a way that is consistent with democratic values of individual liberty,
freedom of speech, personal privacy, limited government, and the rule of law. Some of those
ideals are set out in the US Constitution including freedom of speech, assembly, and worship
and the Fourth Amendment's right to personal privacy. From that amendment stems a body of
jurisprudence defining the balance between an individual's right to privacy and the federal
government's limited ability to abridge that privacy in pursuit of legitimate law enforcement,
national defense, or other overriding objectives. Although a right to financial and information
privacy is not specifically established by the Fourth Amendment, for the last half-century
courts have generally protected privacy using a doctrine called "reasonable expectation of
privacy." Even so, Fourth Amendment privacy protections have been eroded considerably
since the attacks of September 11, 2001. In fact, no account-based financial transactions are
truly private because, in every case, they require personal identity as a prerequisite step. The
Fourth Amendment's jurisprudence needs to evolve further in this digital era to renew the
balance between economic privacy with other societal priorities. There is no "consumer
transaction" limitation contained in the Fourth Amendment. Privacy protections, constitutional
or otherwise, must clearly apply to data generated by all legal use, not just consumer use, of
a US CBDC if it is to enjoy broad societal support. The Digital Dollar Project believes a
well-functioning US CBDC should be private, secure, accessible, and transparent (7). Without
inviolable protections for such civil liberties as freedom of speech, assembly, free enterprise
and individual economic privacy, a US CBDC would be no more worthy of a democratic
society than the currency of an authoritarian one. The American people – and free people
everywhere - have everything to gain by encoding into a US CBDC stout protections for
individual liberty and privacy. The US has everything to lose by neglecting it. The issue is
essential to the future of real democracy. With the proper Fourth Amendment jurisprudence
and thoughtful design choices relating to anonymity and individual privacy, a US CBDC could
well enjoy superior privacy protections than many competing instruments—whether provided
by commercial interests or other sovereigns. A US CBDC may have certain advantages over
non-sovereign stablecoins if it is properly and affirmatively bound by constitutional Fourth
Amendment protections, to which private stablecoins would not be subject. Coding traditional
democratic ideals of economic liberty and privacy into a US CBDC will greatly enhance its
global appeal. Hundreds of millions of people here and abroad may well be reluctant to
surrender their economic security and autonomy to authoritarian state surveillance simply for
the convenience of digital payments. As it has often in its history, the US has the opportunity
to lead in a way consistent with its finest ideals. Protecting constitutional privacy rights while
ensuring effective law enforcement can be achieved by taking advantage of the design
flexibility of digitally based CBDC where technology constraints are less restrictive of policy
objectives than traditional analog systems. A US CBDC could be constructed to provide
privacy to citizens by maintaining a two-tiered banking system where banks, fintechs, and
other service providers conduct identity verifications, just as they do in today's model. Identity
verifications can be tiered and specific to the type of activity that customers are conducting.
Identity management can leverage zero-knowledge-proofs and verifiable credentials to
maintain data privacy. Criminal activity enforcement should follow today's existing legal model
where financial institutions have oversight over their customers, and the government can only
access customer user information through a subpoena. (7)
http://digitaldollarproject.org/wp-content/uploads/2021/05/Digital-Dollar-Project-Whitepaper_v
F_7_13_20.pdf
One of the key attributes sought by many central banks in developing a new, independent
payment rail that can be used by consumers and businesses alike in times of a national crisis.
The design of a CBDC should be flexible and modular to foster operational and cyber
resilience as the network continues to scale. Notwithstanding these features, it remains an
open question what type of payment rail or system should underpin a CBDC, and the Fed is
largely silent on this topic in its discussion paper. The DDP strongly encourages the Fed to
focus exploratory work on appropriate CBDC rails as ultimate selection will have a profound
impact on system governance, interoperability, security, resiliency, and privacy. More
specifically, CBDC rail options range from a centralized government database to open public
blockchains to middle-ground permissioned blockchains with curated nodes and validators.
While testing is necessary to better understand technical, operational, and governance
implications of underlying CBDC rails, DDP suggests that the Fed should avoid pursuing a
highly centralized database system. Such an approach could raise critical security and
resiliency concerns. A highly centralized database would also raise privacy concerns given
the “honey-pot” of information contained in a centralized place. Finally, a centralized database
would likely have interoperability disadvantages relative to more open ledger designs. A
likely preferrable design approach would focus on a DLT-based or inspired CBDC network
that prevents a single point of attack. If designed as a distributed network, such a network
would definitionally be a more resilient and redundant data construct. Additionally, a
blockchain-based CBDC could utilize a multi-signature wallet to stop single-channel attacks.
Funds could be verified and transacted locally within a wallet. If a CBDC enabled offline
payments during low or no network connection, the system would be resilient to operational
failures or disruptions such as natural disasters, electrical outages, and other issues. To this
end, systems designed with distributed architectural components and validations can
continue to operate when other parts of the network are offline or unavailable. In an extreme
case, if the entire system goes offline, then the ability to conduct transactions offline allows
digital currency to exhibit a degree of resiliency regardless of its online/offline status. Offline
transactions will no doubt have limits as security of these transactions are directly
proportional to the storage capacity in secure end-devices such as chip cards or secure
storage options. Unavoidable cyber risks include cryptographic algorithm insecurity over the
lifetime of any digital currency used. Digital currencies are typically comprised of
cryptographic keys that are intended to be resistant to attacks. There is a direct correlation
between the strength of algorithm used, the size of the cryptographic key material, the
compute time to generate the encrypted or signed data, the time value of the data, and the
compute time to cryptographically 'break' or compute the above with access to the key.
Evaluation of cryptography durability is an area of focus and exploration for central banks.
Much like how security features on old physical bills are easier to replicate, the design must
consider a modular infrastructure that prepares for advancements in attack capabilities.
Certain security features may have tradeoffs that reduce functionality or may not be
enforceable, e.g., recall old digital currencies and re-issue new ones. Further exploration and
experimentation into the design requirements of diverse use cases will help shed light on the
potential risks and design trade-offs.
As a complement to cash, which holds legal tender status, a CBDC should be treated the
same as its physical counterpart. Of note, however, legal tender status in the US means
something different from most countries. Neither the statute (31 US Code § 5103) nor any
federal law compels an individual or entity to accept currency or coins as payment for goods
and services. Therefore, legal tender status would not guarantee CBDC acceptance.
Like physical cash, which does not pay interest, a CBDC should not pay interest. Notably,
most countries exploring CBDCs around the world do not propose to pay interest. While an
interest-bearing CBDC could serve as a monetary policy tool, it would compete against
existing depository institutions with negative implications for the financial sector, including
potential bank disintermediation, increased cost of credit, and possible disruption of money
market funds and other short-term assets. Further, elevated redemptions to a US CBDC
during times of financial stress could exacerbate a troubled economy. Importantly, a
renumerated CBDC would make it attractive to hoard money, whereas today, it is impractical
to store significant amounts of cash. An interest-bearing CBDC also raises the possibility of
negative interest-bearing CBDC tokens, incentivizing dollar spending but lowering public
confidence in dollars. Critically, implementing an interest rate on CBDC could have other
far-reaching ramifications, including the heightened risk of the Federal Reserve being viewed
as an agent of the government rather than the independent institution it is intended to serve
today.
If a US CBDC does not bear interest, consumers will likely be incentivized to continue to hold
their money in an interest bearing commercial bank account as opposed to accumulating
significant CBDC holdings. This of course is dependent on economic considerations such as
how much interest is being paid and current inflation rates. CBDC could be perceived as a
safer alternative to other government liabilities (e.g., Treasuries subject to interest rate and
liquidity risk). DDP believes that the key questions are whether the impacts on the structure of
the banking system or the implementation of monetary policy under extreme scenarios would
be significant enough to warrant imposing and enforcing limits. Limits would ideally be
avoided in the long-term, but perhaps considered during earlier, testing phases.
A fully mature CBDC ecosystem will require healthy involvement from diverse intermediaries.
CBDC is a government responsibility, but one that most thoughtfully and carefully integrates
with private sector technologies and intermediaries. CBDC infrastructure will require similar
industry involvement as existing cash, commercial bank, and reserve-account payment
infrastructures that require significant involvement from the private sector to control
onboarding, security, governance, management, and reporting. Commercial banks,
technology companies, fintechs, retail users, clearing and settlement institutions will all be key
partners and will require regulatory frameworks that ensure healthy network usage. With
respect to distribution of CBDC, it is important that the Fed leverage the commercial
capabilities of the private sector in order to maximize access and financial inclusion benefits.
For this reason, as previously noted, a digital dollar should be offered to consumers through
banks and regulated fintech firms. Fintech, in particular, holds promise in broadening
distribution of digital wallets in order to reach un-and-under-banked individuals. With respect
to CBDC payment rails, the private sector should be involved in helping to develop and
operationalize the system. For example, if a blockchain-based system is developed, then
private sector entities, including non-profits or newly-formed utilities, could be tasked with
helping to validate and maintain the distributed ledger. Careful governance requirements
would need to be crafted regarding the specific roles and access to information of
participants. By using innovative cryptographic technologies across operators and
participants in a CBDC network may be able to enhance privacy and limit any one actor's
access to sensitive payments data.
One of the key desirable features enabled by digital currencies is offline payments. Similar to
the features of cash and banknotes, the offline capabilities of CBDCs are a crucial enabler
and necessary for addressing remote users, stability in emergency scenarios, or potential
network outages. Offline capabilities of CBDC have a unique set of challenges, namely the
reconciliation of transactions that have been performed offline with the 'normal' state of the
CBDC ledger when the wallet goes back online. Security controls at the endpoint prevent a
user from double spending, and risk mitigation via transaction limits and volumes will prevent
runaway conditions, if these controls are ever circumvented. The security controls are
typically secure elements that have been deployed over many decades and have been
battle-tested to provide security and resilience to cyber-attacks. Offline capabilities of CBDC
are a risk management decision, and although there may be hesitation to enable this
capability, there are various controls and mitigations that can enable offline features.
Importantly, offline transaction capabilities preserve the existing cash ecology, which is
inherently offline and peer-to-peer. The Digital Dollar Project intends to further explore
technical architectures and requirements of offline transactions through future pilot programs.
sale? If so, how?
To support wide ranging use cases, a CBDC will need to enable transferability across
traditional and DLT-based networks. CBDC development should consider emerging token
standards, such as SWIFT's intended use of ISO-2022 (8) as viable future token networks
that will aim to connect with future CBDC networks. In a CBDC system with diverse
intermediaries, its design will need to support payments across networks and share
transactional data. Earlier this year, Michael J. Hsu, the Acting Comptroller of the Currency
spoke about the need for architecture standards and interoperability across stablecoin
networks (9). Hsu mentions that "without interoperability amongst USD-based stablecoins
[and CBDC], the risk of digital ecosystems being fragmented and exclusive (with walled
gardens) is heightened". CBDC architects should consider that digital asset networks will be
commonplace in the future, and CBDC should be designed to support and enable those
networks. (8) https://www.swift.com/standards/iso-20022/iso-20022-programme/timeline (9)
Acting Comptroller of the Currency, Michael J. Hsu, Remarks Before the Institute of
International Economic Law at Georgetown University Law Center “Thoughts on the
Architecture of Stablecoins”, April 8, 2022
https://www.occ.gov/news-issuances/speeches/2022/pub-speech-2022-37.pdf
CBDC?
The inevitable evolution and advancement of technology should encourage architects to

design an adaptable CBDC that can scale modularly over time. The foundation of a US
CBDC network should set a framework that can evolve as technology changes as well.
Quantum computing will challenge CBDC features such as hashing lengths as it matures.
Careful design and testing will reveal evolving risks before they can occur. Healthy regulation
and standards will also ensure that network intermediaries adhere to best practices and
protect the network from bad actors.
benefits of a CBDC?
Considering the potential adoption of a CBDC, architects should consider the technical and
functional requirements across diverse use cases. Throughput and transaction speed will be
important scalability requirements as adoption increases. A tokenized architecture, that
doesn't rely on account and messaging systems, has proven to be a superior CBDC design
choice in many overseas CBDC experiments to address scalability requirements.
_________________________________________________________________________
Industry
Other:
Country
State
New York
Email
The Depository Trust & Clearing Corporation (“DTCC”) in conjunction with its SEC-registered
clearing agency subsidiaries, the National Securities Clearing Corporation (“NSCC”), Fixed
Income Clearing Corporation (“FICC”) and The Depository Trust Company (“DTC”)
appreciates the opportunity to provide comments to the Board of Governors of the Federal
Reserve System (“Federal Reserve” or the “Fed”) in response to its recent paper, “Money and
Payments: The U.S. Dollar in the Age of Digital Transformation” (the “Fed Paper”). DTCC
supports the Federal Reserve’s efforts to foster a transparent dialogue around central bank
digital currency (“CBDC”) and ongoing experimentation and analysis of the potential benefits
and risks of a U.S. CBDC. We applaud the Fed’s ongoing international collaboration,
including with central banks, the BIS and the FSB, in addition to the work the Federal
Reserve banks are undertaking, including the Boston Fed’s collaboration with MIT’s Digital
Currency initiative. DTCC, through its subsidiaries, is the largest post-trade market
infrastructure for the global financial services industry. NSCC, FICC and DTC have each
been designated as a systemically important financial market utility by the U.S. Financial
Stability Oversight Council pursuant to Title VIII of the Dodd-Frank Wall Street Reform and
Consumer Protection Act of 2010. At DTCC, we are continually working to innovate and
embrace new advances in technology, such as distributed ledger technology (“DLT”),
tokenization and other emerging technologies. Indeed, DTCC is actively progressing a
number of initiatives, including Project Ion which introduces new clearance and settlement
functionality, leveraging DLT to help bring about new efficiencies in clearance and settlement
(See DTCC Sept 2021 paper, “Building the Settlement System of the Future”). In terms of the
request for additional policy considerations and potential benefits or risks, as the Fed
continues its analysis of a potential U.S. CBDC, DTCC encourages ongoing review of the
applicability and impact of CBDCs used in wholesale transactions. We believe that
considerations such as standards to facilitate interoperability among potential CBDC
platforms and digital identifiers are foundational to successful CBDC deployment and
adoption. Given the highly interconnected nature of today’s markets, trusted financial industry
service providers with a core focus on risk mitigation provide a key role in adopting standards
and governance, which are critical to building safe and efficient markets. Given DTCC’s views
noted above and based on our role in facilitating clearance and settlement activities in the
U.S., DTCC is currently analyzing wholesale CBDCs and recently announced a pilot initiative
in collaboration with the Digital Dollar Project and Accenture (See DTCC April 2022 press
release). Specifically, we are developing a prototype (“Project Lithium”) to explore how a
CBDC might operate in the U.S clearing and settlement infrastructure leveraging DLT. While
DLT is not a pre-requisite for issuance of a CBDC, Project Lithium will measure the potential
benefits of a CBDC and also outline any unintended consequences or challenges the pilot
may uncover. In particular, Project Lithium will test how a CBDC could enable atomic
settlement, which is a conditional settlement that occurs if delivery and payment are both
received at the same time (real-time delivery versus payment, or DVP). As part of these
efforts, Project Lithium intends to identify how the value of DTCC’s clearing and settlement
service, including reduced counterparty risk, increased capital efficiency, automated
workflows and added transparency for regulators is further enhanced by a CBDC supported
on a DLT platform. DTCC recognizes that whether to advance a potential U.S. CBDC is a
decision that resides with the Federal Reserve and appropriate policymakers. Thus, Project
Lithium is intended to assist in laying the groundwork for the financial industry and
policymaker community to better evaluate the implications of a wholesale CBDC across the
trade lifecycle. Findings are anticipated to be released in the second half of 2022. DTCC
looks forward to sharing findings and lessons learned with the Federal Reserve, other
policymakers and the broader industry as part of ongoing efforts to explore the benefits and
challenges of a U.S.-backed digital currency.
inclusion?
stability?
CBDC?
sale? If so, how?
CBDC?
benefits of a CBDC?
_________________________________________________________________________
GeoComply
Industry
Technology Company
Country
State
Email
elizabeth.cronan@geocomply.com
While this paper highlights a number of critical benefits, policy considerations, and risks
associated with the introduction of CBDCs, from a risk standpoint, we noted that ensuring the
proper measures were in place to ensure effective sanctions compliance was not addressed.
In light of the significance of this issue, particularly at this moment in time, we thought it was
important to note that any future CBDC framework must include requirements to ensure
effective sanctions compliance. As illustrated by the October 2021 “Sanctions Compliance
Guidance for the Virtual Currency Industry” issued by OFAC, effective sanctions compliance
requires, “the use of geolocation tools to identify and prevent IP addresses that originate in
sanctioned jurisdictions from accessing a company’s website and services for activity that is
prohibited by OFAC’s regulations.” OFAC Director Andrea Gacki has also emphasized the
importance of such tools for purposes of effective sanctions compliance, stating the following
at a recent ACAMs Sanctions conference: “We’ve been highlighting the importance of using
geolocation tools as an effective internal control both in our sanctions compliance guidance
for the virtual currency industry...but also through our enforcement actions.” In summary, any
future CBDC framework that is established must contain requirements for effective sanctions
compliance consistent with OFAC requirements and recommendations.
inclusion?
stability?
CBDC?
As recognized in this Paper, ensuring that proper measures are in place to prevent CBDCs
from being exploited for fraud or illicit financing is a critical priority. Establishing effective
digital identity verification and authentication requirements are critical to fulfilling this
objective. As we noted in question one above, and consistent with the recommendations of
the Financial Action Task Force (FATF), a core pillar of effective digital identity frameworks is
verification and authentication of advanced geolocation data (including GPS; cellular; and
triangulated WiFi data). Accurate geolocation is intrinsically tied to true digital identity
authentication. Previously, an individual’s address was an important part of their identity.
However, when transitioning to the digital world, geolocation becomes a building block of
identity, heightening the need to transform the way identity and effective risk-based
approaches are thought about. Location security facilitates robust and effective risk
management processes by enabling early detection of suspicious activities and a holistic
overview of real-time and historic behavioral patterns. Moreover, authenticated geolocation
and location spoofing detection (via VPN, proxy, virtual machine, emulators, etc) are at the
core of preventing synthetic identity and identity theft fraud from taking place and proliferating.
In future circumstances when the Federal Reserve and therefore the CBDC is providing
economic support or crisis relief, such as through stimulus benefits or other forms of
economic relief, implementation of robust and effective risk management procedures,
including digital identity verification and authentication will be essential to mitigate potential
risks and prevent the proliferation of fraud. FATF offers a comprehensive illustration of the
role that device-based geolocation data can play within the realm of CDD, AML, and CFT in
multiple reports. Please see below for FATF recommendations regarding the importance of
leveraging advanced geolocation data. For example, in its 2020 Guidance on Digital Identity,
FATF states: “Digital ID authentication for authorizing account access may enable regulated
entities to capture additional information, such as geolocation, IP address, or the identity of
the digital device used to conduct transactions. This information can help regulated entities
develop a more detailed understanding of the client’s behavior as a basis for determining
when its financial transactions appear to be unusual or suspicious and may assist law
enforcement in investigating crimes.” Additionally, in its Updated Guidance For a Risk-Based
Approach to Virtual Assets and Virtual Asset Service Providers (VASP), FATF states: "...in
conducting CDD to fulfill their obligations under Recommendation 10, VASPs should obtain
and verify the customer identification/verification information required under national law...
Additional, non-core identity information, which some VASPs currently collect, could include,
for example, an IP address with an associated timestamp; geolocation data; device
identifiers; VA wallet addresses; and transaction hashes." Moreover, in its report entitled
“Opportunities and Challenges of New Technologies for AML/CFT”, FATF states:
"Additionally, onboarding tools that allow for quick CDD and client traits analysis (such as
geolocation, credit checks, anti-fraud software, and others) would also enrich the CDD and
monitoring process and lead to a more accurate understanding of the nature of the business
relationship, as well as its impact to the institutions." Lastly, in their “Guidance on
Proliferation Financing Risk Assessment & Mitigation”, FATF states: "Investment in
technology and advanced software, capable of machine learning and artificial intelligence to
conduct analysis may help strengthen the compliance practices of large and complex
financial institutions, DNFBPs, and VASPs that could be exposed to a higher level of
proliferation financing risks. This would enable them to identify linkages and relationships,
build proliferation financing scenarios and recognise patterns (e.g. transaction times, value,
purpose, counterparties, geolocation), which would be difficult to establish otherwise. As
designated entities and individuals are increasingly using advanced deception techniques,
including wire/payments stripping techniques to hide their true identities and conceal the
beneficial owners, financial institutions, DNFBPs and VASPs should be vigilant to such risks
and deploy appropriate tools to address such risks." Therefore, GeoComply respectfully
recommends that the Federal Reserve incorporates FATF’s recommendations into future
CBDC frameworks pertaining to leveraging geolocation data to enhance AML/CFT, sanctions
compliance, and digital identity to align with FATF’s recommendations.
Privacy is at the heart of digital assets and decentralization. However, the use of these
technologies to facilitate illicit financial activity such as money laundering or the financing of
terrorism has raised a deep concern for industry stakeholders and regulators. Geolocation
data is a non-PII, unbiased data point that forms part of risk-based assessments, aiding
institutions in identifying this kind of activity. By leveraging unique device intelligence, a user,
and therefore their activity, is identifiable without the collection of PII. Other attributes such as
their device characteristics and location biometrics (patterns, behaviors, etc) form part of the
robust assessment to prevent illicit financial activity.
In the last few years, both within the U.S. and across the globe, the financial sector has seen
unprecedented technological adoption and advancement. Although this technological
evolution has had positive impacts on the industry, it has also created accessible entry points
for global cybercriminals and bad actors looking to exploit the U.S. financial system from
anywhere in the world. Just as technology innovates and evolves, so do the tactics and
attacks of cybercriminals, aiming to penetrate financial systems. One of the key factors
enabling cybercriminals to perpetuate their crimes is their ability to manipulate or conceal
their true location. Manipulating or hiding their true location is a bad actor’s first line of
defense, making it a clear red flag. Faking location anonymizes identity and hides intention.
Currently, most financial institutions rely on IP Addresses as part of their risk assessments
and as a cyber indicator. However, based on our experience operating globally in the
geolocation and fraud space, we know there are deficiencies associated with relying upon an
IP address in isolation for geolocation, such as: spoofing and anonymizing of IP addresses
via VPN, DNS proxy, and Tor Exit node; IP geolocation does not provide a high degree of
accuracy and is rarely accurate to within a half of a mile; VPN's are dynamic and continually
update themselves to avoid detection, and newly popular geolocation fraud technique uses
hijacked residential IP addresses to enable users to mask themselves as an “undetectable”
residential IP in a specific geographical territory. Distinguishing between multi-source
geolocation data and an IP address is critical, as the use of accurate, authentic, and
unaltered geolocation data is essential to establishing a person’s true digital identity. Thus,
incorporating multi-source, device-based geolocation data collection into onboarding,
authentication, and transaction monitoring processes acts as a powerful deterrent to bad
actors and facilitates the identification and prevention of suspicious activity in real-time. Not to
mention, cybercriminals are moving beyond just manipulating their IP Address, they also use
a myriad of location spoofing technology, such as fake locator apps, emulators, and virtual
machines, in order to manipulate their geographical coordinates, making it essential to also
verify the integrity of geolocation data. There are numerous benefits to utilizing geolocation
data and spoofing detection solutions, such as: a) Facilitating more robust and reliable Know
Your Customer (KYC) and CDD processes; b) Ensuring that suspicious activity can be
monitored and prevented in real-time; c) Creating an audit trail for improved reporting and
traceability of all transactions; d) Effectively geofencing high-risk and sanctioned nations; and
e) Enhancing Anti-Money Laundering (AML)/Counter Financing of Terrorism
(CFT)/Proliferation Financing (PF) compliance. Collecting and validating geolocation
information would fill existing gaps in securing and monitoring digital asset transactions.
GeoComply respectfully offers these recommendations with the aim to assist the Federal
Reserve in its mission to ensure that individuals and organizations transacting with digital
assets operate in a safe and sound manner and comply with applicable laws and regulations.
Furthermore, there is significant value that CBDCs could provide more broadly, particularly in
instances where the government issues economic relief or stimulus funds. However, this is
also a window for cybercriminals to take advantage of. It is critical to keep in mind the high
rates of fraud associated with the rollout of a range of government-backed stimulus programs
that led to significant losses of coveted taxpayer funds, while also impacting the lives of
individuals who desperately needed those funds. Undoubtedly, there is an opportunity to
leverage more reliable and accurate mechanisms to ensure that consumers can safely and
securely receive essential funds. For example, many of the recent Covid relief and
unemployment funds that were given were fraught with identity theft and individuals receiving
unemployment benefits from multiple states, while residing in one state and utilizing one or a
few devices. Consistent with FATF recommendations, advanced geolocation data can play a
critical role in mitigating these threats. Accordingly, there is an opportunity to align the Federal
Reserve’s approach to CBDCs with FATF’s recommendations on the collection and utilization
of advanced location data and intelligence. CBDCs provide great promise in this area and
there are a number of mechanisms that can be incorporated into CBDCs to ensure that an
individual’s digital identity is easier to affirm and accurately authenticated to prevent identity
fraud schemes.
sale? If so, how?
CBDC?
benefits of a CBDC?
_________________________________________________________________________
Ripple
Industry
Technology Company
Country
State
California
Email
sfriedman@ripple.com
Ripple would like to note some additional potential benefits and policy considerations for the
Federal Reserve Board to consider in the design of a CBDC. Micropayments: We are
supportive of the payments efficiency and resilience opportunities identified by the Federal
Reserve Board in the Consultation Paper, including with respect to micropayments (p. 15).
Ripple believes that an effective CBDC should allow for the processing of micropayments
(i.e., payments made for very small amounts). Currently, the transaction costs associated with
fiat micropayments are too high to support their execution. It is also important to note that
since a CBDC is expected to substantially lower these frictional costs, the number of
transactions (whether micropayments or not) is likely to be much higher than observed today,
leading to greater demand. Digital wallets: We are supportive of the financial inclusion
opportunities identified by the Federal Reserve Board in the Consultation Paper (p. 16).
Additionally, one of the bigger drivers of financial inclusion over the past decade has been the
rise of financial services from outside the banking sector, such as remittance providers and
digital wallets. These services are pioneering new offerings and alternative experiences for
traditional banking users. The issuance of a CBDC could occur in tandem with the creation of
associated digital wallets that give consumers ownership of the digital currency and allow for
a faster and more efficient method of distribution of money by the Federal Reserve. Digital
wallets that enable payments, whether made domestically or cross-border, without requiring a
bank account could succeed in promoting financial inclusion for the unbanked and
underbanked populations, which may not be adequately served by the traditional banking
system. While digital wallets could be used to enable peer-to-peer or wallet-to-wallet
payments, infrastructure will need to be put in place to allow for the seamless transition from
existing systems and must provide for, among other things, consumer protection, fraud
prevention, and authentication and authorization. Moreover, because there are likely to be
many different wallets to choose from, it is imperative that interoperability be taken into
account to enable a seamless payment experience (for example, by allowing for consistent
and effective authentication and authorization). Tokenization of assets: While not addressed
directly in the Consultation paper, Ripple would also like to highlight the ability for a CBDC to
extend the benefits of tokenization (i.e., the process by which an issuer creates digital tokens
on the blockchain which represent ownership of physical or digital assets) to the general
public. This can be achieved by allowing the private sector to develop on the ledger
established for the CBDC, to create new opportunities for tokenization. Examples include
protecting property rights for tangible property (such as real estate, art, and collectibles) as
well as intangible assets (digital rights) via non-fungible tokens. Optimizing supply chain
workflows: Finally, the CBDC workflow being explored can help support supply chain
efficiencies through the escrow of funds and payment of invoices. Decentralized exchanges
(DEXs) can ease friction in cross-border commercial payments by allowing the payor to
choose the currencies they have, and the payee to choose the currencies they want to hold.
Public education: A key consideration when rolling out a CBDC is getting citizens to use it. In
talking with central banks, public education initiatives have been critical for success in digital
payment systems implementations. Those most in need of education can be the hardest to
reach. "Teach the teacher" plans can be effective in allowing the public to be educated by
trusted parties, such as community groups or family members. Auditable integrity: Traditional
digital payments typically have separate processes for: Instruction The exchange of
information related to the movement of value Clearing The agreement between
counterparties that a movement of value has occurred / or will occur with certainty
Settlement The updating of the system of record accounts to affect a movement of value
between parties Currently these processes are connected through the use of data references
and typically dependent on record matching of intermediaries. They can be effectively
collapsed for CBDC based on blockchain technology. The agreement in the application of a
movement of value is unequivocally based on the transaction validity and provable outcome
which can be matched back to instruction details using a cryptographic audit trail.
inclusion?
Of the people who do have bank accounts, many remain underserved and unable to access
the full range of basic financial services, such as savings, loans, mortgages and other forms
of credit. In the United States, for example, about 14 million people are unbanked, and 50
million are underbanked
(https://www.atlanticcouncil.org/blogs/geotech-cues/central-bank-digital-currency-can-contribu
te-to-financial-inclusion-but-cannot-solve-its-root-causes/). Two-thirds of those unbanked
adults also own a mobile phone, an important prerequisite for an effective CBDC rollout
(https://globalfindex.worldbank.org/sites/globalfindex/files/2018-04/2017%20Findex%20full%2
0report_0.pdf). Those households suffer from a wide array of challenges inherent in the
current structure of the financial ecosystem, including difficulties establishing credit history,
accessing basic financial services such as peer-to-peer (P2P) lending, and being able to send
cross-border payments in an efficient and cost-effective manner. Ripple believes that a CBDC
could assist in each of these three areas. Ability to Establish Credit History: Allowing un- and
underbanked Americans access to a CBDC through their mobile phones could not only help
establish a credit history, but a broader history with always-on access to resources regardless
of physical location. P2P Lending: In many parts of the world, particularly those that are still
heavily cash-reliant, something as simple as a P2P loan (e.g., loaning money to a friend or
family member), could be made much faster, more efficient and secure with the use of a
digital currency sent and received via a digital wallet. For many in today’s current landscape,
this simple act can take upwards of a full day (or more) to complete. Cross-Border Payments:
Cross-border payments have historically been inefficient and expensive. A CBDC or
digital-first solution, however, can lower the cost and time involved in making these payments.
Across all of these use cases, however, there is a consistent set of practical hurdles to solve
including, but not limited to, education, identity and offline access. Education: There is a global
educational gap when it comes to understanding digital currencies. Onboarding people into a
digital currency system who are unclear on how to use that system as well as the benefits of
using it, will run the risk of low usage rates and/or financial inclusion. Improving the user
experience or implementing a play-to-earn model that ensures people know how to use the
app or digital wallet before they start handling real money and digital currencies could help
ease people in, granting them further access and additional benefits as they go. Identity:
Developed countries like the U.S. require a national identity to open a bank account, which
poses inclusivity problems in and of itself. For citizens who do not have a family name, a
passport, a driver’s license or any other form of identification, this presents a seemingly
insurmountable hurdle. With the use of a CBDC, those individuals would have the ability to be
associated with a digital wallet, allowing them to meet basic Know Your Customer (KYC)
requirements for identity verification. For example, in places where mobile phone usage is
high but access to financial services is low, leveraging registered SIM cards and mobile
phones as a way of proving identity for payments without a traditional ID number could help
create a threshold to meet these requirements. Offline Access: CBDC platform design needs
to consider offline access. Having internet access as a prerequisite to success may harm
CBDC adoption and usage, both for those without regular access to the internet and for
instances where unexpected power outages occur or devices run out of battery, for example;
in the U.S., for example, currently 7% of Americans say they do not use the internet
(https://www.cnbc.com/2021/07/24/the-us-is-deciding-how-to-respond-to-chinas-digital-yuan.h
tml). With this in mind, CBDCs that provide alternate solutions—particularly those that do not
require constant charging and can run without a direct power source or internet connection for
consecutive days or weeks—and can accommodate offline scenarios will be critical to
implementation. One example of how to solve for offline access could be a solution that
mirrors the Indian e-Rupi, which leverages digital voucher mechanisms such as QR codes
that can be printed offline and scanned to make retail purchases. This is one idea of many
being piloted, and we believe even better solutions will surface. As overall CBDC adoption
and usage continues to grow, it will be critical for central banks and governments to
proactively think about how to enable offline access, built in by design. We have no doubt that
as the technology underlying digital currencies and its many applications continue to expand
and evolve, so too will our ability to understand and leverage these solutions to create a more
inclusive financial system.
stability?
Ripple believes that a CBDC has the potential to offer new opportunities for innovation in
domestic and cross-border payments, which will also benefit commercial banks and payment
services providers, resulting in a competitive and diverse financial system that ultimately
benefits the end-user and consumer. This could increase the resilience of the system
overall. However, the introduction of a CBDC could also lead to some structural changes that
affect the functioning of the financial system. This will depend on a number of factors,
including the level of adoption of the CBDC, the design of the CBDC, and attractiveness
relative to deposits. A material shift from bank deposits to a CBDC might have an impact on
bank lending and intermediation. However, these impacts may be limited if the system has
time to adjust, and a two-tier system could mitigate any such risks. Ripple believes that a
CBDC could, over time, increase the diversity of payment providers and other financial
intermediaries. The introduction of a CBDC could make it easier for new financial service
providers to enter the market for payments services, or for lending – increasing the diversity
of financial service providers. This, in turn, could increase the resilience of the financial sector
to shocks, and reduce the impact of financial crises overall.
CBDC?
Ripple believes that separation of concern is crucial to the privacy of any system. Unless a
central bank has the remit - or desire - to see every transaction, all the information associated
between participants in a CBDC payment should remain private. This is where messaging
layers become important, in being able to share information and keep it off-ledger but at the
same time allowing the participants to access the data to support processing, including for
fraud and anti-money laundering (AML) checks. This information can then be made available
to the relevant authorities as needed. Moreover, messaging layers mitigate a central bank's
exposure in the event of an insolvency by a wholesale counterparty, whilst at the same time
enabling traceability requirements. The Ripple CBDC platform enables the encryption of data,
such as personally identifiable information (PII), while still controlling access and double
spend. The PII is not decrypted in order to prevent double spend or validate its authenticity.
This decoupling of the message from the transaction data allows the central bank to preserve
privacy while not affecting system performance. Sidechain technology similarly facilitates both
scaling and system privacy. Large deployments might require industry, entity, or
geographically distributed sidechains within a national CBDC platform. Sidechains provide a
means for information to stay within the control of a trusted party. For example, a commercial
bank could run a sidechain giving a citizen's trusted bank insight into their transactions, but
not the central bank. At the same time sidechains help to scale the platform by providing an
independent network for verifying transactions. Any transaction that stays on the sidechain
has no effect on the network performance of other chains while still maintaining a verifiable
audit trail.
Public blockchains have set a new standard for operational and cyber resiliency. These
systems hold over 1T US dollars of value in systems open to the world and maintain
consistency across globally distributed operations. Implementing a private solution based on
public blockchain technology adds additional security to an already secure solution. Taking
this public system and making it private allows for the addition of non-traditional participants
such as fintechs and telecommunication providers with controlled risk. The more participants
that can gain access to the system, the greater the reach of the solution. Blockchain solutions
move items such as high availability, disaster recovery, and load balancing from the
infrastructure level to the application level. Rather than requiring an enterprise to maintain
multiple geographically dispersed identical copies of a system, the organization need only run
the servers and let the underlying protocol maintain system health.
This largely comes down to what the desired use case of the CBDC is (e.g., is it a direct case
replacement or an alternative to a traditional interest bearing bank account). If the CBDC is
merely a representation of cash that can be used for P2P and C2B/B2B transactions, it may
not make sense to have it be interest bearing. Whether a CBDC should be interest bearing
will also be highly dependent on the amounts that are ultimately allowed to be held as CBDC.
For example, if this is a low balance solution with limits on what can be held, then interest
might not be appropriate.
Limits make sense when thinking about the barriers to entry/participation. If the intention is to
lower barriers to entry, a limit might be appropriate if the end-user is only providing minimal
information to open their account (e.g., cell number). Where an end-user provides more
information to support KYC activities, it might enable a greater limit as the risk profile would
be deemed lower. The question regarding quantity limits is also tied to the use case and
purpose a CBDC would be created to support (see response to question 15). Finally,
consideration should also be given to participants who are not native to this country. Do
tourists need to be able to use a CBDC? If so, what level of KYC can be performed to enable
their ability to hold and use a CBDC.
To answer this question, the class of individuals allowed to hold CBDC and the level of
information needed to support the participation must be established. Once these parameters
are defined, intermediaries can be identified to support the validation and onboarding of
individuals as well as the user experience. Whilst this has traditionally been regulated
financial institutions, there is opportunity for other regulated entities to offer these services
including, but not limited to fintechs and telecommunications providers. Failure to broaden the
relevant pool of intermediaries beyond more traditional financial institutions could prove one
of the key barriers to adoption in terms of making CBDC accessible.
Offline capabilities should be considered in a CBDC design (see question 3), but might not be
required in early phases. Distributed blockchain solutions can meet the needs of partially
offline payments, such as the sender or receiver being offline, by storing local copies of the
ledger in a tamper proof environment or by supplying proof of payment. Both limits on time
offline and spending can be enforced to reduce any exposed risk of counterfeit and double
spend. A retail CBDC transaction can take place over intermittent or low bandwidth
connections. In areas with no internet connectivity, agents can be used to provide access.
Agents can also utilize trusted execution environments (TEE) to allow citizens access without
compromising security. Finally, retailers can become agents, providing additional services to
the community.
sale? If so, how?
If a CBDC is considered a direct cash replacement, the form factor/ease of use is critical (i.e.,
will individuals who suffer from an impairment be able to use it). If sections of the population
are excluded from the design of the CBDC, this will significantly limit adoption and might
create further exclusion from the financial system. Form factors serve as one of the biggest
design considerations -- e.g., is this purely a smart phone based solution (if so, how does it
leverage capabilities for individuals with sight or hearing impairments) or does it need to
utilize another form factor such as a feature phone or physical card. While barriers to using
physical cash are very low, a CBDC might be able to serve some needs that cash does not.
For example, an individual with arthritis or impaired vision might not be able to count out
cash, but could instead checkout from a store via palm print.
The biggest design decisions involve the on and off ramps chosen, which intermediaries will
allow CBDCs to be obtained, and which intermediaries will support the conversion to and
from CBDC. All are fundamental to ensuring interoperability between existing payment
platforms. These intermediaries will probably need access to the other payment platforms as
well, which can be achieved through point of sale type devices (or other mechanisms) that
orchestrate the transfer of CBDCs. The other key consideration is the amount / what
information is required to allow for interoperability. If sending CBDC to a bank account, the
process will need to support the entry of account information and have this passed as part of
the CBDC transaction to allow it to be credited successfully. Similarly, iif sending from a bank
account to a CBDC account, the bank transaction will need to know about the destination
account. To enable transferability, standards and common interfaces should be defined that
ensure interoperability is simple, cost effective and consistent to allow various systems to
work seamlessly.
CBDC?
With the introduction of capabilities such as programmability, consideration needs to be given

to who can leverage this functionality and for what purpose. For example, is this an open
ended capability or should the ability to create this functionality be limited to
institutions/organizations who meet a certain set of requirements? A policy and governance
framework should be considered to protect the vulnerable and prevent exploitation.
benefits of a CBDC?
In working and talking with central banks globally, Ripple has seen the importance of
examining the cultural significance of different payment instruments and how their
replacement would affect citizens. Different nations’ cultural relationship with cash bears this
point out. In the United States, citizens are afforded a level of privacy when making cash
payments. Fears that a CBDC may not provide the same level of privacy could prove a
cultural barrier to its implementation. We can thus look at how cash is used and provide a
workflow where low value, peer-to-peer payments can be made anonymously. Providing this
workflow, which is not available currently, could bring acceptance and usage to the system.
By contrast, in the nation of Bhutan, cash is commonly used as a tribute to monks who
provide blessings for life events such as weddings and births. This is a common practice and
the central bank operates special cash exchange depots because it is considered
disrespectful to give monks dirty or wrinkled bills. To ensure acceptance of a CBDC, we can
work with community leaders (here, the monks), and provide a CBDC workflow for the tribute
and blessing that is acceptable to all parties involved. This could also expose segments of the
population to CBDC who would not otherwise be exposed via normal workflows. Ripple has
worked with nations where P2P lending amongst family and friends is embedded in the
culture. A pioneering use case for CBDC in these nations could be a system of social credit
where Alice owes money to Bob and Bob owes money to Carol so Alice could pay Carol to
satisfy both debts. Every nation and region has different relationships with cash and other
payment instruments such as checks. These relationships can be examined not only for the
friction they might create but for the opportunities they present to educate and inform the
citizens.
_________________________________________________________________________
Institute of International Finance
Industry
Trade Organization
Country
State
Email
mloldj@iif.com
The Discussion Paper raises most of the relevant issues, but some only in very general
terms. Below are some of the issues that the IIF suggests merit further work and, where
appropriate, further quantitative or qualitative assessment. Mitigants for identified risks,
including financial disintermediation risk and systemic run risk, should be clearly identified
and evaluated for their effectiveness and their effects on the financial system ex
ante. Possible mitigants for the risk of financial disintermediation, and the heightened risk of
systemic runs from bank deposits, that have been identified in the literature include: • limits on
holdings by single individuals, households, or corporations; • tiered remuneration designed to
render use of the CBDC as a store of value unattractive (relative to a means of payment);
and • limits on transactions or accumulations within a particular time. There may also be merit
in exploring whether and if so how the fractional banking model could operate upon
customer-held CBDC balances operated by FDIC insured institutions. This would involve a
range of implications and evaluation of whether changes to bank capital or liquidity regulation
would be necessary. Any reduction in effectiveness of a CBDC in delivering the public policy
objectives arising from such mitigants should be identified and evaluated in a quantitative and
qualitative assessment undertaken by the Fed and/or other U.S. authorities. The Fed and
other U.S. authorities should clarify their attitude toward the relevant mitigants and say which
ones they would not consider, only consider as transitional or emergency measures, or
consider as permanent features, and why. Mitigants should not open arbitrage opportunities
between a CBDC and cash on the one hand, and a CBDC and commercial bank deposits on
the other. In other words, they should preserve fungibility and “singleness” of the unit of
account. Privacy controls need to be further articulated for any CBDC to proceed. • It is not
sufficient simply to delegate all privacy aspects to the intermediary layer. Any personally
identifying information held by the operator(s) of the core CBDC infrastructure should be
subject to a legally binding privacy regime. • Privacy expectations should also be set for
intermediaries in a legally binding and user-centric way which does not discriminate against
regulated FIs or PSPs. Intermediaries should be allowed to access transactional data to
provide value-added services, while complying with applicable data protection legislation. • A
particularly critical aspect to be tackled is the degree to which intermediaries would be
permitted to earn remuneration by monetizing user data, and potential impacts on protecting
consumer privacy. Explicit and well-informed user consent must be at the heart of any data
monetization, as should maintaining the principle of “same business, same risks, same
regulation” as between regulated FIs and PSPs on the one hand, and any other permitted
wallet providers. Cyber security (resistance and resilience), particularly with regard to hostile
state and state-sponsored actors, and operational resilience will both be fundamentally
important. Any sustained outage of a retail CBDC system would be hugely disruptive, and
possibly crippling, to the economy.1 Costs of connecting to central infrastructure and funding
for cybersecurity investments, and liability in case of cyber attack or AML/CFT risk, should be
transparent and clarified ex ante.2 Intermediaries should be regulated financial institutions
(FIs) or payment service providers (PSPs) who are eligible to hold Federal Reserve master
accounts. Further work on structuring, issuance and strategy for distribution with particular
attention to access considerations and liability frameworks across the ecosystem will be
necessary. The energy and climate footprint of any CBDC should be fully
evaluated. Independent oversight of adherence of the CBDC system to applicable regulatory
and technical standards would be an expectation of our members. An independent body
could be set up to oversee compliance in this regard. Such a body would also usefully
cooperate with other global, regional or national bodies internationally with similar CBDC
oversight responsibilities. The applicable standards should be based on appropriate models
such as the CPMI-IOSCO Principles for Financial Market Infrastructures and be available to
intermediaries to aid intermediaries with their own resilience planning. 1. In this regard, we
note with concern that the Eastern Caribbean CBDC system went offline on January 14, 2022
and was still offline six weeks later, as reported in Forbes magazine on February 28. 2. As
used in this submission, the term “AML/CFT” (anti-money laundering and countering the
financing of terrorism) includes countering financial crime or financial crime risks, and also
screening for politically exposed persons (PEPs) and sanctioned individuals/entities.
Other means may be as effective, or more effective, than a CBDC in delivering some
of the potential benefits identified of a CBDC. For example (taking the
“potential benefits” identified by the Fed as a proxy for a U.S. CBDC’s public
policy objectives): •Safely meet future needs and demands for payment
services: oThe private sector in partnership with the Fed already delivers a
range of high-quality, cost-effective payment services to U.S. residents and
businesses. oDirect payments to billers and peers by electronic commercial
bank money are fast, efficient and reliable. Most FIs offer a degree of
programmability with scheduled and recurring payments. oExisting initiatives
such as the Clearing House’s RTP service and FedNow, scheduled to debut in 2023,
will improve the existing performance of the payments system over time. oAs
the President’s Working Group (PWG) et al. November 2021 report on stablecoins
and the Discussion Paper have noted, well-designed and appropriately regulated
stablecoins might potentially support fast, efficient, and inclusive payment
options, though more research is needed to verify this. oA wholesale CBDC,
i.e., a digital liability of the central bank that is not widely available to the
general public, would be another, and possibly less risky, means to provide a
platform for payment innovation than a retail CBDC.•Improvements to
Cross-Border Payments:oThere are other more immediate means to improve the
speed, cost, transparency and accessibility of cross-border retail payments than a
retail CBDC. Of course, most of the building blocks of the G20’s cross-border
payments roadmap, which the IIF is helping to take forward, are not currently
predicated on a retail CBDC. oAs the Fed acknowledges, however, realizing
potential improvements through a CBDC would require significant international
coordination to address issues such as common standards and infrastructure.
oThe most salient alternative measures include: Linking domestic faster
payment systems together on a cross-border basis, such as is occurring bilaterally
in South-East Asia, and could take place multilaterally through projects such as
the BIS Innovation Hub’s Project Nexus. This could involve the activation of
One-Leg-Out instant payment schemes with higher payment limits to increase the
scope of such schemes to cover business payments. Addressing data barriers
that arise from regulatory fragmentation (e.g., in implementation of KYC and
AML/CFT rules) or inconsistent implementation of international payment message
standards and the data required to be included within payment messages, including
the potential for PSPs to interpret domestic requirements on an individual
basis.1•Support the USD’s International RoleoThe question whether CBDC
would support the USD’s international role is a complex one. oOn the one
hand, a retail CBDC is neither sufficient nor likely necessary for reserve
currency status. In our view, the key drivers of reserve currency status are not
likely to be availability of a retail CBDC but rather the rule of law, monetary
and financial stability, and full convertibility.•Financial Inclusion:oAs
the House of Lords report on a U.K. CBDC concluded, it is likely that there are
more straightforward and targeted ways to support access to financial services
than to launch a CBDC.2oOne way is to tackle the problem of the unbanked in
more direct ways, such as by extending low-cost basic account services, including
through public subsidies or tax incentives where necessary. In the US, certified
Bank On accounts have been successful to date and should remain a core component
of efforts to reduce un-/under-banked populations.oInside and outside the
regulated banking sector, there are an increasing number of PSPs providing private
digital wallets or mobile payment solutions including to “unbanked” customers.
Removing unnecessary regulatory barriers to entry to these services, including
through State-based mutual recognition schemes, would help. oThe encouragement
(through chartering reforms) of low-cost, digital-only banks can help reach those
consumers who are digitally literate but cost sensitive, would also
assist.oAnother means would be to increase the level of digital financial
inclusion by improving internet broadband services, and access to simpler, more
accessible devices for the elderly, visually impaired or those with other
disabilities. •Extend Public Access to Safe Central Bank Money:oOffering
the public access to commercial bank money via unquestionably strong,
well-regulated FIs, backed with solid deposit insurance, continues to be an
obvious alternative means of providing access to safe money, albeit not a central
bank liability. 1.See further IIF (2022), Response to FSB request for written
feedback on data frameworks affecting cross-border payments, 14 January. 2.House
of Lords (2022), CBDCs - A solution in search of a problem, at para. 5.
inclusion?
Overall, the IIF is sceptical that a retail U.S. CBDC itself would materially improve financial
inclusion. Rather, a neutral effect appears more likely. A CBDC would neither be sufficient nor
necessary to drive higher rates of financial inclusion. On lack of sufficiency, other more
important drivers of financial inclusion include: financial literacy; digital literacy and measures
to address the “digital divide”; access to secure identity (digital or otherwise); and sufficient
savings or earnings to make engaging with the formal financial system worthwhile. See our
response to question 2 for further detail. To illustrate the lack of necessity, measures of
financial inclusion have risen sharply in Latin America in recent times, partly in response to
the choices made by governments in delivering pandemic relief. Prior to the pandemic, an
average of only 55% of Latin American adults had an account at an FI.1 COVID-19 related
social benefits programs, including pandemic relief payments to bank accounts, through
payment apps and to private digital wallets, helped financially integrate more than 40 million
people in Brazil, Colombia, and Argentina alone. Brazil reduced its unbanked population by
73%, while Colombia and Argentina also made reductions of 8% and 18% respectively. If
similar programs in Chile, Peru, and Uruguay had a similar effect, it is estimated that the
unbanked population in all of Latin America will have been reduced by 25% due to the impact
of COVID-19 social benefit programs alone.2 Further, a recent report suggests that the fact
that many Americans are currently unbanked would not simply be resolved by introducing a
U.S. CBDC, as distrust of the banking system is among the main reasons for financial
exclusion.3 1.Mastercard and Americas Market Intelligence (AMI) (2020) Financial Inclusion
during COVID, October, citing the World Bank. 2.Mastercard and AMI (2020), op cit. Figures
measured as at August 2020 relative to pre-pandemic levels. As cited in IIF (2022), Cloud in
Latin America: Opportunities and Challenges for Financial Services, 28 February (IIF
members only). 3.Maiden and MIT Digital Currency Initiative (2021), The Future of Our
Money: Centering Users in the Design of Digital Currency, December 16.
The answer to this question is highly sensitive to the choice of mitigants for financial stability
risks (chiefly, disintermediation risk and systemic run risk) that may be exacerbated (in
probability or impact) by a displacement of bank deposits by retail CBDC holdings. See our
answer to question 7 below on possible mitigants for these risks. Any mitigants involving
non-zero remuneration on CBDC balances (positive or negative) would likely confer on the
central bank a proliferation of new policy tools that may unduly complicate the conduct of
monetary policy, or on the other hand, provide the Fed greater flexibility in crisis
scenarios. There could arise at least 4 different policy rates for which the central bank would
be responsible: • the federal funds target rate; • the remuneration rate on “payments” or smaller
holdings of retail CBDC; • the remuneration rate on “store of value” or larger holdings of retail
CBDC; • the remuneration rate on wholesale CBDC. The complicated signaling effects from
having so many interacting policy levers may be undesirable.1 On the other hand, a fixed
policy that CBDC balances must be zero remunerated clearly strengthens the zero lower
bound to monetary policy. This effect would be attenuated to the extent that it did not apply to
wholesale CBDC, but this could “break” par between the retail and wholesale instruments,
driving significant arbitrage. 1.As to signalling effects, see Panetta et al, (2021) Central Bank
Digital Currency: functional scope, pricing and controls, ECB Occasional Paper 286, p. 13.
stability?
The economic literature around CBDC, disintermediation and financial stability suggests a CBDC
could negatively affect financial stability. Systemic run riskAs the BIS and a group of central banks
including the Fed have found, CBDC and certain new forms of digital money could increase the latent
risk of systemic bank runs, where depositors may seek to run from bank deposits to CBDC across all or
many banks.1A period of rapid substitution from deposits to CBDC would be equivalent to a run on
the banking system. The cost and frictions of running to CBDC would likely be much lower than
running to cash.2Importantly, the lower costs of running to CBDC compared to cash imply that more
depositors would quickly withdraw at a lower perceived probability of a system-wide bank solvency
crisis.3 In addition to the potential impact of CBDC in benign conditions, during crisis periods a CBDC
could be perceived as a safe haven making bank deposits, particularly uninsured deposits, more flighty
and thus increasing the risk of bank runs.4Depending on the context, the shift in deposits could be
large in times of stress.5Effects of possible mitigants to systemic run riskPossible mitigants for the
risk of financial disintermediation, and the heightened risk of systemic runs from bank deposits, that
have been identified in the literature include: •limits on holdings by single individuals, households,
or corporations or “end users”; •tiered remuneration designed to render use of the CBDC as a store
of value unattractive (relative to a means of payment); •limits on transactions or accumulations
within a particular time; and•crisis measures such as limits or controlling fund outflows from bank
deposits. More research and analysis is needed on the viability of limits, and the trade‑offs between
limiting the speed of possible bank runs to CBDC and reducing the usefulness of CBDC in normal
times.6 This observation applies to tiered remuneration and other mitigants as well. Changing the
interest rate charged on CBDC balances in times of stress or crisis, even if the tool were available,
would be unlikely to reduce systemic run risk given that savers fearing a loss of all their savings may
not be price sensitive to interest charges over relatively short periods.7Any attempt to introduce
holding or transaction limits or tiered pricing may either reduce the appeal of a retail CBDC
significantly, or open a pricing basis or spread between it and cash on the one hand and commercial
bank money on the other, thus fragmenting the ‘singleness’ of the currency as a unit of account. The
cross-border and global dimensions of CBDCs available to non-residents could be especially
pronounced during times of generalised flight to safety. If CBDCs accelerated flights from risk,
deleveraging pressures could manifest themselves in the form of tight funding conditions and sharp
movements in foreign exchange markets.8Systemic risks arising from increased funding
costsIntroduction of a retail CBDC would increase bank lending interest rates and reduce bank
strength, as detailed in our answer to question 6.Reduced bank net interest income, as well as its
constraining effect on lending to the real economy, including through mortgage and SME lending, can
be expected to weaken financial stability if it impairs the ability of FIs to raise capital to meet
prudential capital requirements, including in times of stress. 1BIS and Group of Central Banks
(2021), Central bank digital currencies: Financial stability implications, September, p. 2.2Bank of
England (2020), Central Bank Digital Currency: opportunities, challenges and design, 22 March, p.
383BIS and Group of Central Banks (2021), Central bank digital currencies: Financial stability
implications, p. 9, citing Broadbent (2016) and Callesen (2017).4BIS and Group of Central Banks
(2021), Ibid., p. 13.5BIS and Group of Central Banks (2020), Central bank digital currencies:
foundational principles and core features, 9 October. A crucial element in such system-wide shifts is
the stronger sensitivity of depositors to the actions of others. The more other depositors run from
weaker banks, the greater the incentive to run oneself. It would be difficult to stem runs under such
conditions, even when providing large lender of last resort facilities: ibid.6Bank of England (2020),
Central Bank Digital Currency: opportunities, challenges and design, 22 March, p. 387BIS and
Group of Central Banks (2021), Central bank digital currencies: Financial stability implications, p.
17.8BIS and Group of Central Banks (2021), Op. cit., p. 18.
A retail CBDC could adversely affect the financial sector through a reduction of funding that
would translate into a reduced availability of credit and an increase in lending costs to the real
economy (including of mortgage and SME lending), with business model implications for
FIs. Studies suggest there would be substitution away from retail bank deposits to CBDC in
normal times, as end users take advantage of the low credit risk associated with CBDC.
Estimates of this effect vary considerably, but one study estimates that up to 55% of
commercial bank deposits could be diverted.1 This can be expected to significantly increase
funding costs for banks wishing to keep lending at the same level, as they would need to
raise the rate of interest on deposits considerably or source more expensive wholesale
funding in order to do so. This would in turn substantially impede banks’ ability to create credit
for the broader economy, including through mortgage and SME lending. It can also be
expected to generate strong incentives to considerably increase the role of the Fed in credit
creation by deploying CBDC reserves to acquire bonds or provide other forms of wholesale
funding. While central banks can in principle also be a source of alternative funding, such
funding – whether temporary or structural – may need to be provided against lower quality
collateral as only that would increase HQLA for banks.2 We would suggest that a situation in
which the Fed has an ever- greater role in the provision of credit because CBDC crowds out
bank lending is inconsistent with market economy principles. According to quantitative
modelling by the BIS and a group of central banks including the Fed, bank return on equity
(RoE) would be negatively affected monotonically with both the substitution effect and the
wholesale:deposit spread, such that at a 25% outflow from deposits to CBDC, with a 2% pts
spread, RoE would decline by 0.9% pts.3 The same study also found there would need to be
a significant increase in the banking sector lending rate to maintain net interest income, such
that at a 25% outflow, with a 2% pts wholesale to deposit spread, lending rates would
increase by 0.7% pts.4 The possibility that banks could try to offset the higher cost of funding
by engaging in riskier forms of lending could in turn create financial stability risks.5 Reduced
bank net interest income, as well as its constraining effect on lending to the real economy,
could be expected to weaken financial stability if it were to impair the ability of FIs to raise
capital to meet prudential capital requirements, including in times of stress. 1One study has
found that households could be expected to hold from 4% to 55% of their combined cash and
deposit holdings in a CBDC, depending on whether the CBDC had more ‘cash like’ features
or whether it was more competitive with bank deposits. See Li (2021), Swiss National Bank,
‘Predicting the Demand for Central Bank Digital Currency: A Structural Analysis with Survey
Data’, 18 November. 2BIS and Group of Central Banks (2021), Central bank digital
currencies: Financial stability implications, p. 10, 3BIS and Group of Central Banks (2021),
Central bank digital currencies: Financial stability implications, p. 9, Graph 3. 4Ibid. 5CPMI and
Markets Committee (2018), Central bank digital currencies, p. 16, cited in BIS and Group of
Central Banks, Central bank digital currencies: foundational principles and core features, 9
October and in turn in House of Lords (2022), CBDCs - A solution in search of a problem, at
n. 115.
Possible mitigants for the risk of financial disintermediation, and the heightened risk of
systemic runs from bank deposits to retail CBDC, that have been identified in the literature
include: • limits on holdings, or limits on transactions or accumulations within a particular time,
by single individuals, households, or corporations; • tiered or no remuneration designed to
render use of the CBDC as a store of value unattractive (relative to a means of payment);
• providing alternative sources of funding to compensate commercial banks for the loss of
bank deposit funding; and • crisis measures such as limits or controlling fund outflows from
bank deposits. All of these mitigants introduce complications which may render them unusable
or ineffective, or reduce trust in the integrity of the system if there is wide-scale abuse: • Limits
on individual holdings, and tiering of remuneration above certain limits, require either a secure
national or digital identity scheme, both for individuals and corporations, or a certain, high
tolerance for duplicate accounts being created through multiple intermediaries. • Access by
corporations to a retail CBDC would also introduce the ability for individuals to ‘hide’ CBDC
wallets inside corporations. Such corporations could be sold on the secondary market.
Aggregating holdings across these corporations would be extremely difficult. • Any inability to
aggregate limits over individuals’ multiple or corporate holdings could diminish trust in the
integrity of the system and in the central bank, and may undermine AML/CFT efforts. • Once a
retail CBDC exists, political pressure to make it competitive with commercial bank deposits on
inclusion and other grounds may lead to the relaxation of holding limits and increases in
interest rates paid. • More generally, assuming trusts over CBDC wallets are recognized by
law, limits on individual holdings could be rendered ineffective unless details of trust holdings
are registered. Transaction limits could be considered to reduce systemic bank runs,
including in a crisis. They may however also open wide basis between the retail CBDC and
cash, or the CBDC and commercial bank money (or other instruments such as stablecoins) in
a crisis. There may also be merit in exploring whether and if so how the fractional banking
model could operate upon customer-held CBDC balances operated by FDIC insured
institutions. This would involve a range of implications and evaluation of whether changes to
bank capital or liquidity regulation would be necessary. If viable, this could be a mitigant to
bank deposit disintermediation risk, but not a complete solution.
We would suggest the central bank has a role to play in ensuring the ongoing availability of
cash for several reasons, including resilience, the existence of a digital divide, and a lack of
financial education within a significant part of the population that is unlikely to be resolved by
issuance of a retail CBDC (and may even be exacerbated). That said, if the use of cash does
otherwise decline significantly, it may be necessary to provide an alternative (in the form of a
retail CBDC) to citizens to preserve the monetary anchor. It is unclear, however, to what
extent the use of cash would have to be reduced before this monetary anchor would be
endangered.
CBDC?
As for the domestic payments agenda, the Discussion Paper usefully summarizes some of
the key developments, including RTP and FedNow. We note ongoing consideration of the
possibility of extending RTGS operating hours, by CPMI and others.1 In the absence of a
CBDC, efforts can be expected to continue to be made to regulate stablecoins, either through
regulatory guidance or through actions by the Congress.2 We would also expect FIs and
PSPs to continue to innovate and prepare themselves for more digital and integrated
payments and settlement systems. We note in this regard the recommendations of the recent
report of the PWG and other agencies on stablecoins. Adequate regulation and additional
research will be essential in order to consider the viability of these instruments as long-term
options for cross-border digital payments.3 Cross-border payments are of course a key priority
for the G20 through its 2020 cross-border payments roadmap, to which the IIF has
contributed through comment letters, by co-convening the Global Payments Forum, and by
establishing a formal task force. We fully support the objectives of the roadmap, while we
would suggest adjustments in aspects of its implementation, and are committed to working
with our members and the official sector on its implementation. Most of the building blocks in
the roadmap could be accomplished independently of the establishment of CBDC. We are
confident that the goals of the roadmap could be accomplished without a retail U.S.
CBDC. Separately, private sector and public-private initiatives that have helped and will
continue to help improve cross-border payments around speed, cost, transparency and
accessibility include: • SWIFT gpi, a new initiative developed to improve the experience of
making a payment via the SWIFT network for both customers and banks. SWIFT gpi
combines the traditional SWIFT messaging and banking system with a new set of
rules. • SWIFT GO, a service whereby FIs can enable their SME and retail customers to send
predictable, fast, highly secure, and competitively priced low-value cross-border payments
anywhere in the world, direct from their bank accounts. • The continuing roll-out of ISO 20022,
including ongoing efforts to improve the alignment of implementation. • Initiatives to directly
connect faster payments schemes, both bilaterally (such as the recent Singapore–Thailand
link) and multilaterally (such as the coming Singapore–Thailand–Malaysia link), and the work
of BIS Innovation Hub’s Project Nexus. • Initiatives to introduce digital identity schemes and
digital verifiable credentials schemes domestically and across borders, such as the IIF’s Open
Digital Trust Initiative and the Global Assured Identity Network proof of concept. • The advent
of increasing competition from Paytechs in the cross-border payments space, including those
exploiting a multilateral netting model. • Well-regulated stablecoins, pending an assessment of
their impacts on credit formation and financial stability. 1See the IIF’s submission to CPMI
dated January 14, 2022, in which we observed that there would be considerable cost and risk
associated with moving to 24/7 operation of RTGS systems. 2See e.g. Brunnermeier et al.
(2021), The digitalization of money, BIS Working Papers No 941 3PWG, FDIC and OCC
(2021), Report on Stablecoins, November
The U.S. should extract lessons learned from what the central banks of other large
economies do, including the EU, and consider the geopolitical and interoperability
implications of their actions, including in relation to cross-border payments. However, those
experiences may have limited relevance to the U.S. economy, given the USD’s unique role in
the global economy as the reserve currency and should not, in and of themselves, determine
U.S. action. The experience of small countries, including on cyber issues, will also be
instructive. Retail CBDC is neither sufficient nor likely necessary for reserve currency status.
In our view, the key drivers of reserve currency status are not likely to be availability of a retail
CBDC but rather the rule of law, monetary and financial stability, and full convertibility. Digital
networks may drive “digital dollarization” even if they permit users outside the U.S. to hold
only e-money or commercial bank money representations of USD or stablecoins, and not
CBDC.1 That said, wide availability of a retail U.S. CBDC, together with its availability to
non-residents, may drive some invoicing to be denominated in USD that is not already. There
may also be intangible perception effects associated with the non-issuance of a retail CBDC
in circumstances where other competing economies have done so. The USD and supporting
payment networks should continue to interoperate with currencies of major economies.
Should major economies develop a CBDC system that would not otherwise be interoperable
with existing U.S. payment systems or USD-denominated stablecoins, the Fed may wish to
consider the implications and risks associated with being unable to participate in such a
system. This should not, however, drive the U.S. to prematurely adopt CBDC. 1For the
concept of “digital dollarization”, see Brunnermeier et al. (2021), The digitalization of money,
BIS Working Papers No 941
Possible mitigants for the risk of financial disintermediation, and the heightened risk of
systemic runs from bank deposits to retail CBDC, that have been identified in the literature
are set out in our answer to question 5. Additionally, authorities could impose a “systemic run
tax” or “haircut” on CBDC transactions during times of crisis to disincentivise runs into the
CBDC. However, this could be unpopular and may open a basis between bank deposits and
CBDC during a crisis.
The Bank of England has suggested a “platform model” whereby: • A CBDC payment system
would need to be compliant with AML/CFT regulations and requirements. This means the
identity of CBDC users would need to be known to at least some authority or institution in the
wider CBDC network that can validate the legitimacy of their transaction. • In the platform
model, one possibility is that the core ledger only stores pseudonymous accounts and
balances, but that each account in the core ledger is linked to a Payment Interface Provider
(PIP) who knows the identity of each user. • PIPs would be responsible for applying AML/CFT
checks to users, and for reporting suspicious transactions to the authorities. • This
arrangement means that the Bank would not hold granular personal data on any user,
reducing the privacy concerns that could arise in connection with holding personal user data,
but AML/CFT requirements could still be met by the CBDC system as a whole. AML/CFT
responsibilities could be handled entirely by the PIPs.1 We consider that the Bank of England
‘platform’ model with pseudonymity could be a useful model for the Fed to investigate further.
However, payments data plays an essential role in the provision of financial services, e.g., to
analyze risks better and provide credit more accurately and at a better price. Payments data
is also a core element of offering improved personalized solutions. Many potential
value-added services will rely on access to and use of this data. Therefore, it is important that
the central bank’s focus on privacy does not translate into a general restriction on the use of
data from CBDC transactions. Intermediaries should be allowed to access transactional data
to provide value-added services, while complying with applicable data protection legislation.
CBDC design should ensure that data is used in a responsible way, ensuring both security
and privacy. The Fed paper states that a general-purpose CBDC would generate data about
users’ financial transactions in the same ways that commercial bank and nonbank money
generates such data today, and that in the intermediated CBDC model that the Federal
Reserve would consider, intermediaries would address privacy concerns by leveraging
existing tools. Privacy controls need to be further articulated for any CBDC to proceed. • It is
not sufficient simply to delegate all privacy aspects to the intermediary layer. Any personally
identifying information held by the operator(s) of the core CBDC infrastructure should be
subject to a legally binding privacy regime. For example, restrictions on individual or
corporate holdings, assuming multiple intermediaries, or applying to offline capability, would
seem to require at least pseudonymity at the level of the core ledger. • Privacy expectations
should also be set for intermediaries in a legally binding and user-centric way which does not
discriminate against regulated FIs or PSPs. At the same time, payments data plays an
essential role in the provision of financial services, e.g., to analyze risks better and provide
credit more accurately and at a better price. Intermediaries should therefore be allowed to
access transactional data to provide value-added services, while complying with applicable
data protection legislation. • A particularly critical aspect to be tackled is the degree to which
intermediaries would be permitted to earn remuneration by monetizing user data, and
potential impacts on protecting consumer privacy. Explicit and well-informed user consent
must be at the heart of any data monetization, as should maintaining the principle of “same
business, same risks, same regulation” as between regulated FIs and PSPs on the one hand,
and any other permitted wallet providers (including BigTech providers) on the other. 1Bank of
England (2020), Central Bank Digital Currency: opportunities, challenges and design, 22
March, p. 31
Cyber security (resistance and resilience), particularly with regard to hostile state and
state-sponsored actors, and operational resilience will both be fundamentally important. While
cyber risk is unavoidable, the impact of a hostile state actor attack on the core ledger of, or
major wallet providers to, a U.S. CBDC cannot be overstated. Any sustained outage of a retail
CBDC system would be hugely disruptive, and possibly crippling, to the U.S. and global
economy. In this regard, we note with concern that the Eastern Caribbean CBDC system
went offline on January 14, 2022 and was still offline six weeks later, as reported in Forbes
magazine on February 28. • Each bank in the Federal Reserve System could be an issuer of
CBDC and a validator of transactions, for example. • Another mitigant could be to provide for
segregation of systems operating any retail CBDC from those operating any wholesale
CBDC. This would provide for the continued availability of commercial bank money even if the
retail CBDC were offline. For resilience reasons during natural disasters or major incidents,
offline capability of any CBDC would appear to be essential. AML/CFT and financial crime
risks must be mitigated, likely through holdings limits, either at the individual or device
level. Independent oversight of adherence of the CBDC system to applicable regulatory and
technical standards would be an expectation of our members. An independent body could be
set up to oversee compliance in this regard; for instance, an inspectorate, reporting directly to
the Board of Governors, and independent of the operation and planning of the CBDC system,
could be established to ensure operational resilience of the system. Such a body would also
usefully cooperate with other global, regional or national bodies internationally with similar
CBDC oversight responsibilities.
Yes, any retail U.S. CBDC should be legal tender to avoid opening up an undesirable basis
and differentiation between it and its cash and commercial deposit representations of the
currency, with resulting fragmentation risk and loss of fungibility.
We are conscious that a CBDC could confer on the central bank a proliferation of new policy
tools that may complicate the conduct of monetary policy. The IIF also acknowledges,
however, that it may provide the central bank additional avenues of flexibility during crises.
That said, interest being payable on CBDC by the central bank would strongly add to such
complication. The IIF finds this unfavorable. The BIS study results earlier cited about bank net
interest earnings and lending rates are quite sensitive to the spread between wholesale and
deposit rates.1 Further, substitution effects are very sensitive to the characteristics of the
CBDC, including the extent to which it replicates cash (and is zero coupon) or replicates bank
deposits.2 As such, we would advocate that retail CBDC not be remunerated at a rate above
zero. An interest-bearing CBDC, as well as potentially increasing systemic risk, could also
raise issues as to fungibility with cash and commercial bank money and could create legal
and fragmentation risks. Wholesale CBDC is subject to different financial stability
considerations, so remuneration of that asset would be subject to a different range of
considerations. As a starting point, any wholesale CBDC should be remunerated at the same
rate as commercial bank reserves. As to the lower bound of retail CBDC remuneration, in
times of negative or near-negative interest rates, considerations around the zero lower bound
and the stability of the bank deposit base would suggest that negative interest rates should
apply to CBDC and be applied to retail holdings at a level intended to dissuade large-scale
substitution into CBDC. However, negative interest rates may lack public acceptance and
may create political issues for the central bank. There may also be concerns about fungibility
if a retail CBDC can be programmed to have negative interest rates. 1BIS and Group of
Central Banks (2021), op. cit. 2Li (2021), Swiss National Bank, ‘Predicting the Demand for
Central Bank Digital Currency: A Structural Analysis with Survey Data’, 18 November.
As stated in our answer to question 7, any tiering of remuneration in such a manner as to

incentivize use of a CBDC as a means of payment, and not as a store of value, would
introduce added complications, which may render limits unusable or ineffective, or reduce
trust in the integrity of the system if there is wide-scale abuse. Limits on individual holdings, or
periodic limits on transactions or accumulations, and tiering of remuneration above certain
limits, require either a secure national or digital identity scheme, both for individuals and
corporations, or a certain, high tolerance for duplicate accounts being created or operated
through multiple intermediaries. Access by corporations to a retail CBDC would also introduce
the ability for individuals to ‘hide’ CBDC wallets inside corporations. Such corporations could
be sold on the secondary market. Aggregating holdings across these corporations would be
extremely difficult. Any inability to aggregate limits over individuals’ multiple or corporate
holdings could diminish trust in the integrity of the system and in the central bank.
Except as provided below, regulated FIs and PSPs that are eligible to hold Fed master
accounts should be the only firms qualified to serve as intermediaries for CBDC. Non-resident
firms could be permitted to qualify, so long as they qualify under the above. Consideration
could also be given to permitting equivalently regulated firms, so long as they conform with
relevant requirements such as appointing local agents, submitting to local jurisdiction,
maintaining a local responsible officer, undertaking basic reporting, etc. This implies that, at
least insofar as they are custodians of CBDC, they could be permitted to hold retail CBDC
offshore. The privilege of being an intermediary for a U.S. CBDC should be limited to
institutions that operate within robust regulatory and supervisory frameworks in the following
areas: • safety and soundness; • fiduciary operations; • AML/CFT; • tax withholding and
reporting; • risk-based capital requirements; • personal/consumer data privacy; • cybersecurity
(resistance and resilience); and • operational resiliency. Intermediaries that perform services
for end users and incur the costs and liability involved (e.g., for hacking, AML/CFT or
operational errors) will need to be compensated for taking on these risks to make the
business model feasible for a U.S. CBDC.
For resilience reasons during natural disasters or major incidents, an offline capability of any
CBDC would appear to be essential. This could be achieved, for example, through a stored
value card with merchant readers, or through a mobile phone application with an NFC
peer-to-peer capability. AML/CFT risks must be mitigated, likely through holdings limits, either
at the individual or device level. However, our observations in our answer to question 7 above
about the issues with individual holding limits apply. One possible specific mitigant (beyond
an individual holding limit) would be to limit the wallet size for offline capability to one wallet
per individual mobile number. That way, some AML/CFT information would be available at the
mobile operator, which would presumably be shared with the intermediary at time of
“charging” of the offline wallet. The cost of new offline wallets could be quite high to dissuade
trafficking of wallets, at the expense of deterring tourists from using the offline CBDC.
sale? If so, how?
Costs of connecting to central infrastructure and funding cybersecurity investments, and

liability in case of cyber attack or AML/CFT risk, should be transparent and clarified ex ante.
Intermediaries should be regulated FIs or PSPs that qualify for access to Fed master
accounts, subject to effective oversight. We would observe that pricing a CBDC at below cost
may risk crowding out other private sector payment methods. Intermediaries would, over time,
be expected to design features that render a CBDC attractive to retail users. Some of these
features may include programmability, multi-asset wallets, tokenization features, and
peer-to-peer payment capabilities.
The G7, including the U.S., have said that “CBDCs should coexist with existing means of
payment and should operate in an open, secure, resilient, transparent and competitive
environment that promotes choice and diversity in payment options.”1 This principle of
coexistence is a “must have” and any U.S. CBDC design should deliver on this requirement.
We note that the BIS, through projects such as Project Dunbar, is actively investigating
technical means of ensuring connectivity between CBDC platforms. We would note that
technical means of interoperation are not the same as agreement on the governance layer
which would need to sit at the top of any such system. Such a governance layer, which would
likely consist of agreements or understandings, as well as protocols, among system
operators, would seem to need to be robust to growing geopolitical stresses, including the
possibility of war among member states. It is likely that the central bank would need to
promulgate technical standards to which the intermediaries would be expected to adhere, as
well as to maintain and publish all APIs and data schemata needed by the system as a
whole. Interoperability of CBDC internationally would further require development of a broader
Common Domain Model or similar data architecture, building on the ISO 20022 standard, so
that similar concepts in particular CBDCs could be readily mapped and translated (where not
identically expressed). 1Group of Seven (G7) (2021),
G7_Public_Policy_Principles_for_Retail_CBDC, 14 October.
CBDC?
Any CBDC system will need to be adaptable to emerging security threats and technological
change, including fast-developing quantum computing.1 The Fed will need to keep aware of
design choices by other economies pursuing CBDCs and consider the extent to which they
could positively or negatively impact the interoperability of its own design choices, should it
pursue a U.S. CBDC. 1House of Lords (2022), CBDCs - A solution in search of a problem, p.
5.
benefits of a CBDC?
In our view, the main tradeoff is between financial stability and usability of the CBDC. As
discussed, many mitigants to financial stability risk breaking the “singleness” of the CBDC
and opening basis with cash on the one hand and with private money such as commercial
bank deposits and stablecoins on the other. The International Monetary Fund (IMF) has also
identified in its report on CBDC that there is a potential policy trade-off between limiting
competition with bank deposits and ensuring an effective transmission mechanism of
monetary policy.1 The G7 has identified some of the other main tradeoffs.2 It identified four
key trade-offs, being: • Cyber security vs system performance, utility and adoption: Cyber
resilience and system security is fundamental to trust and confidence – a system at risk of
breach will not be used. But any requirements may have knock-on implications for system
performance (speed, range of functions including the potential applications of
programmability). This, in turn, may impact CBDC adoption and utility, particularly in how far
such CBDCs can support innovation. • Operational resilience vs diversity and competition:
CBDC will be critical infrastructure, so operational resilience is of upmost importance. But
compliance requirements to deliver this resilience may risk excluding smaller firms with fewer
resources from participating and may limit diversity and competition. • Reducing illicit finance
vs privacy and inclusion: CBDC systems might enable enhanced transparency and rigorous
standards of documentation and verification which are not possible with cash. This could help
reduce illicit finance and ensure sanctions compliance. But this could have implications for
users’ privacy and the ability of those without documentation to access the CBDC
system.3 • Privacy vs diversity in business models and financial inclusion: Strong standards of
privacy support inclusion by giving confidence to use CBDC. But strict restrictions on data use
could serve to reduce the range of possible business models in a CBDC system, and
increase costs to users, which could deter use or encourage the use of less private
alternatives. 1IMF (2022), Behind the Scenes of Central Bank Digital Currency, February
9. 2Group of Seven (G7) (2021), G7_Public_Policy_Principles_for_Retail_CBDC, 14
October. 3The IMF has also identified that anonymity can be used for illicit purposes and can
undermine AML/CFT measures. Anonymity, therefore, poses a policy trade-off—the more
anonymity, the larger the risk for illicit use. See IMF (2022), op. cit.
_________________________________________________________________________
Securities Industry and Financial Markets Association (SIFMA)
Industry
Trade Organization
Country
State
Email
pryan@sifma.org
Because 73 percent of all U.S. economic activity is funded through capital markets activities,
it is vital that capital markets impacts be a central consideration for policymakers considering
adoption of a U.S. CBDC. There are several potential capital markets use cases for a “limited
purpose” or “wholesale” CBDC (referred here to as “wCBDC”) that would be used for
institutional financial transactions rather than a more widely available public “retail” CBDC
(“rCBDC”), many of which have already been the subject of tests and experimentation.
These use cases highlight some of the potential benefits of wCBDC, particularly in the
cross-border payments space; they also help us better understand important policy and
design tradeoffs that would need to be considered prior to implementation. See the cover
letter, Section 1 “Scope of Response,” Section 3.1 “Securities Settlement,” and Section 3.4
“Impacts of CBDCs on Cross-Border Capital” on pages 2-6, 22-25, and 27-30.
While we are not yet able to opine on the desirability of adopting a U.S. CBDC, we do believe
that a wCBDC model would be a preferable approach to achieve the potential benefits of a
CBDC for the following reasons. A wCBDC would be less disruptive to the financial system
and financial stability than a rCBDC; it would provide a testing ground for experimentation of
key systems amongst a small group of sophisticated and established financial actors; and has
more proven and obvious use cases than a rCBDC. A wCBDC would also be less politically
fraught, raising fewer concerns around issues such as consumer privacy than a rCBDC.
Finally, a wCBDC may also be more effective than a rCBDC in preserving the U.S. dollar’s
status as a reserve currency and as the predominant currency for international financial
transactions. First, at a conceptual level, a wCBDC could serve as a bridge between an
“on-chain” financial system and the traditional financial system. That is, if the financial system
evolves such that more transactions move into a blockchain-based environment with new
forms of payments and financial services, a wCBDC could help payments services providers
more easily move funds on a wholesale basis within the blockchain environment (e.g., to
other payment services providers on behalf of underlying customers) and transfer funds from
the blockchain environment to the legacy financial system (e.g., a transfer of a wCBDC to a
traditional central bank reserve balance, which can then be used in the traditional financial
system). Second, a wholesale digital payments system could be significantly less disruptive
to monetary policy and financial stability than a more widely accessible rCBDC (with its
potential to disintermediate the banking industry and disrupt short-term funding markets),
particularly if a wCBDC were confined initially to institutions that already have direct access to
central bank money. Third and related, a wCBDC would provide policymakers with the
opportunity to study and test a new payments system amongst a relatively small group of
sophisticated and experienced financial institutions. This would enable policymakers to
address operational issues prior to more widespread adoption. Fourth, wCBDCs have
already been shown in existing experiments to be viable and there are several important use
cases where they could improve existing securities markets processes and infrastructure.
Moreover, successes in these areas could help with future expansion into the retail space.
For example, one of the most-discussed benefits of a wCBDC is its potential to deliver faster,
cheaper and safer cross-border institutional payments. While that would have little immediate
direct impact on consumers, the payment rails developed to facilitate cross-border wCBDC
applications could lead to improvements in the cross-border payments infrastructure available
to retail end-users, which may make it easier for the public to make direct remittances and
other payments across borders in the future. Fifth, as the Board’s discussion paper notes, one
of the rationales for adopting a U.S. CBDC would be maintaining the U.S. dollar’s status is the
most widely used currency for payments and investments, as well its status as the world’s
reserve currency. A U.S. wCBDC would be well positioned to maintain the currency’s reserve
status and its predominance in financial markets transactions. In particular, it would support
U.S. participation in mCBDC arrangements in the areas where U.S. capital markets play a
key role internationally, such as through foreign participation in Treasury auctions, FX
markets, cross border payments – both for financial institutions and their corporate clients, as
well as cross border investment. It could also be used to support swap line arrangements
with other countries that may also adopt a wCBDC, thereby helping to maintain the dollar’s
reserve currency status. In contrast, a retail-only U.S. CBDC would not support the use of the
U.S. Dollar in these institutional markets. Finally, it would initially be politically easier to
implement a wCBDC. A wCBDC would not, for example, incur the same sorts of individual
privacy concerns that could arise in a rCBDC context or require the same sorts of
considerations of how to allocate risk and liability between the private sector and government
with respect to operational and cyber issues. Although we believe that adopting a wCBDC
could provide the benefits of a rCBDC without the corresponding risks, we also believe that
further study is needed to fully assess the costs and benefits before moving forward with
adoption. See the cover letter, Section 1 “Scope of Response”, and Section 2.1 “Access” on
pages 2-8.
inclusion?
We do not address this question in our response given that we focus on the impact of CBDC
(and specifically a wCBDC) on the institutional capital markets rather than the broader public.
In its paper, the Board raised the question of whether CBDCs could have the potential to
impact the goals and implementation of monetary policy. While SIFMA does not have a
position on how a potential CBDC might affect the ability of the Federal Reserve to meet its
monetary policy goals within the broader economic environment, we agree that it is important
for policymakers to consider potential impacts on a wCBDC and/or rCBDC on the Federal
Reserve’s execution of monetary policy. As part of the analysis, we believe it is important to
look at both the mechanics and the infrastructure supporting the Federal Reserve’s monetary
policy and how these processes are impacted by the new functionality of wCBDCs and/or
rCBDCs. Our initial analysis suggests that the fundamentals of primary dealers and investors’
interactions with the Treasury and Federal Reserve through auctions and open market
operations would not be changed, in terms of pricing, settlement risk, and demand for
Treasury securities, by a wCBDC. However, there could be changes to the mechanics of
post-trade processes following auction take-downs as participants take advantage of the
hypothetical new settlement functionality. Similarly, there could be changes to how foreign
investors access US Treasury markets in the event that institutional wholesale mCBDC
arrangements develop. While ultimately we do not expect these process changes to
fundamentally affect the demand for U.S. Treasuries or their pricing, this functionality could
offer potential new market efficiencies and the Federal Reserve should work with the
operators of key market infrastructure supporting Treasury auction and settlement processes
to understand potential impacts and opportunities of a wCBDC. In addition, to the extent a
wCBDC is available to nonbank entities that operate a narrow bank or payments-only
business model, the potential effects on monetary policy of having pass-through investment
entities available to provide indirect access to central bank money should be considered. See
Section 3.2 “Considerations Around the Execution of Monetary Policy” on pages 25-26.
stability?
There has been extensive discussion about the potential substitution effects of rCBDC away
from bank deposits, but there has been less focus on the impacts of CBDCs on capital
markets-based funding models. We recommend the policy makers examine the potential
impacts of CBDCs on other funding models, including both the impacts of rCBDCs and
wCBDCs. One area of impact could arise if either form of CBDC (though most likely a rCBDC)
were to be viewed as a substitute for investments in other low risk, liquid assets, such as
MMFs and Treasury bills that have features that make them near-cash instruments or
comparable to bank customer deposits. This potential substitution effect could lead to abrupt
shifts in their funding. For example, at end-2019, there were an estimated $7tn of AUM in
MMFs. Depending on its design features and its relative remuneration (if accounts were
interest bearing), the introduction of a CBDC could be an attractive alternative for some
risk-averse holders of other cash-substitutes, even in benign conditions. This in turn could
reduce the demand for assets that such funds invest in, possibly affecting yields in turn.
Mitigants for this substitution effect could include: o Quantity measures/limits: these would
restrict the use of CBDC by either imposing caps on the total holdings of CBDC or limiting the
transfers of CBDC. Quantity limits could either be stock-based (central banks limit that
amount of CBDC that can be held) or flow-based (restricting the amount of CBDC that can be
transferred within a given period). However, policymakers should bear in mind that political
pressure could be brought to bear to raise or otherwise alter limits during periods of
significant market stress, potentially limiting the effectiveness of these measures. o Price
measures: these could be used to disincentivize holdings of CBDC or large payments in
CBDC without necessarily restricting them. For example, CBDC accounts could be prohibited
from earning interest, thereby making it more “cash like” than “deposit like.” Progressive fees
for transferring larger amounts of CBDC could also be another mechanism to disincentivize
large holdings of CBDC. o In-crisis measures: in the event of a run-event, gates or switching
limits could be imposed. More broadly, policymakers should consider the potential impacts on
the capital markets of a substitution out of bank deposits which could arise if a rCBDC
becomes more desirable. Because banks need to rely on such deposit funding to a greater
degree than nonbanks, there could be a range of unforeseen impacts on traditional wholesale
funding markets and on other market participants as a result of such substitution effects. See
Section 3.3 “Impact of a CBDC on Funding Models” on pages 26-27. wCBDCs could also
have significant impacts on the FX markets that merit further study. While wCBDCs do offer
the potential to execute and settle FX transactions in new and more efficient ways, these
potential benefits need to be understood in the context of the various legal, interoperability,
and infrastructure issues that a wCBDC would raise. These issues would need to be
addressed to support CBDC enabled FX transactions. See Section 3.4 “Impacts of CBDCs on
Cross-Border Capital: Wholesale FX” on pages 27-29. Finally, the analysis of the benefits of
a potential U.S. wCBDC should also examine the impacts on cross border capital markets
investment flows, and more broadly how a wCBDC could impact the U.S. as a destination for
international securities investment and as a hub for cross-border capital markets. See
Section 3.4 “Impacts of CBDCs on Cross-Border Capital: International investment” on pages
29-30.
The impact of a CBDC on the financial sector may vary depending on whether financial
institutions are required to act as CBDC “intermediaries” (which would be more common in
the wCBDC context) or a narrower “distributor” role (which would occur more often in a
rCBDC context). This distinction is certainly important when considering potential
disintermediation effects of different CBDC operating models (an issue we do not discuss in
length here). It is also crucial in evaluating who bears financial responsibility for key risks
associated with CBDC, and therefore, how likely financial institutions would be to participate
in any CBDC system. Banks (and other financial institutions with direct access to a wCBDC)
would be acting as intermediaries when they receive wCBDC from another institution with
direct access to the wCBDC system. They would also be acting as intermediaries if they
were to issue CBDC-like instruments that have sometimes been referred to as “synthetic
CBDC” backed on a one-to-one basis by central bank reserves – essentially a form of
stablecoin. In either scenario, the responsibility for various operational, cyber, and
compliance risks associated with the wCBDC or CBDC-like instruments would clearly lie with
the financial institution acting in an intermediated capacity. When acting as “distributors” of
rCBDC, financial institutions would provide rCBDC accounts or digital wallets and charge fees
for ancillary services, but the rCBDC itself would be a liability of the central bank rather than
the financial institution. Since the rCBDC would not be a liability of the intermediary, it could
not be used to support revenue generating trading or lending activity. At the same time, there
would be numerous potential operational and cyber risks attached to providing these
accounts, plus a variety of compliance costs. Would banks be responsible for all of these
costs when acting as a distributor of rCBDC? And if so, would the limited revenue and high
costs lead banks and other financial institutions to opt out of participating in a rCBDC system,
thereby undermining its effectiveness? Are there mitigants to this potential problem and how
would they work (e.g., perhaps through some form of cost sharing between the central bank
and financial institutions)? Those are all crucial questions for policymakers to consider before
moving forward with adoption of CBDC, particularly if they were to ultimately adopt a
rCBDC. See Section 2.4 “Implications for Banks Acting as ‘Distributors’ versus
‘Intermediaries’” on pages 10-11). Furthermore, a CBDC could adversely affect the financial
sector through its impact on monetary policy and financial stability, and as a result of any
overly punitive regulatory requirements that may be imposed (e.g., prudential treatment or
risk management requirements). See Section 2.3 “Prudential Treatment” on page 10 and
Section 2.5 “Risk Management” on pages 11-14.
Mitigants for the substitution effect created by CBDCs are discussed in the response to
Question 5. Furthermore, many of the potential risks associated with a CBDC may be
mitigated by requiring CBDCs to be intermediated by regulated financial institutions as
discussed in the response to Question 11.
CBDC?
While wCBDCs offer the potential for settlement innovation, they are neither necessary nor
sufficient for the evolution of existing settlement models and settlement times. In particular,
the acceleration of settlement cycles must be understood in a broader context of securities
products and operations that are adopted by market participants in practice. While wCBDCs
could potentially enable new settlement models and new settlement infrastructure that would
drive gains in efficiency, capital reductions and risk reduction, the unique features of wCBDCs
are best understood as an enabler of these changes and one element of a broader process of
innovation and change. See Section 3.1 “Securities Settlement: Securities settlement – limits
to the benefits of CBDCs” on page 22. The creation of a CBDC is not in and of itself sufficient
to enable changes in settlement processes. The functionality provided by CBDCs would
need to be supported by a range of other changes in settlement infrastructure itself, the
participation and responsibilities of the counterparties to the transaction, as well as potential
changes to ancillary products and services dependent on current settlement models.
Furthermore, many of the benefits of faster settlement or different settlement models often
associated with CBDCs could be developed using other payment infrastructure such as
stablecoins or settlement tokens using DLT infrastructure. If providing new infrastructure for
the payment leg of securities settlement is a key objective for policymakers, they should also
consider the degree to which these other solutions could achieve the same goals with less
complexity to implement and fewer consequences to the broader financial system. For
example, stablecoins have been explored as providing a ledger-based payment function to
support faster settlement. Similarly, tokenization of existing fiat currency within a
ledger-based settlement environment could offer focused benefits for the speed and
efficiency of settlement. Within this context, a narrower scope institutional CBDC could be
more easily inserted within the existing infrastructure system, providing new functionality at
key points within post-trade processes to while minimizing disruption to the broader financial
system. See Section 3.1 “Securities Settlement: wCBDCs are not necessary for settlement
innovation” on pages 22-23. Potential future changes to securities settlement models
incorporating wCBDCs must also take into consideration the market product, operational, and
capital considerations connected to the broader settlement cycle, and in particular the
challenges associated with settlement cycles shorter than T+1. DTCC has identified several
important barriers, which make such a change impractical at present for the broader U.S.
securities markets including: o Moving to T+0 on a transaction-by transaction basis will remove
the liquidity and risk-mitigating benefits of current netting features; o Fails may increase due to
lack of netting as transaction volume rises; o Funding needs will be less predictable and
transparent until end of the trading day; and o Developing real-time reconciliation processes to
comply with regulations will be difficult. SIFMA further accentuated the T+0 challenges in its
August 13, 2021 letter to SEC Chairman Gary Gensler. In the letter, SIFMA confirmed its
support for and confidence in shortening the settlement cycle to T+1, but also highlighted four
specific areas that would be impacted significantly if T+0 was adopted: o Processes for global
settlements, FX, margin investing, and securities lending would have to be redesigned to
meet regulatory and contractual requirements in less than 12 hours; o Retail investors would
likely have to prefund accounts; o Smaller firms and vendors may not have the resources
necessary to complete a move to T+0 and, hence, could find their competitive position
weakened; and Industry stakeholders – including the Federal Reserve’s payment systems –
would have to maintain services for more hours during the day than currently, which could
increase the potential for operational failure. See Section 3.1 “Securities Settlement:
Securities settlement – challenges of T+0 and industry initiatives to shorten the settlement
cycle” on pages 23-24.
Policymakers need to consider the impacts on U.S. capital markets if other major jurisdictions
move to adopt their own CBDC and the U.S. does not. This is particularly the case for
wCBDC, as it is unclear whether the adoption of rCBDC by other jurisdictions would have
major implications on the U.S. capital markets or their competitiveness. At the same time, it
is important not to overemphasize the importance of foreign CBDC adoption on the
decision-making process for any future U.S. CBDC. While there are a number of areas
where connections with foreign CBDCs could potentially drive market efficiencies or where
the absence of a U.S. wCBDC could impact investment flows, ultimately these are far less
significant considerations than the effects of a wCBDC on U.S. financial markets and
infrastructure. There has been speculation that the U.S. dollar’s status as a reserve currency
could be threatened if it also does not move forward with a wCBDC. There are also
questions around whether early adopters could enjoy significant first-mover advantages,
which some have suggested should speed up adoption in the U.S. (though it is questionable
whether rCBDC focused initiatives – for example, like that being implemented in China –
would confer any significant advantages in this regard). While the U.S. dollar’s preeminent
role in the international system is undoubtedly driven by a range of factors, this will be an
important consideration for policymakers considering adoption of a U.S. CBDC. It is possible
that new forms of digital currency may have competitive advantages relative to older forms of
currencies and may be appealing as holding for foreigners whose home country does not
have a native wCBDC. However, these potential benefits should also be weighed against the
degree to which mature and sophisticated capital markets infrastructure in the U.S. currently
delivers these services to investors even without a wCBDC, in contrast to other jurisdictions
which have explored a wCBDC as a solution to long standing challenges for their payments
and investment infrastructure. An analysis of the impact of the presence or absence of a U.S.
wCBDC on U.S. capital markets (e.g., on FX, cross-border payments and investment flows,
international demand for U.S. Treasuries, etc.) needs to be grounded in the specifics of other
major capital markets and their supporting infrastructure. Coordination with jurisdictions that
have not yet launched wCBDC projects will be important as well, both to help share
experiences that will help the design process for any future wCBDCs so they are more likely
to develop in a compatible way, and also potentially to ensure that points of interaction
between clients and institutions in their markets and platforms and institutions using any
future U.S. wCBDC are incorporated in their regulatory frameworks with a minimum of
disruption. See Section 2.10 “Implications of international CBDCs: Considerations if other
jurisdictions adopt CBDC while the U.S. does not” on pages 18-19.
Many of the potential risks associated with CBDC may be mitigated by requiring CBDCs to be
intermediated by regulated financial institutions. Specifically, such financial institutions should
be able to incorporate wCBDCs into their existing risk management processes and solutions
for clients without the need to create new risk frameworks to accommodate wCBDC
infrastructure. Likewise, policymakers should avoid imposing additional risk charges on
financial institutions handling wCBDCs. There is no reason why wCBDCs should incur an
additional operational risk charge or any other technology risk factor. While the technology
that a future wCBDC uses is still an open question, this technological uncertainty is not a
reason to impose new capital charges on banks. Instead, policymakers would be better
advised to be adopt an approach to these issues that is technology neutral and based on
underlying risk. Doing so would not only reflect the emerging international principle of “same
risk, same treatment” in this space, it would also avoid discouraging bank participation in the
system. While any future wCBDC should generally be incorporated into existing risk
management processes, there are several areas where its impact on particular risk factors
ought to be studied, with an eye to minimizing risk impacts through the design and
implementation of the wCBDC itself. These include credit and liquidity risks and operational
and cyber risks. We discuss these risks in our full response. See Section “Risk
Management” on pages 11-14.
The Board’s discussion paper rightly raises privacy as a key consideration in the design of
any CBDC and the decision-making process on its viability and desirability. While privacy
concerns are particularly important in a retail CBDC, a wholesale environment does not raise
the same sorts of privacy concerns that a rCBDC would. Compared with rCBDC, wCBDC
applications would likely hold substantially less personally identifiable information and have
less information related to individual transactions. We expect that under most wCBDC design
models, individual clients and their transactions would be aggregated under the accounts of
the financial institutions they work with, provided that direct access to central bank money by
individual clients is not allowed. This would reduce the scope of personal and transactional
information which is captured by the wCBDC platform. However, privacy concerns are not
completely absent from the design of a wCBDC. Depending on the architecture of the CBDC
infrastructure and the role that intermediaries play in it, if it is possible to follow the
transactions through the chain of the wCBDC infrastructure and if there is considerable
transparency into what is visible and explorable, it could potentially trace transactions back to
their originators as can be done on some public chains. This potential auditability of
transactions by outside users ought to be avoided. Additionally, there are likely to be some
institutional transactions and client types where privacy considerations need to be addressed.
For example, many wholesale customers would be very sensitive to information on their
transaction history being accessible e.g., if it led to investment strategies being revealed.
More broadly, wCBDC design must not allow any transparency into individual transactions
carried out by institutions, whether purchases by retail or wholesale securities clients, or
purchases of goods or services by participating financial institutions themselves. Existing
confidentiality regulations govern the protection of information on client transactions held at
firms – any new CBDC infrastructure needs to be consistent with these confidentiality
protections. The personally identifiable information (“PII”) of employees at financial
institutions who are authorized to work with the wCBDC infrastructure on behalf of their firms
also needs to be protected, given the contractual requirements for the protection of this
PII. Therefore, privacy oriented mitigants need to be embedded from the outset even in a
wCBDC system. Additionally, if a wCBDC eventually existing alongside a rCBDC, there will
arise a new class of wholesale/retail interactions where policymakers need to be aware of
privacy concerns, such as the aggregation of wholesale flows. As these issues are
evaluated, policymakers should also consider whether new privacy standards need to be
codified into law. See Section 2.8 “Privacy” on page 17.
Although further study needs to be conducted, there is no reason to believe that wCBDCs ought to have
greater operational risk than current central bank money operating models. In fact, it is possible that
the unique features of distributed ledger technology (“DLT”) could result in lower operational risk in
some areas, though again that proposition would need to be subject to extensive testing. Close
collaboration among the Federal Reserve, other participating infrastructure providers, and market
participants would be critical to have a 360° view of operational risk and to help ensure that the
appropriate controls and risk management features are embedded from the outset. Any novel
approaches to the operational risk for users of wCBDCs should not, in and of itself, be treated as
grounds for the imposition of any supplemental risk changes.See Section 2.5 “Risk Management:
Operational risks” on page 12. We believe that cybersecurity considerations need to be front and
center in the design of any future wCBDC platform. Given the digital nature of a wCBDC and its
reliance on a range of new technology platforms to support the wCBDC, securing the technology
infrastructure that supports the wCBDC would be critical.Cyber-attacks on wCBDC infrastructure
could be driven by a range of motivations and carried out by many different types of threat actors.
Cyber-attacks could be aimed at stealing non-public information on market participants, introducing
inefficiencies in market infrastructure that they could profit from, potentially illicitly moving funds, or
simply degrading the performance or availability of wCBDC infrastructure, such as by a hostile
geopolitical actor or a “hacktivist” group. Regardless of motivation, scale, or type, a successful
cyber-attack on wCBDC infrastructure would not only impact specific users but reduce confidence in
the wCBDC itself and potentially the security of the central bank more broadly. While embedding
cybersecurity in the design of the wCBDC from the outset is critically important, the specific features
of cyber defense programs will depend on a range of other design considerations which shape the
access points to the infrastructure and data it stores. These include access models, interoperability
features, and any degree of programmability.See Section 2.5 “Risk Management: Cyber risks -
general cybersecurity concerns” on page 12-13. Cyber risk associated with CBDCs should be
differentiated into two levels – risk which exists at the level of the central bank and risk at the level of
an institution which serves as the wallet provider (in distribution models). The degree of cyber risk at
the level of the financial institution serving as the wallet provider will vary substantially depending on
different distribution models for the CBDC. This level of risk will be critically important in
understanding who bears the cyber risk, and as a result, the risks and incentives for financial
institutions to take part in a CBDC program.See Section 2.5 “Risk Management: Cyber risks for
banks serving as CBDC distributors” on pages 13-14.
We recognize that there is an ongoing process underway to address the question of the
existing legal permissibility of a U.S. CBDC, as mandated by President Biden’s “Executive
Order on Ensuring Responsible Development of Digital Assets.” Regardless of the outcome
of that process, it is crucial that the legal status and treatment of any CBDC (whether under
statute and/or through regulation) be made equivalent to the legal status of legacy fiat
currency, and that both be fungible with one another. Clearly defining CBDCs as equivalent
to legacy fiat currency is necessary for the effective implementation of a wCBDC, and to
prevent a range of unintended consequences which could increase costs and risks in the
system. These costs and risks would include negative liquidity impacts owing to a bifurcation
between activities in CBDC and traditional fiat money markets and infrastructure; it would also
reduce the interoperability of infrastructure and create the risk of funding mismatches. There
should also be clarity and consistency regarding key terminology. One area for clarity is the
distinction between an “account-based” and “token-based” CBDC system. Many central bank
speeches and papers, informed by the existing distinction between bank accounts and cash,
have argued that these are distinct types of CBDC systems. An account-based system would
operate in much the same way that central bank settlement accounts do today and is rooted
in the concept of identity verification; that is, the payment from the account could be verified
by knowing the identity of the account holder. By contrast, a token-based CBDC would be
based on the ability of the users of the system to verify that the digital store of value (i.e.,
token) is genuine (others have defined CBDC tokens as “digital representations of value that
are not recorded in accounts” – essentially digital banknotes). For example, to the extent any
CBDC regime is indeed based on a token-based model, it would raise legal questions that an
account-based approach (one that is essentially is identical to the current system) would not.
As noted, the digital token cannot be stored locally, but the private key that allows for the
transfer of the tokens on the blockchain is stored locally. Should the legal framework then be
updated so that the private key is considered the bearer instrument rather than the digital
object/token? That is, should the key be rated as equivalent to physically holding the token or
asset? Related to this is the question of who ought to be responsible for the loss of the
private keys: should it be the owner or would it be a third-party service provider if one was
used? These and likely other questions would need to be resolved in any legal framework,
ideally in a manner that was consistent with other major jurisdictions across the globe. See
Section 2.2 “Legal Status” on pages 9-10.
Price measures could be used to mitigate substitution risks. For example, CBDC accounts
could be prohibited from earning interest to make them more "cash like" than "deposit like"
and disincentivize holdings of CBDC or large payments in CBDC. See Section 3.3 “Impact of a
CBDC on Funding Models” on pages 26-27.
Quantity limits could be used to mitigate substitution risks. However, policymakers should
bear in mind that political pressure could be brought to bear to raise or otherwise alter limits
during periods of significant market stress, potentially limiting the effectiveness of these
measures. See Section 3.3 “Impact of a CBDC on Funding Models” on pages 25-26.
Because we believe that a wCBDC has distinct advantages over a rCBDC, we answer the
question of who exactly would have access to central bank money for settlement purposes in
a wholesale environment? Direct access to central bank money today is generally restricted
to banking organizations and, in certain jurisdictions outside of the United States, a limited
number of non-bank, regulated payment systems providers. Limiting access to prudentially
regulated institutions has been seen as important for a number of reasons: it allows the
central bank to better fulfil its monetary policy objectives, promote financial stability, and
ensure the safety and soundness of the banking system. In a wCBDC context, however,
demand for direct access to wCBDC from other, non-bank market participants could grow as
those institutions seek to settle transactions directly in wCBDC using their own accounts or
wallets (as opposed to the current indirect model, with settlement occurring via a limited
number of financial institutions with accounts held at the central bank). Policymakers would
then need to decide whether to expand access to these institutions, and if so, what type of
rules and oversight ought to apply to those entities – including whether to impose activities
restrictions on nonbank institutions that have direct wCBDC access. And if access is granted,
they would also need to settle a variety of important design questions, such as whether
CBDCs can be created without pre-funding (i.e., can current central bank money be
exchanged for wCBDC rather than increasing the money supply by issuing new wCBDC);
whether intraday and end-of-day credit should be available to all participants or selected
participants; and whether wCBDC would be recorded as on or off intermediaries’ balance
sheets. Given these potential challenges, and for a range of practical reasons, we
recommend that direct access to wCBDC be restricted to institutions that are subject to a
framework of regulation and supervision that is comparable to that currently in place for
institutions with access to Federal Reserve master accounts and services. The Board could
also consider whether the imposition of activities restrictions on non-bank institutions
participating in this system would be warranted. See Section 2.1 “Access: Determining
access to a wCBDC” on pages 7-8.
This topic is not addressed in our response.
sale? If so, how?
SIFMA supports the Board’s view that any CBDC ought to be able to operate alongside
legacy instruments and systems rather than replace them in order to minimize disruptions to
the financial system and given that legacy systems have become significantly more efficient
in recent years. The potential gains in efficiency and risk reduction from development of
wCBDCs would be easier to realize if there is smooth interoperability with existing
infrastructure, such as the ability to transfer balances between a wCBDC and traditional
central bank reserve balances. This of course recognizes that new processes and
infrastructure which build on the functionality offered by wCBDCs will likely gradually expand
from smaller pilots in specific market segments. These pilots will often occur in partnership
with existing infrastructure providers, who may handle multiple parts of the process using
existing infrastructure even as new features are added. Interoperability will need to be built
across multiple dimensions, including in the design of the wCBDC framework, its operating
standards and protocols, and its technology architecture. wCBDC design needs to consider
interoperability with a broad range of existing systems and infrastructure platforms. These
must include, but are not limited to, existing and new wholesale payment instruments and
systems; the broader capital market ecosystem and financial market utilities; cross-border
foreign exchange systems; local rCBDC systems and local wCBDC systems; and ideally,
cross-border and mCBDC arrangements. As we note later in our response, this will require
both coordination with domestic regulators who oversee these infrastructure venues and
markets as well as internationally, with foreign central banks and monetary authorities as they
implement their own CBDC projects and with infrastructure venues in those jurisdictions as
CBDC functionality is embedded in them. We recommend the Board and other
policymakers look to the lessons provided by a variety of international wCBDC pilot programs,
which have explored how wCBDC can be connected to existing payment and settlement
infrastructure. For example, Project Helvetia is a joint experiment by the BIS, SNB, SIX and
five commercial banks (i.e., Citi, Credit Suisse, Goldman Sachs, Hypothekarbank Lenzburg,
and UBS). Although additional study is needed, this project suggests that a wCBDC could
offer safe and efficient settlement on a tokenized asset platform and identified issues
regarding the operational, legal and policy questions necessary for wCBDC issuance.
Additionally, the Board should explore how existing infrastructure platforms have been able to
create interoperability with an expanding range of adjacent payment and settlement services,
such as the experiences of the Depository Trust and Clearing Corp (DTCC). See Section 2.6
“Domestic Interoperability” on pages 14-15 and Section 3.10 “Implications of international
CBDCs: Cross-border interoperability – mCBDC” on pages 19-20.
CBDC?
The potential for wCBDCs to be embedded with logic, or programmability, offers the potential
for innovation and new functionality. However, programmability features need to be
developed so they do not impair the fungibility of central bank money or introduce operational
risk. See Section 2.7 “Programmability” on pages 15-16.
benefits of a CBDC?
CBDCs offer the potential for including some degree of programmability within the CBDC
itself or associated with it. Programmability would allow users to embed logic for a predefined
purpose within the money itself. The restrictions created by the programming could be either
open ended or limited – in dimensions such as time (permanent vs time limited), venue
(programmability within a specific infrastructure platform vs across all uses), and others.
While some elements of traditional fiat money have limited programmability (such as the
restrictions around checks or letters of credit), CBDCs would in theory allow for much greater
programmability, both in terms of range of applications and the flexibility of the logic
associated with the programming. It is possible that future DLT platforms could be designed
to offer a broad range of new features building on programmable wCBDCs. In the
institutional capital markets, researchers and pilot programs have identified a range of
applications where programmability could increase the efficiency of capital markets products
and infrastructure. For example, certain transactions could be programmed to be
self-settling, or to embed features allowing payment on confirmation of transactions.
However, despite the potential benefits offered by programmability, policymakers need to
consider the potential consequences of programmability more broadly, particularly for the
fungibility of CBDCs with conventional fiat currency. These fungibility concerns could
potentially be offset through appropriate design of the wCBDC programmability features.
Programmability features also raise a number of operational and cyber risk concerns which
must be accounted for before it can be realized for any large-scale capital markets
applications. If multiple platforms or infrastructure providers support transactions using
programmable wCBDCs, there also would need to be a baseline of interoperability and
harmonized standards to create an effective system. See Section 2.7 “Programmability” on
pages 15-16.
_________________________________________________________________________
The Global Digital Asset & Cryptocurrency Association (GDCA)
Industry
Other: Self-Regulatory Association
Country
State
Illinois
Email
mike.frisch@global-dca.org
Building a functioning CBDC ecosystem will be one of the Federal Reserve’s most important
policy considerations. Given that the Federal Reserve’s discussion paper focuses on issuing
a retail CBDC, in that context, these policy considerations are: (1) identifying user needs and
consumer adoption such as why users may/may not adopt a CBDC, (2) outlining clear
functions and responsibility for both public and private stakeholders, (3) considering
comparative expertise and related capacity of the private sector, (4) building an incentive
system to leverage the private sector’s ability to innovate, (5) ensuring the horizontal
coexistence of a CBDC and private digital money, (6) standardizing interoperability in
cross-border and cross-currency transactions, (7) examining the effects of the increased
diversity of options in payments, (8) building capacity and capability for instant payment at
high transaction volumes, and (9) facilitating efficient fiscal transfers; all must be considered
and discussed.
No payment system is perfect, and all means of payment present tradeoffs. Therefore, it is
important to achieve vertical interoperability for various actors to collaborate, and at the same
time, secure horizontal interoperability in order to allow end-users to make a choice between
payment methods for each transaction. The Federal Reserve’s discussion paper focuses on
issuing a retail CBDC using an intermediate model, where the central bank distributes CBDC
indirectly to the general public through intermediaries such as commercial banks. However,
the Federal Reserve may also consider issuing a wholesale CBDC, which might instead be
provided to financial institutions and private digital currency issuers to achieve similar
benefits. Specifically, a wholesale CBDC could be issued by the Federal Reserve and used
as collateral by private digital currency providers. Such a scenario would effectively maintain
our dual monetary system whereby the public sector provides stability and efficiency while the
private sector focuses on innovation and diversity. Nonetheless, a well-designed CBDC
system will provide new opportunities and promote participation from the private sector. The
GDCA believes that this collaboration will drive innovation and increase the resilience of the
financial system as a whole.
inclusion?
A CBDC has great potential for promoting financial inclusion. However, the actual design will
determine the nature and scale of its impact on improving access to the
underserved. Lowering transaction fees can help improve access and provide more cost
accessible and efficient payment means to the underserved. A domestic CBDC could also
provide infrastructural support to a broader digital identity framework to eliminate key existing
barriers for those excluded. A CBDC has the potential to decrease fraud in government
distributions (i.e. tax returns and assistance) through access to a strong audit log and
traceability traits that would greatly promote financial inclusion. However, it will be incumbent
on the Federal Reserve to promote an architecture which enshrines these features, as
without them, the complexity of a CBDC system may have the opposite impact on
government oversight and accountability. If the intermediary-model (where intermediaries
provide access to the CBDC to the end users) were to be implemented, those intermediaries
should not be limited to traditional banks, which might prefer current users who are already
financially included and might not make much difference. If the intermediary function is open
to new participants, that could shed light on those who are underserved in the current system
and promote further financial inclusion. There should also be a system to ensure that the
introduction of a CBDCs does not cause further financial exclusion through the lack of
devices and a stable network. In addition, financial education accompanied by digital skill
building should be offered widely to the general public. Otherwise, a CBDC may widen the
digital divide and increase the possibility of causing an exclusion for the most vulnerable.
The transmission of U.S. monetary policy has traditionally been delivered through the banking
system. In certain environments, banks have chosen not to pass through changes in
monetary policy in full. For example, depending on the design, a CBDC could dramatically
improve the monetary transmission mechanism. In a direct retail CBDC system, the Federal
Reserve could implement monetary policy directly and instantly in consumers’ wallets with a
remunerated CBDC. The same could be achieved through smart contracts in an
intermediated system, achieving 100% pass-through via the deposit channel. In addition, a
CBDC could offer the opportunity to implement negative interest rates, which would mitigate
the challenges of the zero lower bound. However, the actual effect on the
maximum-employment and price-stability goals would need to be closely considered by the
Federal Reserve. In addition, CBDC could enable new policies through its programmable
nature. Specifically, the central banks could influence the velocity of money, incentivize
consumer consumption by encouraging spending/discouraging savings in a certain amount of
time. However, the occasions and extent to which the central bank would actually use this
policy tool must be considered carefully. Historically, the Federal Reserve’s ability to
implement monetary policy has been hampered by the fidelity of the resources at hand. For
example, inflation is often reported as a static number, while in reality it fluctuates widely
based on a number of factors, especially geography. A CBDC could provide a highly targeted
response instead of a nationwide response that may not be universally warranted.
stability?
The impact of a CBDC on financial stability will depend heavily on its design. In the extreme,
a direct retail CBDC system could disintermediate the banking system and make the Federal
Reserve responsible for all money creation and credit allocation, creating significant
challenges for the financial system. Such a design might also require the Federal Reserve to
host accounts for consumers directly, a requirement which is currently prohibited by current
law. On the other hand, a CBDC built on a distributed ledger could enhance operational
resilience and financial stability by eliminating single points of failure in the system.
Furthermore, the promotion of a less centralized financial system could also enhance the
resilience of the financial system by improving the diversity of service providers. Financial
stability risks and mitigation will require careful consideration in the design of any future
CBDC, and as such issues are complex, and it is not possible to draw conclusions at this
early stage. There is also a global aspect to financial stability that cannot be ignored. The
U.S. Dollar enjoys the luxury of being the world’s main reserve currency. As such, the U.S.
currently enjoys advantages on the world stage that could be challenged or eroded as other
nations issue their own CBDCs.
If the features of the CBDC system and infrastructure are vulnerable to risks, it could
adversely affect the resilience of the financial sector. Thus, it will be very important to ensure
a CBDC will fulfill the necessary capacity requirements, and to provide capabilities for a
CBDC and its surrounding infrastructure to be flexible and adaptable. By its nature, a
distributed model requires distributed solutions. In this case, we recommend a hard look at
governance models within the participants along with a focus on systemic risk. In the view of
the GDCA, scenario-based stress tests such as those imposed on banking institutions serve
as an excellent model.
Access to central bank money is necessary for the general public to participate in everyday
market transactions. If cash usage declines without the alternative of a CBDC or private
digital currencies, the acceptance of cash might decrease even further. This could lead to an
exclusion of certain populations, especially those who remain unbanked. However, even if
cash usage declines, we suspect that the role of cash will never fully disappear, nor do we
see its disappearance necessary for the adoption of the CBDC. The strengths of cash include
being accessible to anyone and anywhere regardless of age, environment, and situation, as
well as its enhanced privacy properties.
CBDC?
Because domestic transactions occur digitally through the banking system already, the
absence of a CBDC is not likely to dramatically change the existing process of domestic
digital payments. However, today, cross-border payments remain slow and expensive, and
they would likely continue to remain so. Were a CBDC introduced, companies could build
cross-border payment systems on the back of a CBDC, which could speed cross-border
payments and at a lower cost.
Much like regular cash, the holders of CBDC may not be restricted to the citizens of that
country alone. Therefore, the issuance of a well-designed CBDC by other large economies
might increase the international influence of other currencies, resulting in the relative decline
in the status of the U.S. dollar along with the benefits this status still provides to the U.S.
economy. In addition, many of the benefits for cross-border payments and reserve currency
status are enhanced by the ability to interact with other digital currencies around the world. In
the end, the U.S. needs to do what is best to retain its international role as the reserve
currency to the world.
The GDCA recognizes that privacy concerns should be of the utmost importance when
considering the implementation of a CBDC. There are new industry-led solutions in the digital
asset space that demonstrate the viability of balancing AML/KYC objectives and privacy
protection given the right design. These collaborative industry solutions allow for compliance
with the Financial Action Task Force’s Travel Rule while building in safeguards for the sharing
of KYC information. Additionally, there are two-tier CBDC models that rely on commercial
entities for distribution, onboarding end users, performing AML, KYC, and CFT. In this model
type, current privacy protections can remain in place while also meeting AML/CFT objectives.
However, the remaining challenge would be enforcing such existing practices globally with
CBDCs. It is important that the Federal Reserve preserve the anonymity of users similar to
current projections when usage of cash. This might include building a system such that the
central bank can only access information about transactions between intermediaries, but
does not have a record of the transaction between the end-users. However, for the purpose
of crime prevention and investigation, it is also necessary to maintain a procedure where, with
a warrant, investigators could obtain detailed transactional information.
The CBDC should be a legal tender. The implementation of a CBDC could open a new door
to the digitization of administrative processes such as tax payment. One of the benefits of
CBDCs include the facilitation of efficient fiscal transfers, and it would be appropriate for the
CBDC to be positioned as a legal tender from the standpoint of promoting financial inclusion.
An interest-bearing CBDC would enhance the Federal Reserve’s ability to operate monetary
policy directly and instantaneously to the holders of the CBDC. This would improve the
transmission of monetary policy. However, an interest-bearing CBDC could also cause a shift
away from commercial bank deposits into the CBDC, creating funding issues for commercial
banks. This might be particularly acute in a stressed environment, but it could raise funding
costs for banks in equilibrium too. In the case of the negative interest rates, the holders would
experience a severe inflation cost that would result in the avoidance of a CBDC, particularly if
there are easily accessible private digital alternatives.
If there are some quantity limits, that would mean that beyond that limit, the end users will
have their money in the form of cash or cash deposit. This will restrict the flexibility of
payment in the form of CBDC as well as cause confusion among intermediaries and
end-users constantly having to check what form of money they have, not just the amount. It is
also not appropriate considering that the CBDC is programmable when cash deposits are not.
If the CBDC was interest bearing, the end-user’s effect would differ depending on the amount
and the form of money owned. The quantity limits could also be a useful tool when balancing
the anonymity of money and compliance with the AML/KYC. There could be various levels of
AML/KYC where according to the potential risk and quantity could be used as one
standard. With that said, we recognize there may be a rollout phase where we need to
develop trust and foster adoption where one way option would be by requiring some limits as
guardrails.
Intermediaries should not be limited to traditional banks. Nonbanks and other new actors
could serve as an intermediary, subject to federal or equivalent oversight structures.
However, the institutions should have the capacity and capability to provide an infrastructure
to enable high-volume, high-speed transactions in a stable manner. In addition, the institution
should be resilient to financial and cyber risk, protect user privacy, and most importantly have
the ability to follow compliance measures such as conducting an AML/CFT.
Offline capabilities mean being able to use CBDC whenever or wherever necessary, even if
the network is unavailable. It would promote further financial inclusion regardless of the
network infrastructure the end-users have. CBDCs must be accessible regardless of the
region and digital capacity. A lack of high-speed internet should not determine accessibility.
Offline capability is also a good feature to counter operational disruptions and cybersecurity
risks. Being able to use CBDC even in the case of disaster is necessary for a resilient
financial environment.
sale? If so, how?
Interoperability is an essential part of the CBDC design to leverage the privately driven digital
standards that already exist and are constantly evolving. In addition, it is crucial that
transferability is not just for private digital money but also for other jurisdiction’s currency
when sustaining the dollar’s international role and presence. If other currencies succeed in
building a more user-friendly or interoperable platform compared to the U.S., it might cause a
shift from the U.S. dollar and cause decline in the U.S. dollar’s international status.
CBDC?
Technological innovation is most likely to come from the end-user, private digital money, or
intermediaries. Therefore, the CBDC should be designed to be resilient, flexible, and
adaptable to react to future innovations, but at the same time avoid rapid changes that would
adversely affect the market. As history shows, balancing innovation and stability to maintain
trust in the financial system is essential. The pace of innovation in this space will increase
rapidly and its breadth will widen as well. This innovation should not be discouraged through
regulation. Therefore, a tiered system of guardrails that promote trust and foster movement
towards a stable, easy ecosystem as appropriate. While the architecture of the ecosystem will
require thorough consideration, the guardrails should be considered based on multiple factors
such as usability, implementation, system risk, and liquidity.
benefits of a CBDC?
The design of the CBDC should consider interoperability in cross-country and cross-currency
(including private digital money) transactions in order to build an ecosystem which leverages
the private sector’s ability to innovate and allows the end users to have a choice of what form
to pay from a variety of options to best meet their needs.
_________________________________________________________________________
Brian Mannix
Industry
Individual
Country
State
Virginia
Email
Brian@Mannix.com
I expect that, in view of recent developments in the markets, the Fed is feeling more cautious
about a CBDC than it was a few months ago. Nonetheless, it is important to understand the
benefits and risks of digital assets and of the digitization of financial trading generally. My
comments below duplicate those I submitted to OSTP last week, and they focus on certain
technical aspects of the technology -- especially the problem of transient information
asymmetries and the inefficient "racing" that they encourage. I also offer one potential
remedy, the use of a random delay (a type of speed bump) to mitigate the incentive of traders
to race. Pursuant to President Biden’s Executive Order on Ensuring Responsible
Development of Digital Assets, the Office of Science and Technology Policy (OSTP) is
seeking information on the energy use and climate implications of digital assets and their
associated infrastructure. This is entirely appropriate, but it is also too narrow a perspective.
In addition to any climate externalities, the markets for digital assets are plagued by another
more fundamental market failure, known to economists as “information asymmetry.”
Transient information asymmetries are ubiquitous in digital markets, and cause a race to
trade that wastes enormous amounts of energy, as well as capital. Even if the electricity used
for mining digital assets was entirely free of environmental externalities, it would still be
mostly wasted. Other risks loom, including dangerous overcrowding of satellites in low earth
orbit. It is important for federal agencies to understand these risks, and their possible
remedies, before setting policy for digital assets.
The development of digital assets and distributed ledger technology has raised the prospect
of substantial benefits, but also some important technical challenges, including a fundamental
dilemma. The one thing that we expect a financial ledger to do is record an unambiguous
sequence of transactions, or events. But as Albert Einstein showed more than a century ago,
spatially separated events do not always have an unambiguous sequence. For this reason,
decentralized ledgers will always need some kind of consensus process to resolve irreducible
space-time ambiguities, and that process will necessarily impose speed limits on the pace of
transactions. The speed of light is plenty fast enough for humans conducting business around
the world; so this relativistic constraint would be just an interesting footnote to the story,
except for two things. First, it is possible to exploit the ambiguity of sequencing by, for
example, deliberately sending instructions to spend the same digital coin on opposite sides of
the planet at the same time. Any distributed ledger system will need to be able to detect such
hacks, which can take much more elaborate forms. The Wall Street Journal reports that a
major theft of a stablecoin in April was accomplished using a digital flash loan of a billion
dollars, that was repaid in less than a second. The more intractable problem is that, quite
apart from such obviously dishonest hacks, high-speed digital markets are extremely
susceptible to the problem of latency racing and its associated inefficiencies, due to the
ubiquity of transient information asymmetries. George Akerlof, the husband of Treasury
Secretary Janet Yellen, received the 2001 Nobel Memorial Prize in Economics for his work
describing the inefficiencies that arise in markets characterized by asymmetrical information.
There are other serious risks that merit OSTP attention. One danger on the near horizon is
that latency racing will cause catastrophic overcrowding in low earth orbit, as too many
redundant laser-linked satellites are launched, in orbits that may be too low, in order to serve
high-speed traders who are seeking the shortest possible great-circle pathway through the
vacuum of space. Racing can be extremely resistant to regulatory solutions. It is important to
address the underlying market failure, rather than just the symptoms. OSTP is in a good
position to undertake needed research, drawing on resources throughout the government.
inclusion?
stability?
Transient Information Asymmetries in a Relativistic World We have decades of experience

programming computers to cooperate with each other; today it is commonplace to have a
multi-processor in a cell phone or even a wrist watch. Unfortunately, we also have decades
of experience with hostile actions by computers or malware. Markets for digital assets
present an altogether different problem: computers that are competing with each other – not
entirely cooperative nor adversarial, but rivalrous, even while pursuing mutual gains from
trade. This is the domain of economics, or perhaps AI-conomics. We know the conditions
under which markets work well; we also know the conditions that lead to market failures.
Information asymmetries are a well-known market failure; and one, it turns out, to which
digital systems are particularly sensitive. Transient information asymmetries are ubiquitous
on electronic networks and drive the race-to-trade, an unproductive and wasteful competition
to exploit infinitesimal advantages in the speed of communication. In the past twenty years
automated financial trading systems have been plagued by this market failure. Real resources
may be expended in a zero-sum race for advantage that cannot improve efficiency. An
illustration can help. When the Bureau of Labor Statistics (BLS) releases the latest
unemployment figures, it takes pains to make them accessible to everyone at once, in accord
with U.S. Statistical Policy Directives. This is a laudable goal, but also one that is physically
impossible; information cannot propagate across space faster than the speed of light. In
practice, companies like Bloomberg and Thomson Reuters consistently access the BLS data
first, and transmit it at high speed to client computers in New Jersey co-located with the major
trading venues there. They can do this because they have made substantial investments in
high-speed computing and proprietary communication infrastructure. For a fraction of a
second, the public information from BLS can be exploited profitably by the small subset of
traders that are able to access the information, and the market, faster than anyone
else. Similarly, as vividly depicted in the movie “Trading Places,” the latest crop reports from
the U.S. Department of Agriculture (USDA) have substantial trading value before they are
universally known. But in the first few milliseconds after their release, they cannot be
universally known. Data released in Washington DC is quickly transmitted to commodity
markets in Chicago as well as New York, where algorithmic trading systems exploit the
temporary advantage it gives them to profit at the expense of less well-informed traders. In
such zero-sum games, the gains of the winners are not simply offset by the losses of the
losers; they are also offset by the real resources expended by all to engage in the latency
race. USDA has taken steps, with limited success, to disrupt the race to trade on its data;
indeed, all of the federal statistical agencies are struggling with the problem of how to release
data more fairly. High-speed traders sometimes use the Efficient Market Hypothesis (EMH) to
argue that they are making markets more efficient. But the EMH addresses only the static
efficiency of prices; it says nothing about the efficient speed of reaching those prices –
especially when speed is costly. In fact, there is no economic efficiency justification for the
substantial cost of getting access to public data a microsecond faster than a rival is able to
get it. The real resources expended in that effort are a manifestation of waste, caused by
transient information asymmetries that are difficult to avoid in a world where communication
approaches light speed. Releases of government data are only one example of public (or
soon-to-be public) information that has temporary trading value while it propagates unevenly
through space. Probably the most important such data are the so-called market data thrown
off by the trading venues themselves – information about rapidly changing prices and
quantities of recent transactions and pending bids and offers. The advantage of rapid access
to market data is what keeps algorithmic traders tightly clustered around trading venues. One
might have expected that, with the advent of public high-speed communication networks,
trading might have moved to “the cloud” – offsite data centers with fast access to those
networks. To some degree, that has happened. But a more prominent trend is the move
towards ever more tightly concentrated market clusters – equity markets in New Jersey,
commodities in Chicago, currencies in London – and to a web of proprietary communications
infrastructure that pushes ever closer to the speed of light.
Initially latency racing took place on electronic circuits; these were quickly superseded by
faster fiber optic networks. The speed of light is faster in air than it is in glass, however, so
microwave networks have been built to outrace the fiber; and, over shorter distances, hollow
fiber has begun to displace solid glass fiber. The latency race will soon be entering a new
phase. The latest development in high-speed long-distance communication is the launch of
constellations containing thousands of low earth orbit (LEO) satellites, connected to each
other by lasers in the vacuum of space, where light reaches its maximum speed. These
satellite systems will provide a wide range of communication services. But latency arbitrage in
financial markets is likely to be a major influence on the configuration of these systems, just
as it has been for communication systems on the ground. The National Oceanographic and
Atmospheric Administration (NOAA), is tasked with regulating the safe commercial use of
space, and is wrestling with the risks that may arise from overcrowding in low earth orbit.
Coincidentally, NOAA also regulates ocean fisheries, and therefore is very familiar with the
“race to fish” that occurs in poorly regulated fisheries; racing in both fisheries and financial
markets can result in “overcapitalization,” a wasteful investment in an unproductive
competition for speed. The Federal Trade Commission is concerned about congestion in the
radio frequencies used to communicate between earth and space. The Defense Department
is concerned about the risk of satellite collisions and debris cascades. And financial
regulatory agencies are concerned about the stability of financial markets and their
vulnerability to high-speed flash crashes. All these agencies need to understand the
underlying causes of these risks, which are not easily regulated away. Below I describe one
possible technical solution, the use of an encrypted latency channel that slightly slows the
pace of trading.
CBDC?
Design of an encrypted latency channel In recent years financial markets have seen
experimentation with various types of “speed bumps” to defend against high-frequency
traders. One type uses a random delay on orders arriving at an exchange, so that temporal
priority is assigned by lottery rather than by speed. For decentralized digital assets, it may
make more sense to move the random delay into the communications network used by
traders. An encrypted latency channel describes a novel method of communication on a
network, providing a channel with levelized and randomized latency, for the purpose of
discouraging racing in financial markets. Messages delivered through this channel will have a
latency that is, within a certain range, unpredictable, and that therefore conveys no
information about the origin of the message; in this sense, it may be called “encrypted”
latency. Within the geographic footprint of the encrypted-latency channel, all points on the
network are effectively equidistant from one another. When executable orders for financial
trading are transmitted through such an encrypted-latency channel, with the restriction that
such orders may be crossed only with other orders that are similarly transmitted, the result is
a level playing field that confers no latency advantage to traders at any particular geographic
location. This not only will allow more flexibility in locating trading operations; it will also allow
more flexibility in locating financial exchanges (i.e., matching engines). Exchanges need not
be clustered together, as they tend to be today, and algorithmic trading machines need not be
collocated with the exchanges. When conducted through encrypted latency channels,
financial trading can take place in a virtual “space-time cloud” that is, within limits, both
spatially and temporally agnostic. Importantly, an encrypted latency channel can – indeed, it
must – exist side-by-side with faster communication channels. This allows information to
travel through a network faster than does trading activity, so that transient information
asymmetries will dissipate before they can be exploited.
An encrypted-latency channel can be constructed on various types and sizes of

communication networks. For example, a channel with an average latency of less than a
millisecond, on a microwave network in northern New Jersey, could encompass all of the
existing stock exchanges in the United States. On a larger scale, a channel with an average
latency of a few of hundred milliseconds, on a constellation of laser-linked satellites in low
earth orbit, could encompass the entire planet, providing customers with the ability to trade,
with no latency handicap, from anywhere on earth. (This might be called The Random Access
Planet. COOP-YMMV: Customers On Other Planets, Your Mileage May Vary.) The use of
encrypted latency is not something that needs to be mandated. Trading platforms that take
advantage of encrypted latency communication should be able to coexist, and compete, with
platforms that do not. The primary advantage of an encrypted latency channel is that it inhibits
wasteful latency races based on transient information asymmetries. Traders using an
encrypted latency channel are effectively agreeing that temporal priority at the matching
engine will be established, not according to who has access to the fastest equipment, but by
lottery – i.e., by the random component of the encrypted latency. Within its geographic
footprint, an encrypted-latency channel on a communications network will convey messages
with an imposed latency that has approximately the same expected value, regardless of the
point of entry and point of delivery. But the latency will not be uniform; it will have a minimum
value and a maximum value, and a random distribution in between. Alternatively, the
encrypted latency can be thought of as being the sum of a fixed component (the minimum
latency) and a random component. Along with the properties of the underlying communication
technology, the fixed component effectively defines the geographic “footprint” of the channel;
it must be long enough to allow the network to deliver a message between any two points in
the footprint within that timeframe. The random component of the latency has a distinct
function: it makes the total latency unpredictable, in order to discourage wasteful investment
in latency racing. Conclusion Many investors will view the encrypted latency playing field as
more fair than the race-to-trade system that prevails today. But the efficiency arguments are
even more compelling than the fairness arguments. By reducing the private rewards of racing
behavior and the greater private losses by slower traders, encrypted latency can reduce the
net social costs – which likely exceed $100 billion per year across global markets – that arise
from transient information asymmetries. In addition to improved trading efficiency, encrypted
latency can help address some other related aspects of financial markets that have recently
raised concerns. By slightly slowing the pace of trading (and thereby decoupling it from the
pace at which public information propagates) encrypted latency can improve market stability
and help suppress flash crashes. It will likely reduce the growth of PFOF: payment (by
high-speed traders) for exploitable order flow. By suppressing an unproductive competition for
speed at the bleeding edge of what is technologically possible, it should help avoid
overcrowding of satellites in low earth orbit, and congestion in associated radio frequency
communications. By ensuring that communication can take place faster than trade execution,
encrypted latency channels can help cryptocurrencies avoid variations of the “racing hack” –
an attempt to spend the same coin on opposite sides of the planet at the same time.
Encrypted latency channels can also be helpful in finding ways to reduce the excessive
electricity use (and associated CO2 emissions) caused by redundant efforts to mine
cryptocurrencies. In virtual worlds, encrypted latency channels can provide a stable and
secure platform for financial transactions even as other types of virtual interactions take
advantage of full-speed communication channels. More generally, encrypted-latency
communications can enable the development of delocalized finance (“DelFi”) – a version of
decentralized finance (“DeFi”) that delocalizes transactions in time as well as space, in
recognition of the physically reality that the two are inextricably intertwined.
sale? If so, how?
CBDC?
benefits of a CBDC?
Notes: 1) Brian Mannix is the president of Tamer Trading Technologies LLC, which develops
innovative methods to improve the efficiency of financial trading. He is also a Research
Professor at The GWU Regulatory Studies Center. This comment conveys the views of the
author, not those of George Washington University. 2) See Mannix, “Space-Time Trading:
Special Relativity and Financial Market Microstructure,” 2016.
https://regulatorystudies.columbian.gwu.edu/space-time-trading-special-relativity-and-financia
l-market-microstructure
https://www.wsj.com/articles/this-billion-dollar-crypto-loan-is-easy-to-get-but-gone-in-a-flash-1
1651985089 3) For a general discussion of this phenomenon, see Mannix, “Races, Rushes,
and Runs: Taming the Turbulence in Financial Trading,” 2013.
https://regulatorystudies.columbian.gwu.edu/races-rushes-and-runs-taming-turbulence-financi
al-trading 4) U.S. Patent Nos. 10,127,612 and 11,263,694. 5) Patent pending.
_________________________________________________________________________
Texas Bankers Assocation
Industry
Trade Organization
Country
State
Texas
Email
john@texasbankers.com
inclusion?
On behalf of the almost 400 community bank members of the Texas Bankers Association, I
am writing to comment on the Federal Reserve discussion paper on money and payments
issued in January of this year. While a central bank digital currency (CBDC) may offer some
benefits, we believe that the proposal, which is defined as a “digital liability of a central bank
that is widely available to the general public,” could significantly harm traditional banks, rural
communities, small businesses borrowers, and consumers. The Federal Reserve envisions a
CBDC as a close substitute for commercial bank deposits and other low risk assets. As
proposed, the CBDC will be a government-backed competitor to bank retail deposits, which
count for 71% of bank funding today. The loss of this funding source will severely limit credit
availability to businesses and consumers. According to the American Bankers Association,
even if individual CBDC accounts were capped at $5,000, traditional banks would lose $720
billion in deposits. In normal economic times, many consumers and small businesses will
prefer an account at the Federal Reserve over a traditional FDIC-insured account at a bank.
Community banks, which currently make over 50% of all small business loans, will have to
curtail lending. In economic downturns or times of stress, it is reasonable to assume that
trillions of dollars will flow into Fed CBDC accounts. Bank funding for loans to crawl out of an
economic slump will not be there. Successful stimulus programs, such as the PPP, will be
precluded due to a lack of deposits. Community banks were hit hard with a dramatic increase
in compliance costs that emanated from the Dodd-Frank Act. There are 30% fewer bank
charters today than there were in 2010. The driving force for consolidation was the increase
in compliance costs. If policy makers in Washington decide to give the Federal Reserve a
monopoly on deposits, it will be another crushing blow for remaining community banks. Rural
economies will be adversely affected even more. The CFPB recently started a new initiative
that focuses on rural areas. The agency focus is on “rural banking deserts.” Such deserts will
only expand if rural banks cannot access the local deposits that they need for consumer,
agricultural, and small business loans. Rural consumers will have fewer financial choices,
leading many with the only option of accessing subprime and predatory lenders. Financial
inclusion will not be enhanced with a CBDC. The unbanked will be less likely to have
deposits in banks and lose the ability to work with bankers to create savings, get a mortgage,
and secure a financial future. Texas banks actively promote and educate consumers in the
areas of financial literacy, business literacy, and the Bank On program. A
government-backed depository will not have the intended result of helping the unbanked. We
do not think that a CBDC will support the dollar or help maintain the dollar as the world’s
reserve currency. Other central banks may create digital currencies, so far mostly wholesale,
but the reasons the dollar is the favored currency has much more to do with the strength of
our economy, our financial markets, and the rule of law. The real threat to the dollar is in the
area of fiscal responsibility. The creation of a CBDC is a solution in search of a problem. As
proposed, we are concerned that the creation of a CBDC will cause more harm than any
potential benefit. We appreciate the Federal Reserve’s open mindedness in seeking out
opinions on this very important subject and we agree that the elected branches of
government are the best bodies to formulate policy in this area.
stability?
CBDC?
sale? If so, how?
CBDC?
benefits of a CBDC?
_________________________________________________________________________
Samuel Gostomski, Texas Blockchain Council
Industry
Other: Political
Country
State
Texas
Email
The Federal Reserve’s initiative to open a dialog regarding CBDC, and to reach out to the
public for feedback, are encouraging steps forward. However, this dialog should expand its
scope beyond CBDC, and include blockchain-powered currencies and assets, as a
diversified, robust strategy to maintain and expand the global influence of the United States,
and ensure our National Security and dominant global financial status. Specifically, the dialog
should: I. Consider the potential of a public / private partnership with existing stable coins; II.
Address in detail the CBDCs issued or developed by other governments, as a matter of
National Security; III. Ensure that privacy considerations as well as impact of government
monopoly imposed on the financial system are thoroughly addressed; IV. Leverage the
extraordinary level of innovation and experience of the private sector, independent
developers, Bitcoin miners, etc.; V. Include discussions around cryptocurrency regulations;
regulations unfavorable to crypto will severely limit the ability of our nation to rely on a
diversified portfolio of digital currency solutions.
According to the Federal Reserve’s own language: “Today, the dollar is widely used across
the globe because of the depth and liquidity of U.S. financial markets, the size and openness
of the U.S. economy, and international trust in U.S. institutions and rule of law.” So, the future
solution beyond the dollar should be the one that further enhances our financial system and
the openness of our economy. Such a solution can only arise from a diversified approach,
reflecting the very openness and inclusiveness of our system, and not from embracing
government monopoly. Furthermore, the decentralized nature of blockchain-based solutions
such as Bitcoin will increase the competitiveness and stability of the US financial system by:
1. Providing assurances that the government will not interfere in private transactions; 2.
Ensuring basic privacy rights; 3. Being invulnerable to attack from a single node. Historically, it
seems like the choice has largely been between security/privacy or convenience/fungibility.
CBDCs preserve convenience/fungibility while almost entirely removing security/privacy
benefits. Bitcoin manages to provide both and is more viable in the long-term than a CBDC.
inclusion?
stability?
CBDC?
sale? If so, how?
CBDC?
benefits of a CBDC?
_________________________________________________________________________
Object Management Group - Steve MacLaird
Industry
Other: Standards Development Organization (SDO)
Country
State
Massachusetts
Email
maclaird@omg.org
Our answer to Q1 is online here:

https://www.omgwiki.org/CBDC/doku.php?id=cbdc:public:cbdc_omg:04_doc:20_comments:br
p:q01:start and answers to sub-questions: sub-Q1: Benefits -
p:q01:benefits sub-Q2: Policies -
p:q01:policy sub-Q3: Risks -
p:q01:risks Our full response to the discussion paper in .pdf format can be found here:
https://www.omgwiki.org/CBDC/lib/exe/fetch.php?media=cbdc:public:cbdc_omg:omg_cbdc_r
esponse.pdf

p:q02:start Our full response to the discussion paper in .pdf format can be found here:
esponse.pdf
inclusion?

esponse.pdf

esponse.pdf
stability?

esponse.pdf

esponse.pdf

esponse.pdf

esponse.pdf
CBDC?

esponse.pdf

esponse.pdf

p:q11:start and answers to sub-questions: sub-Q1: Risk of Software Crisis -
p:q11:01_risk sub-Q2: Risk of Lack of Stakeholder Buy-In -
p:q11:02_risks sub-Q3: Risk Due to Poor Community of Interest (CoI) Governance -
p:q11:03_risks sub-Q4: Risk Due to lack of Broad, Wide Ranging Security Planning -
p:q11:04_risks sub-Q5: Risk of Data being hacked due to weak Security Infrastructure -
p:q11:05_risks sub-Q6: Risk of Meta-Data being hacked due to weak Security Infrastructure -
p:q11:06_risks sub-Q7: Risk of Business Processes Being Hacked -
p:q11:07_risks sub-Q8: Risk of competing Currency Models for the CBDC -
p:q11:08_risks Our full response to the discussion paper in .pdf format can be found here:
esponse.pdf

esponse.pdf

p:q13:start and answers to sub-questions: sub-Q1: How could a CBDC be designed to foster
operational and cyber resiliency? -
p:q13:sb_01:start sub-Q1 Part A:
p:q13:sb_01:prt_a:start sub-Q1 Part B:
p:q13:sb_01:prt_b:start sub-Q2: What operational or cyber risks might be unavoidable? -
p:q13:sb_02:start Our full response to the discussion paper in .pdf format can be found here:
esponse.pdf

esponse.pdf

https://www.omgwiki.org/CBDC/doku.php?id=cbdc:public:cbdc_omg:04_doc:20_comments:d
sn:q15:start Our full response to the discussion paper in .pdf format can be found here:
esponse.pdf

esponse.pdf

esponse.pdf

esponse.pdf
sale? If so, how?

esponse.pdf

esponse.pdf
CBDC?

esponse.pdf
benefits of a CBDC?

esponse.pdf
_________________________________________________________________________
WTIA Cascadia Blockchain Council
Industry
Trade Organization
Country
State
Washington
Email
arry@washingtontechnology.org
Several additional considerations need to be addressed that have not been in this paper:- How does
credit work in the U.S. CBDC? - Is the goal to open up transparency to the people?- What’s the
ledger?- Who has control and governance over it?- Will it be or not be permissionless?- What sits
behind the digital dollar/CBDC?- Will it be interchangeable with other dollars? - Will the CBDC
be separate and distinct from what we know today in 2022 as the U.S. - Dollar? - Will individual
people be able to hold the CBDC?- How will it empower the market to flourish?We would also
like to highlight several inconsistencies between industry standards and the assumptions and definitions
within this paper. These include:- In the paper, in the section “Identity-verified: Financial
institutions in the United States are subject to robust rules that are designed to combat money
laundering and the financing of terrorism. A CBDC would need to be designed to comply with these
rules. In practice, this would mean that a CBDC intermediary would need to verify the identity of a
person accessing CBDC, just as banks and other financial institutions currently verify the identities of
their customers.” → This is not necessarily accurate, since even in the current system, individuals can
use physical cash without verifying their identity.- In the sentence, “Cryptocurrencies have not
been widely adopted as a means of payment in the United States. They remain subject to extreme price
volatility, are difficult to use without service providers, and have severe limitations on transaction
throughput.” → The last clause is no longer true, as many blockchains have advanced their protocols
and are now significantly advanced in terms of transaction throughput.- In the sentence, “A CBDC
would be the safest digital asset available to the general public, with no associated credit or liquidity
risk.” → The statement reflects more of an opinion. CBDCs are essentially code or software, so
credit or liquidity risk depends on the monetary policies that are written into the digital program. This
also depends on how safety is defined.
The answer to this question is dependent on the goals the federal government has for a
CBDC. For example, is the goal of the CBDC to open up transparency to the people? What is
the tone being sought through a Fed CBDC? The nature of the goals dictate the nature of the
potential benefits.
inclusion?
A CBDC can affect financial inclusion. It could potentially help create a common, open
platform for people to interact with the financial systems. However, these potential benefits
depends on some specifics: - Will physical cash exist in the future with a CBDC? - Who is
allowed to have a CBDC account? - Who is not allowed to have a CBDC account? - As
mentioned above, is the CBDC interchangeable with other dollars and/or other foreign
currencies? - Who can hold the currency or the CBDC? - What is the basis for derivative U.S.
Dollar instruments? - Are CBDCs held as currency in a bank? Generally banks get their capital
from bank deposits from people. - How does credit work with CBDCs?
To meet the stated goals for the Federal Reserve, a U.S. CBDC would need to be
implemented in a way that limits the ability to inflate. We suggest using an algorithmic
constrained inflation model. If everyone can see the supply of U.S. dollars, and a predictable
fixed level of “printing” of U.S. dollars, then inflation of the monetary supply would be
predictable and transparent. If the U.S. CBDC is a “base layer” protocol that powers
regional/alternative currencies that are also pegged to an asset, then the U.S. CBDC would
be backed with the assets of the United States. This would create an auditable track for
creating an algorithmic approach for divisibility and transferability. It would enable
collateralized debt which would be ideal for a CBDC.
stability?
See answer to question #4 for more details. Algorithms, transparency, and publicly known
factors on how the CBDC operates will enable stability through software code. We view
stability as predictability. Unknowns in monetary and fiscal policies create instability. We
would encourage the Fed to embrace monetary and fiscal policies that are transparent and
take an asset-based/collateralized approach. A CBDC would enable hyper dollarization -
within the global economy, the result would be mixed, while within the US economy, there
would be increasing stability as the dollar is enshrined as the world’s reserve currency. In the
short term however, there would be great disruption, as the standard financial intermediation
mechanisms could be easily replaced.
The current derivative market would be affected dramatically. CBDCs would potentially limit
the banks’ ability to issue the current derivatives. Questions: - How does credit work in an
environment when people are incentivized to hold their CBDC with a bank? - Can people
open CBDC accounts directly with the Fed? A CBDC “upsets the table” far more than
stablecoins or non-bank money, purely on scale alone. For example, the challenge of
Diem/Libra pales to the reach that a CBDC would have. Stablecoins have limits on their reach
and applicability that would not apply to a CBDC - they are privately issued money.
Depending on design, they rely on some combination of the full faith and credit of the
institution and network effects. The government would not have such limits. bonds.
To mitigate any adverse impact of CBDC on the financial sector: - A measured rollout would
be very important, focused on the high-priority use cases like taxes. The U.S. CBDC should
act as a base layer for US dollar assets issued by other companies. - The Federal Reserve
should not have to do this as technology and CBDCs are not its strength or expertise. Let
other financial companies use the U.S. CBDC as collateral for US assets. Competition is
helpful to the financial sector, and even more helpful with practical regulation (like enabling
telecommunications to be implemented in rural areas in the country). In order for the U.S.
dollar to compete effectively in the future world of finance, it should take advantage of similar
tools as the best stablecoins in the market. A slower rollout or design of a U.S. CBDC that
maintains the traditional pyramidal structure of the deployment of money would both protect
the financial sector and diminish the benefits of the U.S. CBDC - there needs to be a clear
plan for rolling out that cannot be influenced by external factors.
Yes, it is important to preserve the use of a public option because it is the ultimate lever of
financial access and inclusion. Without such access, individuals would no longer possess the
same opportunities they currently do with cash. The Fed should serve the public first and the
banks second. People should be able to hold the CBDC. Continue to empower the use of
Mastercard, Visa, etc., who already settle in digital currency. Empower the private sector and
Fintech companies to solve market needs by making things more easy and accessible. If
Fintechs could access the CBDC rails, then it greatly increases accessibility not just in the
U.S. but globally. It would preserve general public access and world access to interesting
financial products, which would be hugely beneficial.
CBDC?
In absence of a formal U.S. CBDC, we already have alternatives with known and unknown
risks. For example, Tether, also known as USDT. This trend is likely to continue. Domestic
payments in the US will continue to bandage over the bank centric model, instead of creating a
truly level playing field for all participants. Banks must be exposed to competition in a fair
way. For cross-border payments, the current system of nostro/vostro accounts would likely
continue in the near term, with the addition of some crypto layer for facilitation and tracking. A
stablecoin payment is not settlement, nor are any of the stablecoin providers likely to be large
enough to facilitate exchanges broadly. That said, the wide availability of CBDCs would
create a far more liquid and available market for currencies, especially with direct swaps or
accessibility to accounts in foreign countries.
The U.S. dollar is the most exported product globally from the United States. Every nation
around the world, and every person in the world, would gladly trade in their particular nation’s
currency for the U.S. dollar if they could, and easily. Being digital makes it easier for that to
happen. If we don’t innovate the U.S. dollar and keep it globally accessible, it could threaten
our largest global product. Other nations will attempt to go around the U.S. dollar. The U.S.
should take note that other nations’ efforts to establish their own CBDCs, often with the goal
of implementing policies and surveillance on their populations, will ultimately lead to lack of
global adoption. The U.S. should not “overplay its hand” as the currently global reserve
currency, which requires keeping implementation simple.
Other ways to manage potential risks associated with a CBDC that were not raised: - What is
the appropriate entity to manage the U.S. CBDC? - Is the Federal Reserve the appropriate
entity to issue CBDC? - Does the issuing agency operate with sufficient political
independence? - Does this hurt competition in banking? What is the role of the bank in the
CBDC system? - Will the CBDC be a totally new currency that is separate from the U.S.
dollar?
A CBDC could provide privacy to consumers without providing complete anonymity and
facilitating illicit financial activity. We already have a working technology that provides
zero-knowledge cryptography. Additionally, privacy can happen at another level outside of the
base layer that we suggest makes most sense for a U.S. CBDC to inhabit - in other derivative
products - or on higher levels, for example. We suggest the Fed assess the pseudonymity
provided on the Bitcoin blockchain. It provides a balance between privacy and transaction
tracing. There is still the opportunity for a “dark” or unknown account to interact with an
account where someone has provided their information, but once a dark account transacts
with a known account, law enforcement can get data from the known account owner. The
system inherently keeps criminals away from law-abiding citizens while providing privacy
when needed.
A CBDC could be designed to foster operational and cyber resiliency. They may want to
consider: - Key holding and recovery should be dependent on the customer support
organization, not the federal government or built into the protocol directly. - How do you build
multisig into the system - It should be built upon modern cryptography and digital key
schemas. There should also be regulated competition. Allowing for competition forces the
CBDC to be at least as secure as privately established blockchains.
Yes - a CBDC should be legal tender, in all ways indistinguishable from cash or bank money.
This is very important not only for taxation and government operations, but also for investing.
A CBDC should not pay interest. Paying interest while a CBDC circulates does not make
sense, as it would remove an incentive to use it as a payment method. Interest payments
should be left to financial organizations, for example, that match lenders and borrowers and
provide a risk adjusted return. It does not make sense for the Fed to take over this
function. However, a CBDC that is time locked or loaned should pay interest - the providers of
services with CBDC should be allowed to perform maturity transformation as is common
within the current economy to enable credit.
The amount of CBDC held by a single end user should not be subject to quantity limits. Within
a properly designed CBDC, there would be sufficient traceability that a quantity limit would not
be warranted. Imposing a quantity limit would limit economic freedom and be counterintuitive
to the goal of a CBDC.
Intermediaries for the U.S. CBDC should: - Be a retail bank or regulated bank entity - this
could include payment providers or gateways and other kinds of service providers. - Maintain
an auditable record and provide sufficient data security. - Have the ability to make credit. -
Have a supported customer service unit. The requirements for becoming an intermediary
should be as low as possible to help increase the adoption of the U.S. CBDC.
Yes, the U.S. CBDC should have offline capabilities, particularly if it is replacing the physical
cash we have today. A possible mechanism for achieving this could be a near-field
communication key system (such as the NFC process used for Apple Pay or credit card tap
functions) that enables transactions when one party is offline.
sale? If so, how?
Yes, the U.S. CBDC should be designed to maximize ease of use and acceptance at the
point of sale. Ease of use is an important factor in ensuring acceptance and broader adoption
of the U.S. CBDC. To achieve this, there are a few things to consider: - Lower the barrier of
entry, anyone can adopt CBDC payment or become CBDC intermediaries (ideally
permission-lessly at certain degree) - Mobile payment (pay and accept payment) by default -
Make it extremely easy to integrate with existing platforms and systems
A U.S CBDC should be designed to achieve transferability across multiple payment platforms,
which is why we suggest that the U.S. CBDC would make most sense as a base layer
protocol. The U.S CBDC itself should be self-contained, and the transferability across multiple
payment platforms is achieved by “Gateway” or “Bridge” components (reference to the
cross-chain bridges architecture). The bridge/gateway “translates” protocols and technical
standards between different platforms, thus there will be little or no new technical standard
needed. Transferability is incredibly important for any CBDC - bridges or gateways create
credit or exchange relationships that impact the fungibility of a CBDC. One way would be to
run a series of gateways that are owned by the government or nominated financial institutions
at zero cost and zero profit, using tokens designed by the government on each platform.
There would be a standard known process for implementation. Additionally, any mechanism
should regulate what can be claimed as a stablecoin on a higher layer of the CBDC. This
could be done with a single account issuing all digital currency on top of the base U.S. CBDC
layer.
CBDC?
Future technological innovations can affect the design and policy choices related to the U.S.
CBDC. - Making the information auditable/transparent. - Have a known inflation rate. - Have a
predictable inflation rate (known algorithm). To ensure a smoother transition to a U.S. CBDC,
any changes to the established system should take into account identity and data property
rights, real-time currency conversion and markets, and enable a native token within all kinds
of networks and regions.
benefits of a CBDC?
Several more design principles should be considered. First, a system like this should be
simple - do a single thing, and do it well. In this case, the focus of the U.S. CBDC should be
on all transmission/transactions of federally-backed U.S. dollars, including internationally (i.e.
reduce cost by replacing ACH, Swift, etc). Then the system, in order to enable more features,
should be modular and extensible, using common APIs, for an ecosystem to develop. The
system should also be updateable. Additionally, a U.S. CBDC should embrace citizen-centric
schema(s) that supports a broad system, utilizing public keys, that allows for establishing an
identity, similar to the current system with bank accounts. - One example is to use the social
security number as a public key and then have a separate issuer of a different private key.
Such a system would require a kind of local registration option, but would reduce the potential
for identity theft. - Such a system would also allow for application of CBDCs outside of the
U.S. enabling a market ecosystem to grow on top of the U.S. CBDC. - Focus on building a
standard protocol and framework, so different implementations are possible and scalable.
_________________________________________________________________________
Google
Industry
Technology Company
Country
State
California
Email
jantonaros@google.com
Google LLC (“Google”) respectfully submits these comments to the Board of Governors of the
Federal Reserve System (“Federal Reserve”) regarding its report on “Money and Payments:
The U.S. Dollar in the Age of Digital Transformation.” Google supports the exploration of
Central Bank Digital Currencies (CBDCs) as foundational for the future of money. We believe
that CBDCs could help promote open, interoperable, low cost, inclusive, accessible and
increasingly automated financial services systems. The potential for programmability and for
micropayments may also create the foundations for new business models. Critically, any
CBDC must navigate the technology and policy issues surrounding privacy protection, proper
regulatory and law enforcement, interoperability, cybersecurity and resilience. We see our
role as providing technical and research perspective supporting central banks and the
broader ecosystem should governments decide to move forward with launching a CBDC. We
want to contribute to the open source community seeking to build the next generation of
Internet design and applications. In particular, we are focusing our efforts on two areas of
expertise - large-scale infrastructure and consumer user experiences, including safety,
security, accessibility and privacy. In addition to participating in discussions with central
banks around the world, we are also engaging the academic research community through
partnership with MIT’s Digital Currency Initiative, which seeks to explore the different aspects
of CBDC by working with both technologists and user researchers. Google supports the
creation of inclusive and open digital payments systems that are available to all market
participants and end-users in the economy. Our comments in this submission are based on
Google’s experience in developing new technologies and facilitating payments technology
across Cloud, Android Platform, and Google Pay. These comments discuss our ongoing
research around digital currency designs and how they might affect the use, adoption, and
user experience for a range of different technology products, plus key questions about the
design of policy tradeoffs that might arise. Please find below comments in response to
several of the specific questions that the Federal Reserve posed in the CBDC Report. We
have not addressed all questions as we believe that there are other market participants who
may be better placed to answer the more policy-related questions, and have focused on the
questions which have technical implications. We also appreciate that many of these are
complex and multi-dimensional and would be happy to meet to discuss any areas of interest
in more detail.
inclusion?
stability?
CBDC?
The two additional risk management areas that we believe merit additional exploration are
adoption risk and operational cost risk. There are two issues which are potentially major
contributors to digital currency adoption risk which itself is worth considering. The
contributors are around retail availability characteristics and retail privacy expectations.
Historically, consumer products which act unreliably create stress for the user and lead to
disuse. Digital currency which is dependent on constant Internet connectivity and an
intermediary service provider will introduce unreliability into the user experience. For
instance, uncertainty around the success of a retail user’s transaction with a vendor in a
subway station or at a rural farmer’s market may lead them to prefer other forms of payment.
The other major contributor to adoption risk is anticipated to be uncertainty around privacy
characteristics. It will be necessary to provide clarity around what information will be shared
with merchants, third parties and governments for each transaction rather than have the
details emerge over time. To that end, it will be valuable to explore the contributors to
adoption risk from a user impact perspective, whether it is clearer privacy controls and
communication or addressing availability challenges of intermediated transactions. Beyond
adoption risks, operational costs and scalability will be impacted by the interaction model of
the digital currency. If transactions always prefer using an online intermediary, then
disconnected operation (direct transfer between participants) may be exercised less
frequently and may not perform as desired when the functionality is needed. If it is online
intermediated-only, then availability and processing latency will be critical to merchant
throughput. Low latency, high transaction-per-second systems with high availability
requirements will carry with them higher operational costs. It is worth exploring
disconnected-first, or direct exchange, models to determine if the transaction risk inherent in
an offline, or direct, transaction can be ameliorated in a more cost effective way than the
operational costs from an online system.
The implementation of a CBDC system can ensure that illicit financial activity can be limited
while still providing appropriate privacy guarantees to consumers, which support necessary
trust in the monetary system. Below we highlight some examples of concrete tradeoffs or
solutions that could be explored. At the simplest, a CBDC system may provide privacy while
effectively limiting the potential for illicit financial activity by segmenting transactions by
amount. When transactions exceed a regulatory threshold, they must provide some form of
additional disclosure. For transactions below that threshold, privacy guarantees may be
made. This approach would increase government oversight beyond what is in place for
physical cash today, while only reducing privacy for money movement that is already subject
to reporting requirements. It may also be possible to enact further constraints on
transactions, but the tradeoffs in availability and privacy would need to be considered. Another
path worth investigating, which, however, may compromise availability, would be to require
per-transaction authorizations with embedded transaction limits and expirations. A rolling
transaction limit can then be enacted over a specific time period, especially if the
authorizations take the form of a single use cryptographic token which carries traceability
information discoverable upon abuse. However, if a user runs out of authorizations they may
not be able to transact until their next authorization is valid. Additionally, this approach does
not address the impact of multiple wallets per-end user. To further restrict usage would likely
require a privacy tradeoff which connects end users to their wallets. This model would need
further exploration to assess the importance of these different dimensions. Another possible
direction would be limited traceability through transaction metadata, such as time and
location. This may enable pre-existing approaches to be reusable for responding to illicit
activity through existing practices, subject to legal process. Beyond these approaches, there
are other models where recent advances in cryptography would enable legal compliance,
security, and different privacy guarantees than have been explored so far. An approach
based on these advances could rely on specific properties of currency storage and transfer
conjoined with a final proof of compliance, which provides strong privacy guarantees. In that
class of approach, offline re-spendability of currency could be enabled simply by requiring a
specific zero knowledge cryptographic proof. It is expected that these mechanisms could
restrict illicit behaviors. There are even approaches where party and counterparty information
is encoded in a transaction but not shared globally. In this approach either participant may
reveal the counterparty in a transaction, or if flagged at some point in the future, required to
do so in order to reuse the funds. Each approach will require a deeper, cross-disciplinary
investigation to better understand the benefits and risks of each and guide the exact design.
A CBDC design should ensure that the resulting system is able to maintain desired
transaction throughput even under high load as well as provide continuity of service and
consistent outcomes in the event of network partitioning. It should also be able to separate
the minting of currency from the currency in circulation such that compromises across the
system, internally or externally, do not result in the injection of new currency. Similarly, any
offline-enabling solutions should avoid enabling wallet devices to create new value and
instead be required to re-spend and leave an evidentiary trail that enables conflict detection
and resolution upon settlement. Operational risks will be a function of the design choices that
are made – where some design choices create intrinsic risk that cannot be compensated for
in the future while others may be adapted iteratively. For example, an online-only CBDC may
avoid any double-spending, but limit system availability. On the other hand, if the system is
designed for high-availability, it may introduce risks for counterfeiting/over-spending.
Similarly, a CBDC designed with strong traceability characteristics will likely come with strong
privacy risks. However, awareness of the spectrum of risks enables the CBDC system to be
designed to balance abuse and availability – potentially even actively using controls deployed
throughout the system.
Without the ability to perform disconnected operations, CBDC use may be impossible or
unreliable in regions with limited or disrupted connectivity, those with high network
congestion, or during natural disasters and emergencies. Additionally, the operational costs of
a real-time payment/settlement system scale on transaction volume not deposits and
withdrawals as with physical cash. As such, it is expected that disconnected operation will be
important for operational availability and scaling, as well as financial inclusion. Enabling
“offline”, or disconnected operation, implies increased risk of abuse in the resulting partitioned
networks – namely via “double spending” of currency or balances. Addressing this risk may
be achieved proactively through technology solutions and reactively through risk
management mechanisms: Proactive solutions may rely on secure hardware features to
protect cryptographic keys and storage while also enforcing specific transaction protocol
behaviors. Using a combination of server-granted privileges, through cryptographic signing,
and secure hardware, it is possible to enable transaction-time policies and secure transfer of
funds between devices. (In most cases, a token-style model provides a clearer path for
enabling offline transactions and preserving transactional privacy, but it is possible to tokenize
account models as needed.) Reactively, the outputs of transactions when settled online
should provide the serving system the ability to detect double spending and enable
accountability for any security failures which allowed it. It is worth noting that existing secure
hardware technology can provide a suitable foundation to enable offline operation. However,
many existing secure hardware solutions are proprietary and closed systems. Even with
laboratory validation, such as Common Criteria, it may be desirable to have any secure
hardware solutions acting as the platform for fiat currency be transparent and broadly
verifiable. Transparency will necessitate open source software and hardware. Verifiability will
range from formal correctness proofs over the software and hardware to verifiable supply
chains. Achieving high levels of both will require additional investment in the space.
Additionally, the development of new technology will be necessary over time. For example,
the creation of verifiable hardware circuits would enable new approaches for addressing
double spending, further improving the resilience of a disconnected system.
sale? If so, how?
A CBDC should be defined to ensure ease of adoption across payment platforms to maximize
the benefits possible from their interoperability and connectedness over the Internet. It may
be worth viewing the CBDC design itself as new technology, even if its underpinnings are not.
As such, new standards will be needed as there isn’t an existing broadly applicable standard.
By defining a broadly accepted set of standards, it should better ensure the security and
operational expectations of the underpinnings of the CBDC system into the future.
CBDC?
benefits of a CBDC?
_________________________________________________________________________
Tassat Group Inc.
Industry
Country
State
New York
Email
jsabol@tuskstrategies.com
While the Federal Reserve identifies many of the potential benefits and risks associated with
developing a CBDC in its report: Money and Payments: The U.S. Dollar in the Age of Digital
Transformation (the “CBDC Report”), it understates two critical policy considerations: the
impact that a CBDC could have on bank functions, and the existence of currently available
private sector solutions that offer the same benefits as a CBDC, without the attendant
risks. As the CBDC Report recognizes, there is a clear need to modernize our nation’s
payment system. Today, American businesses have limited options for transmitting funds to
one another, even when they have accounts at the same bank, and many of the options
currently available are slow, inefficient, operate on restricted schedules, and can be
expensive. While it is encouraging that the Federal Reserve has committed to 24x7x365 real
time payments, the FedNow payment system is still over a year away and there are several
significant risks associated with the development of a CBDC. Most significantly, the
development of a CBDC could pose systematic risks to our national banking system, which is
already facing serious threats from emerging fintechs and other nonbanks that issue
stablecoins and other innovative, but un- or underregulated financial products. Since 2008,
there has been a 40% decline in the number of mid-sized and community banks and most
mid-sized and community banks do not have the resources to keep up with the tech
advancements of fintech challengers and megabanks. The development of a CBDC is likely
to exacerbate the risks currently facing these banks. Even if a CBDC is intermediated by
financial institutions, it will still necessarily displace commercial bank money and could drain
deposits (including introducing potential run risk) by offering a competing product that will be
transmissible on a peer-to-peer basis. Furthermore, it may severely diminish the critically
important role that U.S. commercial banks, especially community banks, play in allocating
capital to the small and medium sized businesses. These banks are engines for economic
growth and job creation in this country. Implementing a CBDC may be unnecessary given the
ability of private sector innovation to provide the same benefits. Private sector innovators like
Tassat are already providing banks and their customers the ability to facilitate secure,
instantaneous, and programmable blockchain-based payments around the clock, which make
U.S. banks more effective in serving their customers and bring tremendous benefits and
efficiencies to U.S. companies of all sizes. The strength of the U.S. economy is based on a
dynamic and innovative private sector, made possible by a diverse and strong banking
system. At the core of our banking system are small and mid-sized banks that often have
deep relationships with their customers, serve a diverse array of customers and businesses,
and are deeply invested in their communities. The federal government should adopt policies
that allow these banks to thrive. As currently conceived, the introduction of a CBDC runs the
risk of undercutting the important role that banks play in our economy rather than supporting
banks to better serve their customers and in turn, our economy. A far better path would be to
allow technological innovation by the U.S. private sector to empower American banks,
thereby extending and deepening one of the great strengths of the U.S. economy: its banking
system.
Yes. The potential benefits of a CBDC are currently available to banks and their commercial
customers using existing private sector payment innovations. Leveraging and promoting
existing private-sector payment innovations is preferable to launching a CBDC for several
reasons. Creating a CBDC will require a significant undertaking from the Federal Reserve,
and it is unclear when a potential CBDC would become operational. The Federal Reserve
began its examination of a real time payments system in 2013, committed to building the
FedNow payment system in 2019, and its anticipated launch is in 2023, a decade later. Not
only would it take years to study a CBDC prototype, obtain Congressional approval, and then
build the platform and scale it, it will take a significant amount of resources to overhaul the
current payment infrastructure to accommodate a potential CBDC. This would include banks
expending significant resources to adapt their systems to facilitate the use of a CBDC, which
could lead to less near-term adoption of private sector solutions. By the time a CBDC solution
is implemented, technological innovation is likely to have made it outmoded. In the
meantime, there are private sector solutions available today, and being implemented today,
which can achieve and even surpass the benefits envisioned with CBDC without any of the
drawbacks and risks involved with CBDC. Private sector innovations are nimble and can adapt
more quickly than the Federal Reserve. These innovations incorporate leading-edge
technology into service offerings, allowing businesses and others to benefit from the latest
technology today, as opposed to waiting years for the Federal Reserve to implement
technology. In fact, private sector payment innovations are already having an impact on
improving efficiencies in payments. Some of these innovations use blockchain technology
between groups of financial institutions to facilitate payments, such as R3’s platform and JP
Morgan’s Liink, and other instant payment solutions like RTP. Tassat Group (“Tassat”) is one
such private sector innovator. Tassat was founded in 2017 to provide American banks with
the tools to compete in an increasingly digital economy. Tassat has developed proven
technology allowing banks to modernize by harnessing the benefits of private, permissioned,
blockchains within the regulatory perimeter of the U.S. banking system to facilitate secure,
instantaneous payments. TassatPay is an intrabank solution to provide customers with
real-time, 24x7x365, business-to-business payments without preset transaction size or
volume. Through its use of blockchain technology, Tassat’s technology enables use of smart
contracts and delivery-versus-payment settlement. TassatPay is delivered directly to bank
clients via either a user interface or API, which means the bank is integrated directly into the
client’s treasury management system, allowing banks to deliver both secure, real-time
payments 24x7x365 and Fedwire capability in one place. Tassat’s technology is compatible
with legacy banking systems, allowing member banks to give clients access to the latest
innovations without having to redesign or fully upgrade their systems. These types of features
enable banks to capture an increasing share of a client’s banking activity. It is also affordable
for all banks large and small. To date, Tassat’s technology has facilitated over $400 billion in
instantaneous, secure blockchain-based payments between current bank customers. Most
importantly, Tassat’s technology allows banks to continue to use commercial bank money
and has resulted in increased deposits and bank growth and therefore does not pose the
attendant risks of a CBDC, stablecoins, or cryptocurrencies, which threaten to drain banks of
deposits. Soon, Tassat’s payments technology will be used by the bank-owned Digital
Interbank Network, permitting customers of participating banks to make payments with each
other using a secure, permissioned blockchain. Currently available private sector payment
options strengthen banks and lead to internal growth by using commercial bank money, a
form of money that is familiar to most individuals and that has reduced credit and liquidity risk
when compared with alternative payment solutions.
inclusion?
stability?
Yes. A CBDC could adversely impact the financial sector by changing the financial sector
market structure, decreasing the safety and stability of the financial system, and creating
vulnerabilities in operational resilience and cybersecurity. With respect to changes in the
financial sector market structure, the CBDC Report states that features such as paying
interest and instantaneous transferability could lead to decreased bank deposits, which would
affect a core function that banks provide - lending. Consumers rely on borrowing to finance
homes, cars, and other large purchases, while small business owners rely on borrowing to
run their businesses. According to the Independent Community Bankers Association,
community banks provide 60% of all small business loans and make more than 80% of
agricultural loans. A CBDC that is quickly and easily converted from bank deposits would
mean decreasing the amount of funds available for lending, and this would increase the costs
of borrowing. An interest-bearing CBDC would be even more detrimental by competing with
assets considered to be safe, such as Treasury bills and money market mutual funds. Not
only would this further increase the challenges consumers and businesses face in borrowing,
but an interest-bearing feature would compete directly with products offered by commercial
banks. As the Federal Reserve states in the CBDC Report, a CBDC should “complement,
rather than replace, current forms of money and methods for providing financial
services.” Less money circulating through the banking system could also lead to the potential
destabilization of the financial system if demand for a potential CBDC is high. The CBDC
Report provides that the Federal Reserve may need to substantially expand its holdings of
securities to meet market demand for a CBDC, which would make reserves more sensitive to
market developments. A CBDC would be subject to many of the same operational and
cybersecurity risks as existing payment services but would actually be less defensible
because more entry points would exist, compared to existing payment services. This long list
of serious risks posed by a CBDC begs the question as to whether any of the potential
benefits could outweigh them. The nation’s current payment system has benefited greatly
from innovations developed by and competition within the private sector that do not carry with
them the same types of systemic risks to the nation’s financial system. Tassat has seen
firsthand the positive effects that the blockchain-based payments innovation has had on
increased bank growth and overall deposits.
One way the Federal Reserve could mitigate some of the systemic risks posed by CBDC is
by limiting CBDC access and transferability to regulated entities within the intermediated
financial system, essentially limiting its use for wholesale purposes rather than retail, so that
consumers and commercial entities would continue to use forms of money such as
commercial bank money but still benefit from the technological upgrade that a CBDC could
provide. There are a number of private sector innovations, including TassatPay, that currently
provide many of the same benefits of a CBDC, such as speed and low cost, but without the
risk of disintermediation, which would expose consumers and businesses to the cybersecurity
and operational risks of a CBDC, and disruption of the financial sector.
CBDC?
Many countries that are considering issuing a CBDC are defined by far more centralized
financial systems than our own, with private sectors that lack the dynamism and innovation
emblematic of the American economy. The adoption of a CBDC in these countries is likely to
make their financial systems and economies even more centralized and further reduce
innovation.
sale? If so, how?
CBDC?
benefits of a CBDC?
_________________________________________________________________________
Industry
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New York
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Digital payments made with a U.S. CBDC can be less expensive, more efficient, and more
fraud-resistant than cash, credit, or debit card payments. In fact, the primary risk related to
CBDCs is in not pursuing the development of one, and instead allowing foreign jurisdictions
the opportunity.
Implementing a CBDC to achieve widespread adoption and utility (versus existing money and
stablecoin assets) requires building a “minimum viable” digital asset that attempts to replicate
cash functionality as closely as possible, and resists building in additional functionality that
would complicate integration. In all cases, this means designing a CBDC to be as
standardized, interoperable, and simple in its functionality as possible.
inclusion?
A U.S. CBDC would likely have a net positive effect on financial inclusion. Empirical evidence
has shown that inclusive financial systems are an important component to economic and
social progress across all demographics. As the predominant form of payments in the United
States, payment cards are already inaccessible to many U.S. citizens who are un- or
under-banked. If designed to be deployed through intermediaries that include regulated
nonbank financial service providers, a U.S. CBDC could be as exchangeable and transferable
as cash while providing many of the conveniences and other benefits of payment cards and
other forms of digital payments.
A U.S. CBDC should be designed to operate along the same levers as cash in the U.S.
financial markets, and should therefore offer the Federal Reserve similar controls toward
achieving its desired monetary policy.
stability?
A U.S. CBDC would likely affect financial stability in a positive way, by allowing transactions
to process faster and more efficiently while providing less exposure to fraud. Further, CBDCs
would provide for greater access to commerce at lower costs, promoting financial stability and
inclusion on a broader scale.
If designed to function as simply and generically as possible, a U.S. CBDC should only
enhance the ability of the financial sector to adapt to a shifting landscape of financial
exchange. In essence, by providing a U.S. CBDC, the Federal Reserve enables U.S.
businesses and individuals the ability to conduct commercial transactions with confidence
online and in whatever other digital ecosystems may arrive in the future.
Our investigation continues.
Yes. If cash usage declines because of a broad shift toward digital payments, it becomes
more imperative for the Federal Reserve to issue a U.S. CBDC that can offer equivalent
functionality in a digital context.
CBDC?
In the absence of an “official” U.S. CBDC, private enterprise will continue to develop
substitute products to fill its place. These substitute products may develop into private
monopolies on commercial activity that the Federal Reserve would otherwise like to avoid.
Decisions by other large economy nations should not influence the Federal Reserve’s
decision to issue a CBDC. Put another way, the issuance of CBDCs around the world is
already much of a foregone conclusion; the US should decide to issue a CBDC based on the
merits of the technology and opportunities for innovation and financial inclusion that it
represents.
The “Money and Payments” paper largely tasked existing frameworks and established
solutions with addressing the potential risks of a CBDC solution, and this is the ideal strategy.
A U.S. CBDC should explicitly not embed any functionality that would enable transactions to
become personally identifiable outside of separate databases maintained by the CBDC’s
designated intermediaries. The existing framework of rules that are designed to combat
money laundering and the financing of terrorism are sufficient for preventing such a CBDC
from being used to facilitate illicit activity.
A U.S. CBDC should consider existing blockchain networks as templates for operational and
cyber resiliency, and preferably be deployed across as many such blockchain networks and
distributed ledgers as possible.
Yes. A CBDC should be legal tender, because otherwise the inherent benefits of a CBDC
would not be realized. A CBDC should be considered as exchangeable as cash within the
U.S. financial system.
No. To maximize the utility and adoption of a U.S. CBDC, such a CBDC should not embed
mechanisms that complicate its integration into existing commercial frameworks. An ideal
design would allow a U.S. CBDC to substitute for cash in as many settings as possible.
No. Placing an arbitrary constraint on the amount of CBDC that can be held by a single
end-user would impose additional overhead obligations on intermediaries that could
compromise the Federal Reserve’s stated goal of protecting consumer privacy, and would
explicitly restrict the adoption of such a CBDC.
The intermediary types identified in the “Money and Payments” paper—namely, commercial
banks and regulated nonbank financial service providers—are the appropriate types of firms
to serve as intermediaries for the U.S. CBDC and could be considered in the roles of issuers,
transmitters, or redemption providers. The OCC, FinCEN, and various state authorities offer
existing and established frameworks for the oversight of money transmission—whether cash
or CBDC-based—that fulfill the obligations of the Bank Secrecy Act.
No—at least, not initially. The current state of development toward offline support for digital
asset transactions is promising, but a consensus-driven approach has not been established.
The U.S. CBDC should be launched in a “minimum viable” form while offline transaction
support strategies are being explored, and consider implementing “offline” capabilities once a
leading strategy is established and the end-user need becomes more clear.
sale? If so, how?
No—at least, not initially. The current state of development toward offline support for digital
asset transactions is promising, but a consensus-driven approach has not been established.
The U.S. CBDC should be launched in a “minimum viable” form while offline transaction
support strategies are being explored, and consider implementing “offline” capabilities once a
leading strategy is established and the end-user need becomes more clear.
If a U.S. CBDC was implemented as a digital asset, in the way that many U.S. dollar–pegged
stablecoins are issued today, then it benefits from being deployed across as many
blockchains as possible (e.g., Ethereum, Solana, Avalanche). This so-called “multi-chain”
support would enable a CBDC to adapt to additional networks or payment platforms as they
are developed in the future and would aid adoption via seamless integration into existing
digital asset platforms and ecosystems.
CBDC?
The future of technological innovations in the realm of digital asset value transfer is difficult to
predict. A U.S. CBDC benefits from being designed as simply and generically as possible,
which will support its ability to withstand and adapt to technological advancements and shifts.
benefits of a CBDC?
The design principles identified by the Federal Reserve (privacy-protected, intermediated,

widely transferable, and identity-verified) are well considered. However, the principle of a
CBDC being “widely transferable” instead of “universally transferable” or “interoperable”
stands in conflict with the theorized benefit of supporting the dollar’s international role. Just as
US dollar cash carries value with and can be held by individuals, entities, and financial
institutions outside the purview of the U.S. government, a U.S. CBDC would benefit from
being universally transferable as a digital asset on open blockchains, even beyond the
network of U.S. CBDC “intermediaries” and beyond the point at which the Federal Reserve or
these intermediaries can verify the identity of end-users who are not U.S.-based. Any attempt
to limit the transferability of such a CBDC by way of a permissioned ledger or inbuilt
identification mechanism would inherently limit its performance against the goal of being
privacy-protecting and the theorized benefit of supporting the dollar’s international role.
_________________________________________________________________________
Electronic Privacy Information Center (EPIC)
Industry
Country
State
Email
wiener@epic.org
The discussion paper does not adequately describe the privacy risks created by current
third-party payment systems and thus does not adequately describe the necessary legal,
regulatory, and technological architecture that would be necessary to establish a
privacy-protective CBDC. The discussion paper does acknowledge that an intermediated
digital currency would present similar privacy risks to the current payment system: Consumer
privacy: A general-purpose CBDC would generate data about users’ financial transactions in
the same ways that commercial bank and nonbank money generates such data today. In the
intermediated CBDC model that the Federal Reserve would consider, intermediaries would
address privacy concerns by leveraging existing tools. But the discussion paper does not
explain the invasive data collection that pervades the current payment ecosystem. At this
moment when the Federal Reserve is researching and considering alternatives that could
improve payment systems, the Board should take the opportunity to consider what legal,
regulatory, and technological changes would actually improve financial privacy for individuals.
The report should include a close review of current data collection and use practices in the
banking, payment, and fintech sectors and recommend changes that would establish much
needed privacy protections for individuals. The current system for both physical point of sale
and online payments is under-regulated and subjects individuals to voluminous financial
surveillance. Credit cards, online transactions, and point-of-sale systems all have access to
detailed records of individuals’ financial transactions, and many of the entities operating these
systems are either selling this personal data to brokers, or they act as brokers themselves.
Currently, large data sets of credit and debit card transactions are available for purchase to
almost anyone. A search on the bulk dataset aggregator Datarade returned 35 separate
datasets offering individual credit or debit card transactions for sale, and 234 total data sets
offering transaction data including bank-to-bank transactions, electronic payment
transactions, and loyalty card data. The widespread dissemination of this data poses
substantial privacy risks because this type of transaction data is easy to de-anonymize. In
2015 a study found that metadata from just four transactions in a dataset was enough to
identify the cardholder in 90% of cases. Current payment systems are designed to enable
data brokers to collect, aggregate, and sell consumer data, and we do not have legal or
regulatory privacy protections to protect against abuse. The widespread brokering of financial
transaction data can cause substantial harms to individuals. Brokers that collect or purchase
transaction data can use it to build detailed profiles of individuals that can reveal or be used to
infer private information about them, including their political views, their religious beliefs, their
reproductive and family choices, and their personal preferences and habits. These data can
also be used to underpin consequential decisions about where an individual can work, live, or
even what price or level of service they receive. This pervasive profiling forces individuals into
a “scored society” that frequently operates as a black box where they do not have access to
the most basic information on how they are evaluated. Secret algorithms can be used to
determine the interest rates on mortgages and credit cards, raise consumers’ interest rates,
or deny people jobs. For more information on black box algorithms, see the work of Frank
Pasquale. And many times, algorithmic scoring does not create rational results. In one
instance, a consumer found that his credit score suffered a forty-point hit simply because he
requested accurate information about his mortgage. For more information see: EPIC, Data
Brokers, https://epic.org/issues/consumer-privacy/data-brokers/, and EPIC, Screening and
Scoring, https://epic.org/issues/ai/screening-scoring/. The widespread collection and use of
transaction data also exacerbates risks of overbroad government surveillance. Law
enforcement agencies have reportedly begun to purchase bulk data from brokers in ways that
can sidestep constitutional and statutory privacy protections. For example, Immigrations and
Customs Enforcement (ICE) uses transaction data from utility payments to identify allegedly
undocumented individuals for arrest and deportation, even when those individuals live in
“sanctuary cities” that have opted not to provide information to the agency. Some of the data
used by ICE uses was collected by credit reporting agency Equifax from another data broker
holding more than 400 million utility records. Federal agencies have also had real-time
access to credit card transaction data since at least 2010, creating risks of oversurveillance,
wrongful arrest, and abuse. Continued in 2
Continued from Question 1 For full comments with citations please see EPIC's website:
https://epic.org/documents/epic-comments-on-the-federal-reserve-discussion-paper-money-a
nd-payments-in-the-digital-age/ Federal agencies have also had real-time access to credit
card transaction data since at least 2010, creating risks of oversurveillance, wrongful arrest,
and abuse. Access to credit card data can be obtained without a warrant. The current digital
payments landscape is over-surveilled and under-regulated. Individuals are subject to private
and corporate surveillance from payment services providers and data brokers. That data is
used to monitor, evaluate, and score individuals through opaque algorithms, eliminating
financial privacy and harming individuals’ access to credit, housing, and jobs. Much of the
same data is available to law enforcement with little oversight or protections against misuse.
The Consumer Financial Protections Bureau is currently conducting an inquiry into data
collection by big tech platforms that facilitate transactions including Google, Apple, Facebook,
and Amazon. The Fed should join the CFPB in studying invasive payment monitoring
practices by big tech companies that collect transaction data. Central Bank Digital Currency
should not replicate the current system.
inclusion?
stability?
CBDC?
For full comments with citations please see EPIC's website:

https://epic.org/documents/epic-comments-on-the-federal-reserve-discussion-paper-money-a
nd-payments-in-the-digital-age/ The discussion paper lays out many options for managing the
potential risks associated with CBDCs. However, we believe that the paper does not
adequately address the risks posed by intermediary and third-party implementation of digital
wallets. Recent developments in the fintech and cryptocurrency ecosystem have shown that
wallet services pose potentially substantial risks of data abuse, fraud, and other unfair
practices if not adequately regulated. Malicious or improperly vetted wallet systems can
exacerbate the problems of data aggregation, financial surveillance, and fraud. Implementing
any new technology creates risks during the adoption period, when individuals are especially
vulnerable to fraud and exploitation. And digital wallets pose unique risks because they
expose individuals to commercial exploitation of personal transaction data as well as the risk
of malicious third-party fraud, theft, or manipulation. Without close review prior to deployment
and constant scrutiny following adoption, the software and systems used to facilitate
payments via CBDCs could cause more harm than good. Rampant thefts and fraud in digital
assets including cryptocurrency and Non-Fungible Tokens (NFTs) demonstrate the risks to
consumers in implementing new and unregulated financial technologies. Digital wallets are
currently used in cryptocurrency marketplaces, and associated transactions like the sale of
NFTs. A recent study from Chainalysis found that more than $3.2 billion in cryptocurrency
was stolen in 2021, with the trend accelerating in 2022. While most of the largest thefts are
accomplished by hacking cryptocurrency platforms, individuals are also widely vulnerable to
fraud and theft. For example, in May 2022, hackers were able to spread fraudulent links
across several popular NFT Discord channels, triggering automatic transfer of NFTs from
unwitting users’ digital wallets. These thefts take advantage of individuals unaware of how
easily current digital wallets can be exploited. Expanding digital wallet use across the
economy by adopting a CBDC will expose even more vulnerable individuals to potential thefts
and fraud. Digital wallets then present serious security risks that need to be addressed before
widespread adoption, especially if they are to hold CBDC funds. Digital wallets will have
access to sensitive information and digital transactions, which inherently create detailed
records unless designed to avoid them. Wallets apps will have access to users’ personal
information, banking information, and unless regulated could easily access phone location
information as well. Because digital wallets will have to interact with both banks and
point-of-sale devices, the wallet is a potential privacy vulnerability as the app could collect
information on both sides of a transaction. Unscrupulous wallet developers will have a strong
incentive to design wallets that maximize data collection and make that data available for sale
to data brokers. And similar risks exist for point-of-sale systems, which will only provide
transaction privacy if they are designed to do so. New laws, regulations, and thorough
product-testing are necessary to protect privacy for digital currency transactions. The Federal
Reserve should investigate the current marketplace for digital wallets and provide
recommendations for the legislation, regulation, and product testing necessary to protect
consumers if digital wallets are widely adopted. The following principles are a starting
point: - Data Minimization: digital wallet providers should be prohibited from collecting any data
that is not strictly necessary to make the digital wallet work; o No Transaction Records: digital
wallet providers should not be permitted to create and maintain records of transactions
conducted using the wallet; o No Location Data: digital wallets should not be permitted to
collect or store location data or to transmit it off the device holding the wallet; o No Data
Exploitation: digital wallet providers should not be permitted to sell or transfer data collected
from wallet users; - Regulation: Congress should designate one agency to implement
regulations for digital wallets; - Product Testing: Congress should mandate that either the
National Institute of Standards and Technology or a designated regulatory agency perform
rigorous product tests on all digital wallet apps to ensure that the apps conform with the
above principles.
If the Federal Reserve moves forward with a digital currency, that currency should use a
token-based system that does not rely on distributed ledger technology. The Fed should look
to the work of cryptography and digital cash pioneer David Chaum for guidance in
implementing a token-based CBDC. A token-based digital currency issued by the Federal
Reserve would present several advantages. First, a token issued by the Federal Reserve
could be incorporated into the current banking system, making it easier to adopt a CBDC.
Second, it is possible to design a token that replicates the transaction privacy created by
physical cash but also implements anti-money laundering protections. This type of CBDC
would be a substantial improvement for consumer privacy as payment service providers
would not be able to exploit transaction data. Third, by avoiding a distributed ledger system, a
token issued by the Federal Reserve would have affordable transaction costs and be easy to
scale up for public use. Fourth, tokens can be designed to expire and need to be refreshed
after a certain amount of time, cutting down on currency hoarding and reducing the ability of a
central bank to do long term financial surveillance. Expiration dates can ensure that a CBDC
is mainly used for transactions. A token-based CBDC could work with existing intermediaries
(banks) and would be able to preserve transaction privacy while allowing for anti-money
laundering controls. To accomplish this, currency in the form of tokens would be issued by a
central bank, transmitted to users through commercial banks, and encrypted and stored in a
digital wallet. To spend the token, the user transmits it to a merchant, who deposits it with the
merchant’s bank and then the central bank to verify it has not been used before (“double
spent”). Using a public/private key pair, merchants can verify the validity of the token using
the central bank’s public key, but would not receive the payer’s private key, maintaining payer
anonymity. Similarly, because neither the commercial bank nor the central bank can see the
token’s unique identifier, a merchant depositing the coin with the central bank does not reveal
the individual who withdrew it. Banks would still be able to implement anti-money laundering
controls because merchants are identified and verified when their accounts are created. By
limiting the amount of currency a merchant can receive in one transaction, and monitoring
patterns of payment with merchants, banks and the central bank can conduct strong
anti-money laundering activities without compromising privacy for payers. The Federal
Reserve should look to the work to David Chaum to design a CBDC that improves privacy for
digital transactions. The following publications are particularly relevant: - David Chaum,
Christian Grothoff, Thomas Moser, How to issue a central bank digital currency,
Schweizerische Nat. Bank (Mar. 2021),
https://www.snb.ch/n/mmr/reference/working_paper_2021_03/source/working_paper_2021_0
3.n.pdf. - David Chaum, Amos Fiat, and Moni Naor, Untraceable Electronic Cash (extended
abstract), Advances in Cryptology CRYPTO '88, S. Goldwasser (Ed.), Springer-Verlag, pp.
319-327, https://chaum.com/wp-content/uploads/2021/12/Untraceable_Electronic_Cash.pdf.
- David Chaum, Privacy Protected Payments Unconditional Payer and/or Payee
Untraceability, SMART CARD 2000,
https://chaum.com/wp-content/uploads/2022/02/Privacy-protected-payments-unconditioanal...
.pdf. In addition, the Federal Reserve should investigate fully anonymous digital currency and
present fully anonymous currency as an option in future publications. The discussion paper
discounts the possibility of implementing fully anonymous digital cash due to current
anti-money laundering and anti-terrorism laws. However, developing a digital currency will be
a long-term process that presents the opportunity to re-think the costs and benefits of those
laws. Fully anonymous digital cash may present even greater benefits to privacy, consumer
protection, and inclusion for currently unbanked individuals that should be explored. And the
use of intermediaries to facilitate the use of CBDCs should make it possible to integrate an
anonymous digital payment mechanism through the intermediary while complying with
anti-money laundering and fraud regulations as the current system already does with cash
deposits and withdrawals. The Fed should investigate and provide an option for fully
anonymous digital cash to inform the discussion around CBDC design, and allow the public to
weigh in on whether a fully anonymous digital currency is desirable. Conclusion EPIC urges
the Federal Reserve to foreground privacy and consumer protection as key considerations in
their review of digital currency proposals. Because a digital currency by itself will not solve
equity, privacy, and fraud harms, the Fed should move slowly to ensure that it does not adopt
or encourage use of systems that pose new and significant risks.
sale? If so, how?
CBDC?
benefits of a CBDC?
_________________________________________________________________________
Suncoast Credit Union
Industry
Credit Union
Country
State
Florida
Email
julie.renderos@suncoastcreditunion.com
inclusion?
stability?
With most of the options presented, considerations must be given to controlling the flow of
funds to or from the FRB to prevent major shocks to the financial infrastructure. If consumers
were allowed to move large amounts of money very quickly it might cause some financial
instability and develop a lack of trust of the system, resulting in low adoption by consumers.
Yes, a CBDC could adversely impact the financial sector if the framework is not well thought
out and conducive to the existing structure of the financial sector. The CBDC should plug into
the existing financial sector structure and utilize the existing ecosystem of financial institutions
that can assist with maintaining a safe and secure payments delivery channel. Leveraging
the existing financial structure provides the opportunity for a safer and more stable digital
currency than other digital currencies offered by nonbanks.
In today’s banking model, the financial institution (FI) is the intermediary between the
consumer and the Federal Reserve Bank (FRB). The deposits provide a source of liquidity to
financial institutions, who then lend those deposit dollars out at a higher rate. The financial
institution makes money on the difference of what it earns in interest income less what is paid
out in cost of funds, known as net interest margin. That margin is used to cover the
requirements to operate the financial institution and maintain compliance with the vast rules,
regulations and laws including know your customer, anti-money laundering, bank secrecy,
etc. To take away deposits from an FI and move them to the FRB removes an important
source of liquidity for financial institutions. However, a tool to mitigate this is to consider
changing the model to still include financial institutions as the intermediaries for CBDC.
Moving those deposit dollars off of financial institution balance sheets and to the Federal
Reserve Bank would mean that the FRB would have significant low-cost liquidity. The FRB
then could loan out that liquidity to FIs at low rates. This lower rate could be set by market
rates less a set percentage determined to service those accounts as an intermediary. This
would provide a low-cost liquidity source to FIs, and it would provide the margin needed to
continue to service the accounts with the operating and compliance costs that are necessary.
By the FRB not paying interest to consumers on the CBDC deposits, it still provides an
incentive for financial institutions to provide higher interest bearing deposit accounts. In other
words, on their balance sheet the FI would simply replace their transactional account
balances with a borrowing, which would allow them to continue to earn their spread to pay for
the operational expense. This practice of not paying interest on balances could diminish the
attractiveness of CBDC as a digital currency if other digital currencies provide a return, and
this account does not. However, those other digital currencies have risks associated with
them. The CBDC would be considered a risk-free transactional payment option for the
consumer, and therefore a return would not be expected.
CBDC?
Consumers might turn to other digital assets, such as stablecoins or other countries CBDC, to
perform their monetary transaction for cross-border payments. Due to the lack of full
regulatory insight into activities occurring in nonbanks it may contribute to money laundering
or other fraudulent activities. To help mitigate these activities, it is important to develop a
model of CBDC to help improve the process and reduce costs required by consumers and
fully regulated financial institutions to perform these types of transactions. Further, to support
a global economy it is very important for the US to work with other countries to create global
standards to establish trust and a free-flowing digital currency across the globe.
It is important for the US to maintain the position of trust and monetary strength in world
markets. If the US opts to not pursue CBDC another country will establish themselves as
leaders in this space and potentially cause the US to lose this position.
Yes, the existing banking structure that already has the operations, regulations, and expertise
to manage and monitor accounts should be leveraged. There should be some compensation
that goes back to the FI in exchange for their assistance in maintaining a safe and secure
payment channel. This is similar to the way that VISA pays interchange to issuers to absorb
processing costs and fraud losses in order to maintain a zero liability promise to their
cardholders.
Similarly, as is done at FIs today, as long as the FI is still the intermediary for CBDC, they can
continue to comply with the rules, regulations and laws around bank secrecy, anti-money
laundering and know your customer. However, the FI must receive compensation in order to
afford the operations required to maintain this compliance. This can be achieved in different
ways, one is to provide a discount on liquidity, another is to receive a fee based on
transaction volume to/from the CBDC. FIs can monitor transactions of money movement in
and out of the CBDC payment channel but would not have the visibility to monitor
transactions between digital currency accounts.
One of the key elements of creating resiliency is to ensure there is diversity, therefore, if the
current regulated financial institution’s infrastructure is used it would use the current diversity
that exists. The proposed direct model creates a more singular point of failure of the financial
system and removes the ability to control the level of impact. In using the indirect model, it
creates layers of defense and if a financial institution was compromised it would limit the
impact to the scope of that financial institution, and not the overall monetary network. In a
black swan event that resulted in CBDC to be unavailable, consumers and businesses would
struggle to conduct transactions if the core functionality became unavailable. If there was
shared responsibility amongst financial institutions by using the indirect model, it helps
mitigate the scope of impact to the economy by spreading the risk across multiple regulated
financial institutions. Additionally, the use of blockchain technology would ensure cyber
resiliency and trust in a digital currency.
It depends. If it is built as a secure, trusted, reliable and risk-free delivery channel that is
regulated, then yes, a CBDC should be considered as good as cash.
No, the CBDC should not pay interest. As a risk-free transactional account, there should not
be an expectation that the account would bear interest. Likewise, to maintain a safe, secure,
and risk-free payment channel takes operational costs. The FRB can leverage the thousands
of financial institutions that already protect and monitor accounts and transactions to maintain
a safe and secure payment channel and compensate them for this service. This will also
allow financial institutions to maintain interest bearing accounts for liquidity purposes, and this
payment channel would be priced to be not as attractive so that the majority of the liquidity
remains in financial institutions.
To ensure the safety and soundness of CBDC, intermediaries that follow the regulations of
financial institutions should be allowed to patriciate in the CBDC network. Allowing
intermediaries that do not fall under these regulations increases the risk to the overall
ecosystem. The financial sector already has an ecosystem of financial institutions and
regulators that have the operations to maintain security and monitor accounts. These
financial institutions have the operations and expertise to be an effective intermediary for
CBDC. The CBDC can be a product that compliments an FIs existing deposit products, as
opposed to competing against it.
Yes, to be a reliable and trusted payment source, a CBDC should have offline capabilities.
This could be achieved similarly to the way VISA stands in today when systems are offline. It
allows up to a maximum threshold to allow transactions to continue to flow without
interruption. Under the indirect model, key financial institutions should hold offline copies and
act in a stand-in capacity (requiring a majority transaction approval between institutions) until
functionality and validity of the underlining CBDC is brought back online. This further
stresses the need to implement the indirect model by taking advantage of the current financial
infrastructure currently in existence. It should be evaluated to determine if a secure offline
model can be supported at the POS/consumer level in the event there is a failure of
technology or communications to facilitate transactions.
sale? If so, how?
Acceptance of CBDC will be key if the intent is to obtain high adoption at the consumer level.
It may be best to allow private companies to innovate and develop the interactions at the
consumer level to provide the best experience. The CBDC should use an open standard to
allow for this innovation to occur, with proper security requirement defined. In addition, there
should be some merchant responsibility associated with this implementation to protect the
overall ecosystem from beginning to end.
Current standards should be reviewed to determine if they are applicable to the development
of CBDC. If it is determined that any new standards are required then the Request for
Comments (RFC) process should be followed, and the FRB should seek involvement from
public and private sectors on the development of new standards.
CBDC?
benefits of a CBDC?
The consumers’ needs should be considered in the design of CBDC. A study should be
conducted on what the consumer requires in order to have a high trust and adoption of this
payment option. The consumers’ experience with how they would handle disputes, and
whether their funds are guaranteed up to a certain dollar amount should be considered.
These design features centered around the consumer should be the differentiators that create
loyalty and demand for CBDC.
_________________________________________________________________________
Future of Digital Currency Initiative at Stanford University
Industry
Academia
Country
State
California
Email
fdcadmin@fdc.stanford.edu
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Yes. Adopting blockchain for the settlement of financial transactions would create the
benefits of reducing settlement time, record keeping costs and capital requirements. We also
strongly urge the Federal Reserve to study the benefits of blockchain in reducing the capital
and liquidity requirements for banks and broker dealers. In addition, blockchain, as a record
keeping system, will dramatically reduce the time and need for audits. More importantly, the
banking regulators can give regulatory authority to banks to issue fiat backed stable coins in
US dollars or other currencies. The stable coins could then be used as a functional substitute
for a CBDC in a blockchain based financial network. Allowing US banks to also issue
stablecoins in foreign currencies could simplify and speed the settlement of cross border
transactions for US based companies who are now very dependent on the SWIFT system
where settlement times can take days and even weeks. Lastly, bank issued stable coins
provide a safer and possibly intermediate step in assessing the risks and benefits of a digital
finance system.
inclusion?
Yes, impact is of course possible both ways. Difficult to tell a priori. Pro: could break current
monopolies. Con: could enable other kinds of consumer abuse. CBDC could greatly increase
financial inclusion, depending on its design. It could allow for instantaneous access to funds
whether paychecks or government stimulus. Another opportunity is frictionless cross border
payments and remittances. However, depending on whether the CBDC design is account
based, or direct vs indirect, may affect whether the unbanked population has access to this
new digital currency. One way to increase financial inclusion through this new digital
currency would be to provide digital wallets to anyone who requests them. Currently, US
citizens can purchase US Treasuries on the US Treasury website. This website could be
modified to allow citizens to apply for their own digital wallet. Other adjustments could be
made to the website to satisfy KYC requirements. The digital wallet could be designed to
hold solely CBDC or CBDC and other tokens. Its purpose could be further expanded to hold
financial and health records as well. One important record keeping process in need of dire
repair are social security records and personal identity. Designing a system that
automatically downloads income history and other records to a person’s wallet would allow
the individual to compare his or her records with centralized government records for
accuracy. Lastly, organizations like the Department of Motor Vehicles or US Post Offices
could be other entities to provide wallets.
The tools for monetary policy are limited and have proven to be rather blunt instruments in
managing a complex and dynamic economic system. These tools include only quantitative
easing or tightening along with interest rate adjustments. However, the Federal Reserve has
no tools to precisely target specific segments of the economy, industries, geographic regions
or populations. Congressional policy helps, but can be untimely. The solution rests in the
Federal Reserve’s ability to identify supply and demand imbalances in industries or regions
that are creating price instability and adjust those imbalances. CBDC has the potential for
providing more options for monetary policy levers targeting specific problems. We
understand that a CBDC might also provide additional modes of failure as well. Discussions
around programmable money have been floated by various groups as a possibility. This idea
is intriguing and worthy of exploration.
stability?
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Potential adverse effects of CBDC: New failure modes (outages, cyber threats,
etc.) Dollarization of other economies, if US CBDC more widely adopted than current
USD Potential inadequacy of existing compliance/enforcement mechanisms Facilitating new
types of fraud Undermining existing payment methods, particularly cash Harming either privacy
or the perception of privacy Either helping or hurting undocumented economic activity that has
unexpectedly systemic importance Disintermediation: CBDCs issued without consideration for
current depository financial institutions risk disintermediating the two-tiered banking system.
Research suggests that the credit issuing capacity of commercial banks is vital to stimulating
economic growth. Removing commercial banks from this function may result in destabilizing
monetary distribution channels, resulting in uneven distributions of capital into the
economy. New category of flight to safety potentially reduces the velocity of money at
inopportune times Differences of CBDC from stablecoins: CBDCs can leverage trust in central
banks to avoid some of the engineering complexity of decentralized “trustless”
systems CBDCs don’t pose the same solvency risk as stablecoins Unlike CBDC, stablecoins
present added risks, including loss-of-value risks via stablecoin runs or fire sales, lack of a
consistent set of regulatory standards, on top of traditional payment system risks, such as
credit risk, liquidity risk, operational risk, and settlement risk.
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As society becomes more digital, governments should have a financial instrument that can
offer similar benefits of cash while capitalizing on the growing trend of electronic payments.
This includes offline payments, low transaction fees and preserving the anonymity of cash.
We believe this is one of the most important considerations actually because whether or not
cash is an option impacts financial inclusion, privacy, and the ability to implement novel
programmability into the CBDC. Cash usage declining affects heavily unbanked people, who
are often paid in cash or with a check that they need to cash at a financial institution. Banks
will not maintain offices/ATMs if the cost of having them filled and operating (which includes
armored cars to bring the cash to different locations, security, etc) is larger than the benefit
they are getting from them. Therefore they will likely keep the offices/ATM machines in the
places where the offices/ATMs will have more use (e.g. center of a city) which will be very far
from the places where low income people live. Therefore, a CBDC should foresee these
developments and allow unbanked people to hold it.
CBDC?
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US should take a more globalistic, and less nationalistic, view of CBDCs. This way we can
co-influence some of the design choices made around interoperability, privacy, security and
scalability. They are great learning experiments. The US should monitor closely and see what
has gone wrong and right.
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Yes since it should be seen as a substitute for cash. A CBDC should be an acceptable form
of payment for general obligations, including retail transactions, wholesale transactions,
taxes, debt settling etc.
A CBDC should have the capability to pay positive interest or charge negative interest, but
except under extraordinary circumstances, the expectation should be a zero nominal interest
rate no different from cash. In particular, CBDCs must not compete with commercial bank
deposits or reduce demand for interest-bearing financial instruments, unless doing so is an
explicit (and likely temporary) goal of monetary policy.
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Many firms! This would allow access to CBDCs more widely which could decrease risk, offer
more variability in what CBDCs can be used towards, and potentially increase financial
inclusion via widespread usage. Key is issuance (Central Bank) versus distribution (multiple
entities including banks) A CBDC solution should NOT disintermediate a two tier banking
system. Commercial banks should still own the relationship with the customer and play the
role of distributing liquidity into the general economy.
Yes this can help with better access and financial inclusion of individuals in emerging markets
or situations where there is limited internet connectivity (i.e. natural disaster) Offline
transactions help with operational continuity and resilience and then you can truly then say
that CBDCs can be a substitute for physical cash, since physical cash can be used offline, so
should CBDCs.
sale? If so, how?
No. A CBDC should be designed to serve as a lowest layer in a multi-layer systems, where
third parties implement higher layer functionality such as point of sale systems. To ensure
innovation, it is important that the CBDC not overly constrain the design of point-of-sale
systems by hard-coding design choices into the CBDC itself. Analogy: IPv6 should not be
designed to maximize ease of use and acceptance of email, web, streaming video or any
other specific service. Specifically, a baselayer CBDC system should be created to allow for
other, newer, use-cases to be built upon it and tailored for each use. Further,
over-engineering specific uses now ossifies the system and leaves it open to obsoletion in a
short time.
The challenge in interoperating with existing payment arrangements will depend on new
system designs, but most have standardized mechanisms to make inter-account transactions.
Support of both traditional and emerging financial standards (e.g. ISO-20022, SWIFT,
NACHA), will likely play a part in enabling interoperability with other payment systems. There
will also need to be portability of funds between different intermediaries and customers so
that no one user or funds are locked up.
CBDC?
-Creating an open, lowest layer CBDC system today with as much functionality and
interoperability now as it can have will likely help ensure such openness and support of new
technological advances that need to plug in and to interoperate in 20 years’ time. Making sure
a system is technically capable of supporting new technological advances today, therefore,
helps (though does not ensure) that it can be future-proofed against the new technology and
use-cases of tomorrow. -Emerging technology already in the “pipeline” at research labs that
we predict to be 5, 10, 20 years out can also influence current design choices. For example,
quantum resistant cryptography as a design choice is influenced by the threat of quantum
supremacy by hostile nation-states. Breakthroughs in lowered energy consumption and
heightened throughput can and should also be considered in CBDC design. Further work
towards ubiquitous digital identity systems or technology also have design and policy
considerations affecting CBDCs.
benefits of a CBDC?
We believe that any US CBDC should be guided by three high-level principles: 1. Embrace
market-based solutions and the competition of ideas. In particular: 1a) When negative
externalities arise, the Federal Reserve should directly charge, in dollars, for behavior that
negatively impacts the financial system, and not place ad hoc restrictions on the use digital
dollars. For example, if CBDC holdings begin to put pressure on the fractional reserve
banking system, the fed should charge negative interest rates, rather than limit who can hold
digital dollars or placing arbitrary caps on account balances. 1b) CBDCs must not be
imposed on people, but should be forced to compete with existing forms of money, including
a long-term commitment to supporting physical cash. Even highly appealing technology can
morph into a burden when users have no alternative and there is no feedback mechanism by
which the design process can react to lost users. 1c) CBDCs should provide the Federal
Reserve with more fine-grained levers with which to continuously monitor the economy and
fine-tune economic policy. 2. Provide egalitarian, self-serve access to CBDCs, so that
all citizens are in a position to innovate and there are few gatekeepers to digital money. 3.
Similar to the architecture of the Internet, follow the end-to-end principle in system design:
When functionality can either be implemented natively by the CBDC or effectively layered on
top (closer to end users) by third parties, prefer the layered approach. The core CBDC
functionality will be the most difficult to update, and may not be well-suited to properly
capturing all the requirements of as-yet unanticipated applications. The CBDC should provide
only the lowest layer functionality necessary for effectively implementing higher-level
applications.
_________________________________________________________________________
National Community Reinvestment Coalition
Industry
Country
State
Email
arust@ncrc.org
Please see our comment submitted by electronic mail to digital-innovations@frb.gov
inclusion?
stability?
CBDC?
sale? If so, how?
CBDC?
benefits of a CBDC?
_________________________________________________________________________
Neha Narula
Industry
Academia
Country
State
Massachusetts
Email
narula@mit.edu
This is an extremely important question and has not received enough in-depth investigation.
The challenges in answering this question are twofold: First, we must have a set of specific,
concrete (though hypothetical) US CBDC designs to compare against, and we do not.
Oftentimes when people claim that CBDC would achieve a benefit or cause a specific
problem they are considering one design (which they have not well-articulated) and are not
considering the fact that there is a tremendous amount of parametrization and choice to be
made in CBDC design. Second, a lot depends on exactly which benefits we are aiming to
achieve, and the underlying reasons why these benefits are challenging to achieve today. For
example, a goal might be to lower transaction costs; some measurements show retail
transaction costs in the US are on the order of hundreds of billions of dollars a year.
Answering the question of how one might reduce transaction costs would require a study to
determine if these costs are due to issues like high fees from lack of competition, costs of
complying with regulation, or costs in managing risks like fraud. Depending on where the
issues lie, different interventions can be imagined to address them (some might be designs
for various types of CBDCs, some not). These potential interventions should be considered
and measured. Then all of these different goals and means of addressing them should be
considered in aggregate: It might be the case that one intervention might address multiple
goals simultaneously. There is one possible goal that can only be addressed by a CBDC, by
definition: providing a public option for payments as payments move increasingly into the
digital realm.
inclusion?
Our work found that uncertainty surrounding financial transactions emerged as the
least-addressed and most-persistent pain point for Americans. To the extent that a CBDC
could address this issue, it could be beneficial for financial inclusion. A CBDC could help -- it
could provide fast transaction settlement and well-understood fees, reducing uncertainty.
Note that if it is difficult to access a CBDC or requires onerous identity checks, it will help less
with financial inclusion. More can be found in our research report titled “Centering Users in
the Design of Digital Currency”.
https://www.maidenlabs.org/_files/ugd/93b65a_242f6839b55a4a80a752b986b39a62e3.pdf
stability?
CBDC?
In order to maximize the potential of CBDC for financial inclusion and as a platform for
innovation, individuals should be allowed to, if they desire, self-custody CBDC. It is unlikely
most users will choose to do this, but the existence as an option means it will be easier to
enforce interoperability, portability, and user choice. A broad set of intermediaries should be
allowed to provide services using CBDC, and they should be regulated according to the roles
and responsibilities they take on, along with the accordant risk. For example, an intermediary
that custodies funds on behalf of users should be regulated differently than an intermediary
that provides cryptographic key sharing or backup services, and cannot actually move or
spend a user’s funds. Requiring intermediaries for custody might affect the ability of an asset
to truly act as a liability of the Federal Reserve. During times of stress or correlated failure, a
user would have no mechanism for taking their CBDC outside of what might be an entirely
failing intermediary system, and a user’s CBDC might become “stuck” as their failing
custodian goes through bankruptcy proceedings and their balance sheet is unwound. CBDC
would need to be designed carefully so that users can not only take their CBDC out of an
intermediary quickly, cheaply, and easily, but that there is also another non-failing, adequate
intermediary to use instead. Having a proliferation of intermediaries, and even letting users, if
necessary, be their own intermediaries (self-custody), seems to be the easiest way to achieve
this.
Yes, a CBDC should have offline capabilities to best approximate cash as a payment
technology. This will likely be achieved through a combination of secure hardware on smart
cards and cryptographic designs to limit the possibility of double spends. Relying on secure
hardware introduces new risks, including the risk of a compromise in the secure hardware’s
supply chain. This is not insurmountable, but requires careful analysis and design.
sale? If so, how?
CBDC?
benefits of a CBDC?
The paper states that a CBDC should be intermediated and identity-verified. Unfortunately,
posing these requirements, especially at this stage of US CBDC development, is premature.
First, these are not well-defined terms. Intermediation can happen at many points in
transacting: gaining access to the transaction system (receiving a payment), custodying
funds, writing and releasing wallet software, or even processing transactions. These are all
distinct functions that come with different risks. Exactly which functions is the paper
suggesting should be intermediated? Note that the US does not have a universal digital
identity system, and is not likely to have a widely-adopted one in the next few years.
Requiring identity documents of CBDC users would be in contrast to the design of digital
cash. Would people who do not have identity documents be prevented from using the CBDC
at all? If it’s the same level of identity verification and intermediation as the existing banking
system, then this likely reduces the potential for CBDC to help with reduced transaction costs
and financial inclusion. Determining that “financial institutions in the United States are subject
to robust rules that are designed to combat money laundering and the financing of terrorism.
A CBDC would need to be designed to comply with these rules” is premature. The rules apply
to financial institutions, and a CBDC would be a financial asset. The architecture of a CBDC
would need to be able to withstand changes in regulation and should not “bake in” rules that
might or might not apply to a wide variety of institutions and users that might hold the CBDC.
If CBDC is not being held by financial institutions (for example if it is being transacted in small
amounts in a peer-to-peer fashion) it should not be subject to the same rules. In fact, doing so
might eliminate potential benefits like financial inclusion and reduced costs.
_________________________________________________________________________
Payments Leadership Council
Industry
Trade Organization
Country
State
Email
info@paymentsleadershipcouncil.org
"Money and Payments: The U.S. Dollar in the Age of Digital Transformation" provides a
comprehensive high-level assessment of the opportunities and challenges associated with the
deployment of a CBDC including the public-private boundary between the activities of the Board of
Governors of the Federal Reserve (the Fed) and the private sector. That said, the Payments Leadership
Council would like to highlight some items of importance that PLC members would recommend the
Fed explore in greater depth.Risk and ChallengesCommercial incentive: Consideration must be
given to whether all firms will be mandated to offer CBDC accounts. The absence of a mandate may
create obstacles to ensuring universal access. Implementation: The PLC believes that there are
several implementation issues that should be addressed in order to create the appropriate framework to
mitigate and balance the risks identified by the Fed and ensure a level playing field for all participants.
Should the Fed develop a CBDC, it is important to:● Clearly articulate the CBDC use case, market
applicability, scaled development, and overall goals before engaging in any potential activities.●
Ensure the CBDC's interoperability with existing national and international payments systems and
compatibility with existing acceptance infrastructure.● Outline where friction may lie within the
current payment and financial systems and how the deployment of a CDBC would alleviate existing
friction or challenges.● Identify potential market disruption and build a detailed plan to mitigate
disruption. ● Engage the private sector throughout the development of a CBDC. The payments
industry has the expertise and experience in building effective and equitable payments networks and
can provide strong resources for the federal government as it considers a range of modernization tools
and techniques.● Support an open and competitive marketplace that spurs innovation and fosters
investment into the payment technologies of tomorrow. The Fed should explore a structure that ensures
the ability for private market participants to compete fairly in order to effectively serve consumers and
that positions the central bank as the operator of strategic activities such as minting tokens.●
Investigate the development of a robust risk management framework able to embrace the complex
architecture of modernized payments systems. The Federal Reserve should protect users and private
and public payment infrastructure by prioritizing cybersecurity and privacy to the same minimum
standards as the world's leading payment networks of today.● Explore additional innovative
payments systems and tools to see how other modernization efforts may compare to a CBDC.●
Create a regulatory framework that further expands the existing open and competitive payments
systems in the U.S. and boosts international competitiveness.
In the U.S. today, consumers can choose to pay by cash, card, account-to-account transfer,
or through other digital payments. To provide value to consumers, a CBDC must have the
same ease of use and accessibility as current payment methods and allow for consumer
choice at the point of sale. Deployment of a CBDC is not a prerequisite to innovation. New
capabilities can be delivered via upgrades to existing payments infrastructure or through the
construction of new infrastructure that does not expand consumers' access to central bank
money. The core factor that could distinguish a CBDC from any other retail payment system is
the central bank's ability to provide an absolute guarantee on its liabilities. It is critical to
understand that the most important and differentiated feature of a retail CBDC is the creation
of a new form of public money. The ability to create a new form of public money is a distinct
power available only to the Fed and Treasury.
inclusion?
Some people continue to rely on cash for most, or all, of their payment activities. These
constituencies include individuals who are unbanked or underbanked, a subset of elderly
individuals, and a small proportion of individuals disinclined to use electronic payments for
legitimate reasons (for example due to a preference for the full anonymity offered by cash
transactions). Continuing to meet the needs of these individuals falls within the Fed's
mandate to facilitate efficient payments; however, it is not clear that a CBDC would resolve
the underlying issues faced by underbanked individuals, including financial literacy and the
ability to access banking services, and it seems very unlikely that it would meet the needs of
those unable or unwilling to use digital payment systems. Building an inclusive economy
means promoting financial literacy and security and ensuring all small businesses can grow.
Existing digital payment systems help foster financial inclusion and expand access to new
opportunities, but it remains unclear whether a CBDC is better suited than other digital
payment offerings to support financial inclusion. The elements critical to unlocking increased
financial inclusion within the U.S. are largely tertiary to increasing the availability of central
bank money and creating a new set of payment rails. Therefore, if the Fed believes financial
inclusion is a key rationale for a CBDC, the PLC believes that further study is needed to
demonstrate a link between underlying issues and a CBDC's ability to solve them.
PLC members concur with the Fed's evaluation that "the potential for significant foreign demand for
CBDC …would further complicate monetary policy implementation" with potential implications for
credit supply, bank lending, and even financial sector stability. As such, it will be critical for the Fed to
carefully examine the suitability of circulation (such as quantity limits or tiered remuneration),
ensuring that the transmission of monetary policy would not be affected by shifts of large amounts of
commercial bank money to holdings of digital dollar. There are a range of policy tools the Fed can
use to ensure that a digital dollar does not undermine the U.S.' financial stability goals either in the
course of its regular operations or during a crisis. For instance:● Limiting the absolute quantity of
flows and adjusting the desirability of holding digital dollars through a price mechanism. While further
study of this issue is clearly required, it appears that each of these mechanisms has its own strengths
and weaknesses. Limits have the advantage of being easily understood by users and, if set at a
reasonable level, have little or no impact on consumer usability. At the same time, they provide
commercial banks with a strong understanding of their potential exposure to deposit outflows. While a
range of technical issues might need to be addressed—for example how inbound payments that would
exceed a user’s limit should be handled—these challenges appear tractable, particularly if addressed at
the design stage. ● Alternately, the Fed could influence the desirability of holding a digital dollar by
adjusting its rate of remuneration—either on the entirety of a user’s holdings or at different rates across
two or more balance 'tiers.' While this approach would provide the Fed with greater discretion, some
commentators have expressed concerns that this approach may not be enough to halt a 'digital bank run'
during financial crisis. Moreover, the use of highly negative rates to constrain deposit substitution
during a crisis could face significant popular and political opposition.Ultimately, it is the view of
the PLC that the design of any digital dollar should provide the Fed with the capacity to both impose
limits and adjust remunerations across a variety of dimensions. Further study will be required to
understand the best application of these tools. If the Fed chooses to move forward with the piloting
and deployment of a digital dollar, the PLC would suggest the following actions to improve collective
understanding of the risks of deposit substitution and the appropriate use of policy tools to mitigate
those risks: ● Developing a scenario-based analysis of the operational, macro-economic, and
financial stability impacts of a CBDC that include a broad range of calibrations for the rate of user
uptake and the degree of commercial deposit substitution;● Carefully analyzing, where possible, user
behavior data from CBDC pilots and production deployments in comparable economies; ●
Conducting live controlled-access pilots of large scale, breadth, duration, and complexity (including
the involvement of multiple supervised private intermediaries) in order to more effectively model
consumer behavior towards CBDCs, as well as the policy levers that would permit the Bank to
influence the rate of deposit substitution.It is important to note that most central banks appear to
have determined that the additional functionality offered by a CBDC is likely marginal in contrast to
existing mechanisms from a purely monetary policy perspective. U.S. CARES disbursements, for
example, revealed that the current financial system is equipped to disburse funds to end-users. Issues
with CARES disbursements had to do with fairly limited access to identity and account detail pairings,
not the speed of the payment system or the nature of the money being moved.Additionally, some
have asserted a CBDC system would enable easier "helicopter drops" (i.e., the term coined by Milton
Friedman in his 1969 paper, "The Optimum Quantity of Money," that has since been used to refer to a
monetary stimulus strategy that increases the quantity of money supply and distributes cash directly to
the public). These commonly discussed narratives, however, assume universal (rather than opt-in)
participation in the CBDC system.
stability?
The economic changes arising from a shift to real-time retail payments are well documented and
include: ● A move away from an informal economy; ● Increased working capital for businesses;
● Improvements in the efficiency and cost of the financial system; ● Expanded financial
inclusion. There are now jurisdictions all over the world that have real-time or near-instant
payments. Most of these operate on a deferred settlement basis with one or two having or planning 24/7
settlement of retail payments. The ability to reliably settle interbank obligations using balances at the
central bank or in central bank money is vital not only to the smooth functioning of the payment system
but also to financial stability more broadly. However, it is important to note that there are a variety of
approaches the Fed can take to mitigate the impact of the challenges on financial stability with the
introduction of a CBDC. More on these approaches are highlighted in the response to question four.
PLC members believe that all efforts to drive payment innovation should be guided by the following
high-level principles: ● Provide strong consumer protection, including privacy and security of the
consumers’ data and transactions; ● Deliver a level playing field that ensures all
stakeholders—including but not limited to financial institutions, merchants, and mobile network
operators—have the ability to contribute to and benefit from the introduction of a CBDC; ● Ensure
future innovations interoperate with the domestic payment infrastructure and international payments
networks to enable the design of products that offer consumers greater flexibility, choice, and reach;
● Ensure future innovations are reliable, resilient, and secure so they can support large volumes of
transactions and be available 24/7; and ● Operate in full compliance with all applicable laws and
regulations, including those applicable to anti-money laundering, and consistent with the economic
systems of the markets the network/blockchain operates in.Within this context, stablecoins
represent a fascinating and fast-moving area of innovation. Alongside a number of other payment
mechanisms, well managed and adequately supported stablecoin projects have the potential to
introduce improvements in a user’s payment experience and expanded payment functionality—such as
increased programmability of payments. That being said, it is important to recognize that the
underlying structure of a fully collateralized stablecoin is functionally similar to that of an e-money
provider, a view that is shared by the UK’s Financial Conduct Authority in its guidance on crypto
assets. A stablecoin would not benefit from the explicit guarantee enjoyed by a CBDC and would
not offer the interest income and other benefits typically associated with commercial bank deposits.
Moreover, from the perspective of a central bank, stablecoins would constitute a new variant of
commercial money, and thus would not address any concerns that the Fed may have regarding the
implications of declining cash usage (addressed in detail in our response to question eight). As such, it
is our view that, while stablecoins could potentially add value to the U.S. payments ecosystem, they
should not be viewed as a substitute to a CBDC, particularly with regard to ensuring consumers'
continued access to central bank money.
There is a range of policy tools the Fed can implement to ensure that a digital dollar does not
undermine U.S. financial stability goals either in the course of its regular operations or during
a crisis (addressed in detail in the response to question four).
Cash usage is in natural decline but will remain a viable option for consumer payments for the
foreseeable future. The rise of electronic and contactless payments has significantly
expanded the array of payment options available to consumers, and the benefits of these
options has contributed to a natural decline in the use of cash. For consumers there is little or
no distinction between cash (central bank money) and deposits (commercial bank money);
the two are easily interchangeable and both are readily accessible and available. Consumer
choice in a payment method is determined by ease of use, acceptance by the merchant
and/or other benefits or incentives. Consumers do not choose a payment method based on
the distinction between central bank money and commercial bank money. The same
principles should apply to the use of CBDC and electronic payments. As outlined in the
response to question 3, some people continue to rely on cash for most, or all, of their
payment activities. It is clear that continuing to meet the needs of these individuals falls within
the Fed’s mandate to facilitate efficient payments; however, it is not clear that a CBDC would
resolve the underlying issues faced by underbanked individuals, and it seems very unlikely
that it would meet the needs of those unable or unwilling to use digital payment systems.
CBDC?
Absent the existence of a CBDC, the domestic payments landscape is likely to be

characterized by the same vibrant competition and world-leading innovation that has defined
the past several decades. The desirability of the dollar as an international reserve and trade
settlement asset is driven by an array of factors including the depth and breadth of the
treasury market, the U.S. legal system, the absence of capital controls, the sophistication of
the U.S. financial system, and more. Over the longer term, the absence of a tokenized form of
the U.S. dollar could limit its capacity to natively interoperate with other tokenized assets,
most notably foreign wholesale CBDCs and wholesale CBDC platforms (e.g., Dunbar,
M-Bridge, etc.).
See our response to question nine above. In general, development and implementation
should only begin once a specific use-case and well-defined objectives have been articulated
and agreed upon.
Cross-Border Spillover: In its October 2020 "Report on a digital euro," the European Central Bank
notes that international spillovers of a digital euro could have serious unintended consequences on
third-party economies, potentially driving the substitution of domestic money and amplifying "the real
and financial cross-border spillovers of domestic monetary policy shocks by creating a new channel for
their propagation." The bank expressed concerns that the unintended negative macroeconomic
consequences of such spillovers would be disproportionately borne by smaller, less developed and less
financially stable economies. The ECB has thus asserted that mechanisms will need to be established
that "limit the scope of users of the digital euro when necessary—for example to exclude some
non-euro area users."The same may prove true if a U.S. CBDC is introduced. Further study is
required to identify and develop the correct policy tools to mitigate these spillover effects, however, it
is clear some form of policy for controlling the size of non-U.S. digital dollar holdings would be
necessary.Counterfeiting And Double Spending: Effectively mitigating the risk of counterfeiting
and double spending for a digital dollar would require consideration across a number of
dimensions:● Governance: A two-tiered CBDC design, alongside a strong regulatory framework to
provide and enforce operating rules and standards, would ensure that the central bank retains
institutional governance and control over the core CBDC infrastructure—enabling it to implement and
maintain strong protections against counterfeiting or double spend.● Technology: Appropriate
technology can support a digital dollar that provides traceability and proof of central bank issuance via
cryptographical evidence. These technologies could ensure immediate reconciliation, immutability, and
auditability through cryptographic guarantees. Additionally, given the Fed's consideration of a digital
dollar that supports offline transactions, the ability to create a secure bearer instrument that facilitates
transactions while eliminating the risk of double-spend will be required.
The design of any digital dollar should capitalize on the complementary capabilities of both the Fed
and the private sector. A ‘two-tier’ or ‘platform’ model would provide a secure, fast, and resilient
technology environment that avoids the unnecessary expense of parallel infrastructure and ensures that
compliance requirements remain primarily with industry. This approach would ensure that the Fed
retains institutional governance over core monetary infrastructure, while relying on private sector
competition to drive innovation, efficiency, and a diversity of offerings. Under a ‘two-tier’
approach, the private sector could support the digital dollar in a variety of ways, including, but not
limited to:● Customer Identification: Financial institutions and other regulated intermediaries are
well positioned to onboard new users (e.g. sign-up, KYC, funding of accounts, etc.), conduct ongoing
AML/CFT monitoring, and provide user education.● Privacy: PLC members believe that digital
dollar transactions should be subject to the same KYC and AML obligations as all other electronic
payments, and that the requirements on the flow of payments data for AML and CTF monitoring apply
equally to digital dollar transactions. In addition to well-established existing privacy tools, a host of
emerging technologies have the potential to offer even greater levels of user privacy without
undermining the objectives of existing compliance regimes. These include:● Zero-knowledge
proofs (ZKP) guarantee that customers have sufficient tokens without revealing the balance to
merchants.● Shamir Secret Sharing (SSS) reveals data details only if a pre-defined majority of nodes
agree.● Multi Party Computation (MPC) supports wallet infrastructure where private keys reside
across multiple locations and supports data processing (e.g. AML/KYC) while keeping details
private.● Anonymization techniques, such as differential privacy, prevent consumer’s personal data
from being identifiable within large datasets.
Protecting all U.S. payments networks is more important than ever as digital payments and
technology play an increasingly critical role in the broader economy. The introduction of any
new payments service or product involves risk assessment inherent in design and requires
ongoing monitoring and evaluation once the service is launched. Should the Fed decide to
move forward with the creation of a CBDC, it is critical to develop a dedicated approach for
cyber resiliency that encompasses the direct and indirect cyber risks to a potential
infrastructure as well as the relevant stakeholders. The members of the PLC understand
first-hand the incredible amount of sophistication, investment, and expertise that goes into
ensuring the defense and resiliency of payments networks and welcome the opportunity to
continue this essential dialogue with the Federal Reserve on cyber resiliency.
Should the Fed move forward with the creation of a CBDC, the PLC believes that adoption of
a digital dollar is more likely if the digital dollar has the status of legal tender.
While the success of a CBDC in part relies on sufficient user adoption to justify the time and
investment, it would presumably not be desirable if the CBDC were to replace commercial
deposits as the primary store of value held by retail consumers, which would risk undermining
the stability of the U.S. financial system and, during potential stress periods, risk reducing
commercial bank deposits. Academic and central bank publications in recent years have
detailed the implications of large-scale or volatile substitution between commercial and
central bank money. In order to mitigate the often-unpredictable deposit substitution effect,
many central banks across the globe have concluded that they will take a zero-yield, cash-like
approach to the design and deployment of the CBDC. This often means providing a zero rate
of return on CBDC holdings.
Limits on individual holdings of a CBDC may help to avoid destabilizing levels of deposit substitution,
particularly during periods of a financial crisis and in scenarios where there could be heighted
cybersecurity risk. In these instances, quantity limits could mitigate the impact of cyber theft. Other
benefits include:● Limits can be easily understood by users;● Limits set at a reasonable level
have minimal impact on consumer usability.Limits provide commercial banks with a strong
understanding of their potential exposure to deposit outflows. However, the Fed should be aware of
any potential implications of quantity limits. Research by the Swedish Riksbank suggests that the use
of limits could have the unintended consequence of disrupting parity between the market valuation of
retail CBDC deposits relative to commercial bank deposits, particularly during a stress period. In its
2018 "e-Krona Project Report 2" the Riksbank notes that:"It is the Project’s assessment that
limitations on access to e-krona may be associated with problems. For example, it may be difficult to
maintain parity between Swedish krona in the form of cash, deposits in bank accounts and reserves.
Assume, for example, that the e-krona becomes very popular but that there is a maximum limit
imposed on each person’s holdings. This could lead to the emergence of a market on which those who
have not fulfilled their e-krona quota would be offering those who have the opportunity to buy e-krona
in cash or by depositing money in a bank account at a higher than one-to-one price."Should the Fed
develop a CBDC, PLC members encourage the Fed to work with the U.S. and international academics
and consumer and industry stakeholders to understand and resolve technical issues preferably at the
design stage, to set reasonable limits and explore how to handle inbound payments that would exceed a
user’s limit, as well as how limits might result in a loss of pricing parity between the central bank and
commercial bank money.
Should the Fed develop a CBDC, PLC members strongly concur with the Fed's suggested
"intermediated model" for the deployment of the CBDC and stated view that "potential intermediaries
could include commercial banks and regulated nonbank financial service providers, and would operate
in an open market for CBDC services." Open and competitive payment ecosystems are critical to
enabling access, adoption, and use of payment options, which serve a wide range of user needs and
preferences. Private-sector competition in the provision of payments stands to solidify and foster
payments innovations, financial inclusion, and free flow of national and international payments.
The PLC also concurs with the Fed's evaluation of the benefits of an intermediated model for
CBDC in the discussion paper:● "An intermediated model would facilitate the use of the private
sector’s existing privacy and identity-management frameworks; leverage the private sector’s ability to
innovate; and reduce the prospects for destabilizing disruptions to the well-functioning U.S. financial
system."This model would ensure that the Fed retains institutional governance over core monetary
infrastructure, while relying on private-sector competing networks to drive, including but not limited
to, continued innovation, efficiency, identification, interoperability, and consumer protection.
Therefore, should the Fed continue to examine the deployment of a CBDC following a review of the
submissions to the discussion paper, the PLC strongly encourages further engagement with the private
sector to explore an intermediated model that works for the U.S. financial system.
A CBDC without offline capability could limit the usability and usefulness of CBDC. The PLC
concurs with the Fed's stated evaluation that the offline capabilities of a CBDC "could
enhance the operational resilience of the payment system." From the diverse experiences of
the PLC members, achieving offline capabilities would improve the overall CBDC system with
greater resilience, reach, and financial inclusion. Delivery of offline payments could be
structured as a value-added service, with risk underwritten by supervised private
intermediaries, rather than as a feature of the core system. The handling of offline
transactions by card-based ecosystems today provides an instructive model for how this
could be accomplished by using a combination of technology and business roles to define
liability and limit exposure. PLC members make use of counters on the payment card chip to
manage the risks of offline payments. These counters can be set to allow offline transactions
only when the number of offline transactions or cumulative amount of offline spend are below
a certain threshold. These risk parameters may be set at a regulatory level or based on
individual issuer risk tolerance. This allows the convenience of offline transactions for
consumers and merchants at a manageable level of risk that is tolerable for all entities in the
ecosystem. Even though these are innovative technologies that continue to evolve, there is
likely no silver bullet to offline CBDC transactions, meaning that a stakeholder in the
ecosystem will always be required to take on some level of risk. First, the challenge lies in
finding a way to enable offline payments without exposing either the buyer, seller, or the Fed
to the risk in case the payment might not ultimately be settled. Second, there is still a risk that
criminals will try to exploit these new forms of money and platforms, as the Fed,
governments, private-sector networks, and consumers continue to explore safeguards. As a
first step, it's vitally important that the Fed collaborates with private-sector innovators to
deploy tried-and-true security architectures into a CBCD's offline capabilities, including but not
limited to public-key cryptography through strong user authentication measures and the use
of offline limits on the payment card chip to only allow offline transactions below certain
frequency or cumulative amount. The PLC believes in the paramount importance of rooting
consumer trust in the commitment of the CBDC to strong security and privacy practices online
and offline.
sale? If so, how?
A CBDC could provide consumers value as a payment mechanism if it can be used for a wide
variety of in-person and digital transactions. However, enabling acceptance points is one of
the greatest challenges to driving the mass adoption and usability of a new payment solution
from day one. Therefore, should the Fed make the decision to deploy a CBDC, PLC members
strongly recommend an open acceptance model. Linking the CBDC to existing payment
networks with broad merchant acceptance could potentially make adoption and acceptance
easier for merchants. Merchants are more likely to accept a CBDC payments option if this
acceptance will not add unnecessary costs and complexities to their existing, proven
transaction model. The Fed should continue to incentivize the private-sector networks to
expand the reach of existing networks to a broad populace.
PLC members concur with the Fed's stated evaluation that a CBDC could "creat[e] additional
opportunities for cross-jurisdictional collaboration and interoperability" as cross-border
payments and digital trade continue to grow in prevalence. As a first step, should the Fed
continue a review of the applicability and need for a CBDC in the U.S., it would be beneficial
to conduct further outreach and collaboration with the private sector on the potential
establishment and interoperability across supervised intermediaries of a CBDC ecosystem.
Protocols that facilitate interoperability require an exceptional amount of precision in their
development, deployment, and ongoing execution. The establishment of such interoperability
would help avoid closed loops that reduce the fungibility of money, fragment liquidity, and limit
competition. The goal of interoperability is to strengthen the domestic payment ecosystem
and reinforce the role of central bank money at its core, however international interoperability
will also be critical for facilitating cross-border payments.
CBDC?
It is not possible to predict the entire scope of services enabled by a CBDC. Therefore, as
future demands on payment systems continue to evolve in unpredictable ways, the PLC
recommends that the Fed, should it make the decision to create a CBDC, embrace the
necessary scalability, extensibility, and flexibility of the CBDC design to ensure the digital
currency is future-proof for optimal value-added services.
benefits of a CBDC?
To make CBDCs successful, central banks need to establish the digital currency as a widespread means
of payment while avoiding that they become a form of investment. As identified in the European
Central Bank's December 2021 paper, "Central Bank Digital Currency: functional scope, pricing and
controls," and discussed throughout the comment here, central banks need to consider three conditions
for success in design and deployment of a CBDC, including:● Widespread merchant
acceptance;● Efficient distribution of CBDC;● and, demand from consumers to pay with
CBDC.Should the Fed move forward with a CBDC, the PLC strongly believes that private-sector
leaders and innovators, particularly payments companies, can and should play a proactive role in
helping guide and facilitate the birth and maturation of a CBDC in the U.S. PLC members have a
breadth of expertise necessary to support every stage of a CBDC’s evolution. In any case, the Fed
should define a business model which preserves a competitive payments landscape, preserves sufficient
and sustainable commercial incentives for participants, and allows seats for democratic governance
with respect to the continued design and evolution of a CBDC in the U.S.
_________________________________________________________________________
Pollee team organige by green tree
Industry
Individual
Country
Bangladesh
State
Email
Pollee team organige by green tree green food Dhaka service world green world tree service
cleen world long life jeurny advaisore WOD media with publisher Pollee green tree found
Bisness mail nasir@greentree.com Bikash acount 88001994343295 any bank of bd
inclusion?
stability?
CBDC?
sale? If so, how?
CBDC?
benefits of a CBDC?
_________________________________________________________________________
ANB Bank
Industry
Country
State
Colorado
Email
jeff.patterson@anbbank.com
While the paper outlines a few potential, though unlikely, benefits of a CBDC, it doesn't
address the primary question about what problem a CBDC solves and barely touches on the
risks presented by such a digital cash product. First, let's address the economic risk which
would be in the trillions and not just borne by the Federal Reserve. Developing the primary
blockchain that would make the CBDC possible would be just the initial cost, and
subsequently paid by taxpayers. The costs to adopt existing payment and bank systems
capable of consuming CBDC would quickly mount into the trillions of dollars. This economic
cost would be passed onto small businesses and community financial institutions, which
would prevent many of them from being able to participate in a CBDC payment system.
Since the CBDC would be digital cash, criminals and hostile nation nation-states would
highly target it. Billions are already lost each year due to fraud scams. Introduction of a
CBDC would see such losses escalate quickly. If losses that result from individuals willingly
sending money as a result of a scam are covered by the Federal Reserve then these costs
could impact monetary policy and the overall financial system. Currently, if a financial
institution follows the law and does not cover fraud losses from consumers who authorize the
transfer of funds, the financial institution bears the reputation risk from negative publicity. If
the Federal Reserve operated this way, the very value of the dollar would suffer from a
reputation of losses, and many would exit the CBDC. Lastly, the paper doesn't touch on
known blockchain technology risks such as high-power consumption and the resulting
environmental damage. It doesn't address quantum risk related to the encryption algorithms
used by current blockchain technologies. A much more thorough review of risks should be
performed and published before any steps are taken to develop a CBDC.
Yes. The proposed benefits could be better achieved by updating existing technology,
expanding central bank exchange agreements, and reducing regulations. The majority of US
dollars in circulation now are digital, and most transactions are digital. New technologies are
already in development that will enhance digital transactions without having to create an
entire new infrastructure for a CBDC. FedNOW will provide a greatly improved payment
system that will spur and drive innovation that exceeds what might result from a CBDC and
will fit into the existing payment infrastructure. If the goal is increasing financial inclusion, a
review of laws, regulations and guidance that currently incents financial institutions to de-bank
riskier customer behaviors should be reviewed and updated to encourage products and
services for the unbanked.
inclusion?
It is highly unlikely that a CBDC, combined with a consumer account held by the Federal
Reserve, would impact financial inclusion. For many consumers who do not have a bank
account currently, it is unlikely that an account at the Federal Reserve would be viewed
positively or desired. Additionally, digital currencies are not well understood or accepted by
the majority of the population. Recent, wild swings in the value of digital currencies have led
many to exit the market and tainted the perception of digital currencies in general.
Blockchains' open and distributed nature is one of the key mechanisms that establishes trust
in the technology and makes it work. Any central bank-controlled blockchain will, by
necessity, not be open or distributed but tightly controlled, reducing trust in the technology
and offsetting possible increases in trust due to the government backing. A CBDC on its own
would have no impact on financial inclusion. Finally, the staggering upfront costs to update
payment systems, bank core systems, accounting systems, point of sale systems, and other
technology that forms the infrastructure of the modern payment system would prevent many
small businesses and community financial institutions from being able to participate, which
would have a large negative impact on financial inclusion.
A US CBDC offered through consumer accounts at the Federal Reserve would have a
significant negative impact on the Federal Reserve’s ability to implement monetary policy.
Removing funds from the existing financial system would reduce the ability to lend, limiting
the ability to implement monetary policy effectively. Additionally, the negative impact on
community financial institutions would be significant.
stability?
The paper doesn’t address a number of known risks, such as fraud risk, risk of the system
being non-functional, risk of a centralized financial system, disintermediation of financial
institutions, and doesn’t account at all for unknown unknown risks from blockchain
technology. These, and other, risks present a significant potential to seriously undermine
financial stability.
A CBDC will have adverse impacts on the financial sector no matter how it is developed. If
used strictly by financial institutions, the costs to incorporate a CBDC into existing bank and
payment systems would greatly outweigh any benefit a CBDC would bring. If the Federal
Reserve offered consumer accounts holding the CBDC, the entire financial sector would be
disintermediated from the financial system. This would negatively impact millions of
consumers as access to services offered by financial institutions would no longer exist.
There are no tools that could mitigate the adverse impact on the financial sector of a CBDC
offered to consumers through a Federal Reserve account. There are also no tools that will
mitigate previous discussed risks to a level that would provide comfort to the millions of
consumers who would lose access to their community financial institution.
Cash usage would increase, along with the risks associated with cash usage, if a CBDC is
offered to consumers through a Federal Reserve account. A large number of consumers
would consider this an encroachment on their privacy and would move to using more cash.
The combined negative impact of a CBDC on community financial institutions would leave
many consumers with fewer banking options and further exacerbate the increase in cash use.
CBDC?
International standards for financial transactions have already been developed that carry a
great deal more information regarding the transaction than a blockchain based CBDC could.
Expanding existing payment systems to use these standards and implementing central bank
settlement agreements would be the preferred method to evolve cross-border payments.
The US dollar is the word’s currency due to the faith and trust in the US. Decisions by other
nations to issue a CBDC should not influence a US decision to do so. A CBDC must, first
and foremost, solve a problem. And it must solve that problem in a way that existing payment
systems can't and that those systems are not able to be updated to solve. It must also
strengthen the U.S. financial system and not lead to the disintermediation of community
financial institutions. The risks of a CBDC greatly outweigh any benefit of offering one.
This paper doesn’t even scratch the surface in discussing risks to the U.S. financial system
associated with a CBDC. Mitigating potential risks from a CBDC is not possible with a CBDC
accessed through consumer accounts held at the Federal Reserve. Adding such an
unregulated and technologically risky mechanism into the payment system exponentially adds
to the risks a CBDC will bring. The unlikely potential benefits from a CBDC do not outweigh
the risks it presents to a safe, robust, effective and secure U.S. financial system.
The only way a CBDC could provide privacy to consumers without providing complete
anonymity is if the CBDC is facilitated through existing financial institutions and their existing
regulatory system. Financial institutions are well equipped to manage the risks of illicit
financial activity while protecting consumer privacy.
No. Using the Merriam-Webster definition of legal tender – money that is legally valid for the
payment of debts and that must be accepted for that purpose when offered” – would place an
incredible burden on every business and individual in the US to be able to accept this form of
payment immediately upon the release of a CBDC. This would not be technically feasible or
practical.
If financial institutions strictly hold the CBDC as a reserve, similar to reserves currently held
in the Federal Reserve, it should function the same as current reserves. If the CBDC is held
in private consumer accounts, the CBDC should not pay interest as it is not inherently being
used to generate new money through the lending function. Businesses or others holding a
CBDC on behalf of a consumer may be free to pay interest at their discretion.
If held in individual consumer accounts, yes. A CBDC would essentially be digital cash. We
already see scams and fraud accounting for billions in losses to consumers and small
businesses each year. A digital cash product, such as a CBDC would be heavily targeted by
criminals and hostile nation states. Without quantity limits, the amount of losses would quickly
escalate into the trillions, whether those losses are borne by the individual consumer account
holder or the Federal Government. The resulting losses will result in reputation harm to the
entire US financial system and the value of the dollar. Setting limits that would effectively
mitigate this risk would severely limit the value of a CBDC payment mechanism.
While there is no real problem that a CBDC solves and no need for one, if one is developed,
access to the CBDC should be intermediated through financial institutions as access to
primary US payment systems is now. The regulatory structure already exists and financial
institutions are already well established to facilitate secure accounts and transactions. Using
the existing financial system would help limit the costs a CBDC would create. Bringing a
CBDC as a non-regulated payment system to the effective, safe and trusted U.S. financial
system creates great risk.
Offline capabilities would greatly increase a product that already carries great risks, with no
ability to mitigate those risks. That an offline block could be manipulated by one party to the
transaction prior to it being merged into the central blockchain when it comes back online
presents great risks. The resulting harm to the U.S. financial system could be catastrophic.
sale? If so, how?
It isn’t that a CBDC should be designed for the point of sale. It’s that there are thousands of
existing point of sale systems, banking systems, and other payment systems that would need
to be updated to use the underlying CBDC. This would represent trillions of dollars of
expense, much of which would be passed down to small business and community banks,
disenfranchising them from this payment mechanism.
As with question 19, it is the updates and modifications to existing payment platforms to
interact with the CBDC that would end up costing trillions of dollars and present great
economic risks to the financial system.
CBDC?
Any blockchain-based product developed with current technology would quickly need
significant updates as quantum technology becomes more and more mainstream. While
existing systems can be adapted over time as quantum technology advances, at some point
the entire basis of a blockchain system will need to be redeveloped to quantum standards
due to the mathematical nature of how the blockchain operates.
benefits of a CBDC?
_________________________________________________________________________
Bitt
Industry
Technology Company
Country
State
Utah
Email
simon@bitt.com
In terms of additional potential benefits, payment efficiency will likely be enhanced. If

designed and configured correctly, CBDC technology would offer a platform that allows
competing and innovative payment services to thrive, which would lower costs significantly.
A CBDC payment system would provide a new way to make payments, serving as a new
backup to the electronic payment system in place. This is convenient since the current
backup system, physical cash, is showing a downward trend in usage. The development of a
CBDC could generate efficiency improvements in the financial system. Common knowledge
of an inevitable faster and cheaper payment system could serve as an incentive for banks to
carry out substantial improvements in their own payment rails. Additionally, there is an
important antitrust potential benefit. A CBDC would allow consumers the option to keep
personal information private when interacting with online payment platforms. This will remove
important market failures such as the potential digital data monopolies (since private
information about individuals could allow firms to implement price discrimination), or
externalities that lead to underinvestment in privacy by consumers (which allow private firms
to make inferences about other people for free). The implementation of monetary policy will
benefit from real-time information gathered from CBDC collective usage. Although the net
impact on monetary policy will depend on its final design (as explored in subsequent
questions), a CBDC will allow the Federal Reserve to have access to massive amounts of
data and be able to follow the path of the CBDC in the economy, in real-time, and without a
breach of privacy. With this information, the Federal Reserve could improve the efficacy of its
monetary policy. A CBDC might facilitate certain government payments and transfers. For
example, transferring benefits to households to deal with a particular negative event (e.g.,
natural disasters) or means-tested payments could be done efficiently with CBDC. Finally, a
digital currency has the potential to reduce the high costs associated with the management of
bills and coins. Businesses collectively spend hundreds of millions of dollars each year on
cash management services to protect them from the risks associated with holding,
transporting, and handling cash. Similarly, the Federal Reserve could save an estimated 90%
on the costs associated with issuing, managing and replacing notes and coins. In terms of
risks not mentioned in the paper, there could be a lower-than-expected level of adoption. This
could affect the Federal Reserve’s reputation, which is crucial for managing expectations of
the public for better implementation of monetary policy. If the CBDC does not have offline
capabilities it would be prone to potential failures. A CBDC that works using power sources or
telecommunication networks may not work in the case of a network disruption or power
outage. Bitt’s offline CBDC solution (in patent filing stage) has offline transaction capabilities,
with a reconciliation mechanism to the online network. On policy considerations, it is
necessary to frame the development and implementation of a CBDC within a strategic plan
for the payment system. The CBDC should only be a piece of this plan, which should also
include incentives to innovation and the role of government, private sector and academia,
regulatory changes aiming to increase innovation, and a plan to work with international
partners for setting global standards.
Summarizing the paper, the benefits mentioned include safely meeting future needs and
demands for payment services, improvements to cross-border payments, supporting the
dollar’s international role, promoting financial inclusion, and extending public access to safe
central bank money. It is recommended to not approach the CBDC plan as a dichotomous
on-off decision. Instead, it should be framed within a strategic and comprehensive plan for the
payment system, especially in the context of web3 and decentralized financial ecosystems.
The CBDC should only be a piece of this plan, which should also include incentives to
innovation and the role of government, private sector and academia, regulatory changes
aiming to increase innovation, and a plan to work with international partners for setting global
standards. With respect to meeting future needs and demands for payment services, a first
option is to correct inefficiencies in the current payment system. There are substantial
frictions in payments in the US, as MIT professor Christian Catalini mentions in recent
research, due to legacy infrastructure, market fragmentation and lack of competition. Potential
solutions are the introduction of a fast payment system such as FedNow, estimated for 2023,
a Real-Time Gross Settlement (RTGS) system, which, notwithstanding, would have a cap of
USD25,000 per transaction. Besides, this option does not address key requirements of the
digital economy (e.g., configurable programmability, among others). A second, more
comprehensive option is to foster digital currency competition and innovation. This would
entail the Federal Reserve allowing access to Fed master accounts to an ample set of retail
digital currency and stablecoin providers, such as noninsured banks, fintech payment firms,
and even nonbank fintechs. However, private digital currencies and stablecoins are subject to
platform and operator risks and may require clear cut standards and regulations that have yet
to be defined. As for the dollar’s international role, and improvements to cross-border
payments, these benefits do not strictly necessitate a CBDC. The international dominance of
the US dollar rests on factors that are difficult to replicate in the short-term, and are not
necessarily related to having a CBDC. The depth and liquidity of a global, and accessible US
financial market, the fairness and stability of the US legal system, the reliability of US
monetary and financial policy, lack of barriers to international capital flows, among other
strengths, are the pillars of such dominance. Nevertheless, there is an outstanding
opportunity for the country to gain global influence through the development of standards for
CBDC, especially for cross-border transactions. This leadership cannot be obtained without
the US developing and testing CBDC technology. Regarding financial inclusion, an ongoing
alternative is the Bank On initiative, which promotes nationwide low-cost bank accounts. Data
from 2020 indicates that there is rapid scaling of the program, with 82% of new accounts also
new to the financial institutions (which includes youth participation). Although more analysis is
needed, it seems encouraging so far. However, a CBDC with design characteristics that
appeal to the unbanked and underbanked could have the potential to target that segment of
population, as it is explained in the following question. Therefore, a well-designed CBDC is
more of a complement than a substitute to the Bank On initiative. Finally, in terms of
extending public access to safe central bank money, this is important to the extent that
physical cash usage and acceptance decreases dramatically. Although the US is not there
yet, the downward trend in usage is undisputable (cash share of payments in 2012 was 40%,
whereas in 2020 it reached 19%). The observed shift is towards private money, which is not
riskless. Instead, it depends on the solvency of the financial institution issuing it. Same
applies in a near future in which private stablecoins and cryptocurrencies take a more
prominent role in terms of means of payment. Providing risk-free money to the public in the
form of CBDC could enable a safer alternative store of value in times of economic
uncertainty.
inclusion?
Financial exclusion is a significant problem in the US. It is estimated that around 7.1 million
households are considered unbanked (2019 FDIC Survey of Household Use of Banking and
Financial Services), and about three times more are underbanked. Besides, with 5.4% of total
population as unbanked, the US is at the bottom compared to other G7 countries. Financial
inclusion is important since, according to the World Bank, it has the potential to help the
achievement of ending extreme poverty and promoting shared prosperity. This is
accomplished by facilitating the use of financial services, that may result in investment in
health, education, insurance, and new businesses. Moreover, they can help the poor to
smooth volatile incomes and expenses when the household breadwinner falls ill or loses
his/her job, or when major expenses arise. In addressing financial exclusion, it is important to
consider the root problems. Unbanked households have consistently cited a set of main
reasons for their financial state in the FDIC surveys of 2013, 2015 and 2019. These reasons
are mostly related to costs (“don’t have enough money to meet minimum balance
requirements”, or “bank fees are too high”) or trust/privacy (“do not trust banks”, “avoiding a
bank gives more privacy” and “ID, credit, or former bank account problems”). Cost is also a
crucial determinant of financial exclusion, specifically for digital payments. For example,
unbanked households are more likely to be excluded from digital payments than banked
households, which could be due to not having home internet access, a smartphone, or cell
phone service. In other words, using digital payments is expensive and costs matter for
unbanked households. A CBDC could substantially improve the financial inclusion issue.
First, a CBDC would lower financial transaction costs by enabling multiple intermediaries to
enter and compete amongst themselves. Also, an increased number of licensed payment
service providers, especially those that are not regular financial institutions, would elevate the
trust of financially excluded households in using CBDC. Additionally, it facilitates the reception
of cash transfers from government, which is especially relevant for low-income families that
are often financially excluded. More importantly, a CBDC can be designed and configured to
foster financial inclusion. This design configuration should require no minimum balance,
provide low-cost or free access, and work under any circumstances (e.g. offline capabilities),
assure privacy for user, provide multiple endpoint access (not only e-wallet, app, or website),
and allow for low-cost conversion to physical cash. If a CBDC is designed considering
financial inclusion, it could serve as a mechanism to begin addressing the problem. The right
design of the CBDC would substantially increase its adoption by the unbanked and
underbanked, and progressively see these households start using a broad gamut of financial
services. For that purpose, and referring to the list of barriers explained above, as explained
by Jesse Leigh Maniff of the Federal Reserve Bank of Kansas City in a 2020 paper, a
financially inclusive CBDC design should require no minimum balance, provide low-cost or
free access under any circumstances (e.g. offline capabilities), be able to assure privacy for
user (and at the same time comply with anti-money laundering regulation), provide multiple
endpoint access (not only e-wallet, app, or website, but also cards and other payment
instruments), allow for low-cost conversion to physical cash, and require that CBDC service
providers go beyond regular financial institutions (which the unbanked do not trust) to include
payment service providers, social platforms, and other intermediaries who qualify for a CBDC
integration or requisite payments services license.
In terms of monetary policy implementation, initially, with the deployment of the CBDC, there
may be a partial shift from bank deposits (disintermediation) and physical cash into CBDC. It
is hard to estimate the amplitude of the shift, but, whatever it is, the shift from physical cash
into CBDC is an exchange of cash for cash, so the balance sheet of both the Federal
Reserve and of households is going to remain the same. However, there might be
differences in volatility. To the extent that the demand for CBDC is more volatile, it could
affect the overall volatility of the autonomous elements in the Federal Reserve Balance
Sheet. Under a floor system, this is not a problem, but if the Federal Reserve at some point
abandons the ample reserve approach, then an additional layer of liquidity intervention would
be necessary. Regarding the shift from deposits into CBDC, this will decrease the
commercial banks' reserves at the Fed, which, in principle, is what happens regularly when
the public shifts from deposits into physical cash. This is not a problem as long as the
reserves stay above the threshold for the ample reserve approach to function properly.
However, if the shift is large enough, the ample reserve approach would be compromised. If
that were the case, the Federal Reserve would need to compensate for the reduction in
reserves so that its level is at least above the floor. They might also need to revise their
current floor upwards, if volatility increases significantly due to the high speed at which CBDC
is transacted. Increasing commercial banks’ reserves is standard implementation of
monetary policy, and the Fed has multiple tools to accomplish that. However, there are two
subtle issues here: banks need the right collateral to increase their reserves, which, for a
sizable increase, they might not have enough. For that, the Federal Reserve might need to
consider supplying reserves against a wider range of collateral. Secondly, the balance sheet
of the Federal Reserve is going to increase to accommodate the issued CBDC. This in turn
might need a fine-tuning in terms of risk management on the Federal Reserve side,
depending on the specific assets held. The effects of monetary policy transmission
mechanisms are probably going to be faster (due to the digital nature of the CBDC,
depositors can more easily and costlessly move between deposits and CBDC), stronger, and
implemented more efficiently. This effect is going to increase in proportion to the scale of
adoption of the CBDC. For example, to the extent that financial inclusion is improved, then
the interest rate channel will be reinforced, because more households would have access to
interest-sensitive borrowing and saving instruments. Additionally, the pass-through of policy
rates to lending rates is likely to increase, since competition in the provision of credit between
banks and nonbanks would be greater. Monetary and fiscal policy could also be
implemented more efficiently. The Federal Reserve would have the opportunity to study and
analyze the dynamic of the CBDC in the economy, in real-time. Anonymized, aggregated data
should be captured to ensure data is not used for nefarious purposes, and users’ privacy is
respected. With this information, the Federal Reserve could assess in real-time which specific
monetary or fiscal measures are more effective, which would significantly increase the
efficiency and effectiveness of both types of policies. Finally, a CBDC could be designed to
pay interest rates. The options are ample: pay interest rates that are positive, negative,
variable, temporary, non-linear, or, more controversially, fees applied to CBDC not used in
specific time frames or for a particular purpose, among others. This would definitively add
tools for the Federal Reserve to implement more effective monetary policy. This comes with
secondary effects and therefore should be assessed further. More information on this topic
can be found in subsequent sections. In summary, the Federal Reserve will have to manage
some issues in terms of the mechanics of its monetary policy, but the transmission channels
are probably going to work faster and become more sensitive to changes in the policy rates.
On top of that, the Federal Reserve will substantially improve its knowledge of the
transmission of monetary and fiscal policy, so an optimization of these policies is reachable.
This is definitively a gain for the operations of the Federal Reserve towards accomplishing its
dual goals, and these results are obtained with a non-remunerated CBDC.
stability?
The implementation of a CBDC could introduce outcomes that affect financial stability, the net
effect of which should be assessed. In a crisis, a CBDC could be perceived as a safer asset
with respect to bank deposits, generating a move from the latter to the former, increasing the
probability of bank runs. This disintermediation (which comes with a potential reduction in
credit, and increase in banking cost, both for credit and deposits) is not confined to a period of
stress. An event of rapid and profound substitution from deposits into CBDC (e.g., at the start
of CBDC deployment) would be equivalent to a bank run too. This could happen more easily
with a CBDC (depending on its design, as discussed in the final part of the answer) because
of the elimination of frictions and costs to move bank deposits to the digital currency holding
account. Notwithstanding, the existence of other liquid and safe alternatives could mute the
systemic risk from CBDC. In effect, if the public can move their deposits to such alternatives
as narrow banks or Treasury-only mutual funds (these types of mutual funds registered
significant inflow after the collapse of Lehman Brothers in 2008, as opposed to observed
strong outflow in most prime money market mutual funds), then CBDC remains one option
among many. On the other hand, the implementation of a CBDC has important positive
effects on financial stability. To begin with, a CBDC would provide a backup payment system
outside of the banking system, which would reduce systemic risk. This may grow in
importance if payment infrastructure becomes increasingly internationalized. Furthermore, a
CBDC that could restrain the demand for private digital currencies, especially in the absence
of adequate regulation, could strengthen financial stability. To the extent that a private digital
currency becomes systemically important, the risks associated with its financial failure would
be systemic too. A CBDC, by being a digital instrument, would generate real-time
information to alert the Federal Reserve that a bank run is taking place. Thus, the Federal
Reserve can react quickly, in real time, by using its lending facilities, activating elements in
the design of the CBDC for such events (e.g. limit caps for daily transactions, or negative
interest rates) or if necessary, imposing a bank holiday. An evolved CBDC solution could
provide dynamically implemented functions such as circuit breakers, interest rates, and
transaction and holding limits to discourage bank runs should they be detected in real time.
In conclusion, it is unlikely that the net effect on the probability of a run is positive. This
statement is based on current research and modelling which clearly is not based on observed
information, and therefore is subject to interpretation. However, even if the statement
happens to be incorrect and the probability of bank runs increases, there is a set of central
bank policies, behaviors from commercial banks and design elements that could be
embedded into the implemented CBDC that could act as a buffer. These important
considerations are examined in detail in the following questions.
For households to hold and use CBDC they would need to shift from their physical cash and
commercial bank deposits and into the central bank digital currency. Commercial banks
would witness a reduction in their liabilities (lower deposits), along with a reduction in assets
(banks’ reserves at the central bank, which are used to transfer to the household’s CBDC
account). Commercial banks could end up with a contraction in their balance sheets. These
effects would be more pronounced as commercial bank liabilities are in direct competition
with a CBDC (i.e., retail deposits). Banks might try to compensate for the reduction in public
deposits by switching to other forms of funding, such as wholesale deposits, which are more
expensive and volatile. Additionally, they could vie with each other for retail deposits
remaining in the system through an increase in deposit interest rates, which would result in
decreasing profits. This decrease could induce an increase in risk-taking lending practices,
accompanied by a rise in lending rates. In order to mitigate such risks in the short term, the
central bank could resort to its lender of last resort function and compensate for the loss in
deposits with an injection of liquidity or an adjustment of reserve requirements. Also, lower
physical cash usage would translate into savings from cash handling by the banks. More
importantly, a CBDC would bring new opportunities for innovation that could benefit
participants (including expected newcomers) of the financial system across the board. They
could offer more diverse payment services, such as programmable payments, or more
affordable ones, with less intermediation services, including cross-border payments. Also, this
more competitive landscape could bring in innovative lending services by non-banking
institutions, offsetting (although unknown to what degree) the initial partial-equilibrium
reduction effect. Regarding stablecoins and other nonbank money, the disintermediation and
compensatory effect would be similar. However, there is an important difference that must be
considered, especially to the extent that some of these nonbank money providers scale up.
Stablecoins are generally fully collateralized by safe assets such as fiat currency deposits at
banks, and high-quality liquid assets (HQLA) such as government bonds. There is evidence
though that for some issuers the assets backing stablecoins are not completely safe as
claimed (e.g., Tether, who was fined by the New York Attorney in 2021), which brings the
issue of financial stability to the table, especially if the stablecoin issuer has reached a global
scale. Some algorithmic stablecoins pose even larger risk, which is evidenced by the recent
collapse of Luna and the UST stablecoin. More significantly, stablecoins usage is growing
rapidly. The trading volume for example is already at the level of US B2B volume, which
despite a comparatively small base, is possible due to the velocity to settle transactions.
Although most of that volume is associated with transactions of cryptocurrencies, it is
forecasted that their uses will expand, along with its demand. The issue is that a scenario of
growing demand for stablecoins also means a high demand for HQLA. This situation has
consequences, since commercial banks utilize HQLA to fulfil their regulatory liquidity and
capital requirements. Since HQLAs are scarce, banks might not be able to increase their
reserves at the central banks. If the government issues more instruments to keep up with the
demand, it would be crowding out funding for credit. Furthermore, the cash collateral for
stablecoins carries significant liquidity risk. Stablecoin deposits are very volatile due to the
high velocity of their transactions. If the cash collateral is not managed adequately,
accounting for sudden withdrawals (e.g., by investing cash collateral in long-term Treasury
bonds) there could be a risk to financial stability. Notwithstanding, within a general
equilibrium point of view, nonbank money will also come with the compensatory arguments
put forward for the CBDC. These benefits could in the end offset some or all the negative
effects discussed in the case of stablecoins.
The Federal Reserve already has a solid line of defense in place to reduce the probability of
disintermediation or bank runs after implementing a CBDC. High-quality supervision and
regulation, and deposit insurance, strengthen public trust in banks. The Federal Reserve has
multiple ways to provide liquidity into commercial banks (and into nonbanking institutions),
including its role as a lender of last resort. One additional mechanism available to the central
bank is to resort to its policy rate (and additional monetary policy tools) to counter tighter
financial conditions from disintermediation. Neither of these instruments would affect the
benefits of a CBDC. Furthermore, the commercial banks themselves have two important
mechanisms to react to potential disintermediation. First, they can look for alternative sources
of funds, such as wholesale deposits. By doing that, banks can offset the reduction in deposit,
at the expense of lower profits, but the offset could be substantial, since banks would react.
This line of reasoning itself could motivate banks to embark on serious improvement of their
payment systems even before the CBDC is implemented. Finally, the CBDC itself could
contain design elements to counter disintermediation and potential runs, the two more
important being a tiering remuneration system for the CBDC and a limit on the quantity of
CBDC a user can hold. Regarding the former, the remuneration applied to the CBDC
depends on the amount held; above a certain level the CBDC pays a lower interest rate or not
at all. In this way the degree of disintermediation (shift of deposits into CBDC), is effectively
limited. It is even an option to apply a negative interest rate on tier 2 in crisis time or starting
the implementation of the CBDC, sparing tier 1. The second element of design is capping
the amount of CBDC held by a single user. It is straightforward to see that with this design a
CBDC becomes innocuous for financial stability. This would be especially true if the CBDC
pays positive interest rates. However, a cap on CBDC amount per individual introduces
frictions in its role as part of the payment system. For example, there is a risk that a payment
is rejected due to the receiver having reached the CBDC limit, unknown to the payer in
advance. There are ways to deal with such situations and this is explored more in depth in
following questions.
According to the Diary of Consumer Payment Choice, conducted by the Federal Reserve,
cash share of payments in 2012 was 40%, compared to 19% in 2020. While this is not as
dramatic a decline as with the case of Sweden, where cash is used in less than 10% of all
transactions, it presents a clear view that cash is leaving the payment scenario and a
cashless society is not a utopic future scenario anymore. The shift in cash usage is towards
private money. It is therefore important to note the crucial differences between public (central
bank) and private money to determine the best solution to public access in the digital era.
Central bank money is safe, riskless, and adequately performs its three public roles: medium
of exchange, store of value and unit of account. Private money has been made safe through
regulation and support. For example, deposit insurance, the financing and lender of last resort
functions of the central bank, and banking regulation, make sure that banks are solvent all the
time. Despite these measures, private money is not risk-free. The perceived value of private
money depends on the perceived solvency of the financial institution issuing it, and those
financial institutions could fail. Therefore, allowing the current trend in cash usage to go to the
limit is dangerous. Without public money, a bank run is more likely (the lender of last resort
would not be available), and other episodes of instability could undermine confidence in the
financial system.
CBDC?
Digital payments are expected to grow substantially in the coming years, with or without a US
CBDC. For instance, according to market and consumer data firm Statista, “Total transaction
value [in digital payments] is expected to show an annual growth rate (CAGR 2022-2026) of
15.45% resulting in a projected total amount of US$3,200.00bn by 2026.” One more
concrete example is the expected growth in use of stablecoins. According to a 2021 paper on
Cato Journal, authored by Caitin Long, the annualized trading volume of stablecoins is in the
order of US$16 trillion, which is comparable to the level of US B2B payment volume of US$25
trillion, despite a comparatively small base, and possible due to the internet native user
experience, and the velocity and ease with which transactions are settled. Although most of
that volume is associated with facilitating trading of cryptocurrencies, it is forecasted that use
cases will expand, along with demand. Market players in the digital payments space will
seek to capitalize on this growth trajectory, both in the domestic and cross-border market, by
catering to consumers with newer products and services. Digital wallets and
account-to-account transfers are examples of winners in the short-term future. This trend has
been accelerated by the COVID-19 pandemic. Further into the future, consumers’
internet-connected devices (including wearable technology), and the IoT will increase
contactless digital payments. Greater fragmentation in the digital payment space is likely to
occur as firms seek to corner a piece of the market and engage in offering proprietary digital
payment systems. This can have the effect of locking-in customers, leading to higher
consumer costs, both in terms of individual services and in the cost of switching providers.
There may even be greater competition among firms as they align themselves to support
particular digital platforms facilitating a much larger digital payment space and providing
consumers greater payment flexibility. With the proliferation of differing digital payment
options, there is an increased potential for volatility in the financial markets. The Federal
Reserve and other regulatory agencies will need to keep abreast of the digital payments and
their potential impact on the entire financial system. Enhanced and greater regulation in the
digital payments’ arena can be expected. There will also likely be increased integration of
card payment networks with cryptocurrencies, and other digital payments, as they seek to
maintain relevance in a rapidly shifting payments environment. Card networks will endeavor
to mitigate the competitive pressures resulting from increased cryptocurrency use while
profiting from the enthusiasm for these types of digital payments. On the cross-border side,
lack of a US CBDC could see the continued and even enhanced role for US dollar stablecoins
which are already heavily transacted outside the US Unless a regulatory framework is
enacted for stablecoins, the Federal Reserve must be prepared to evolve its monetary policy
transmission techniques. Furthermore, on cross-border payment evolution, innovation and
competition would be prominent key drivers of growth, endogenously interacting with an
upward and evolving demand from established and new actors. For example, in addition to
the continuation of increase in B2B international trade payments, retail remittances and
cross-border e-commerce are poised to exhibit substantial growth. The emergence of new
payment technologies and widespread adoption of digital payment tools, plus the comfort with
small-item purchases and increased security with this type of transaction, are all contributing
factors for increased remittances and e-commerce transactions. Globalization trends, both at
the large corporation and SME level, will also significantly contribute to cross-border payment
growth. In particular, the global expansion of SME would be associated to innovation in
payment solutions catering to this segment. Recent examples of the former are payment
solutions such as Mastercard’s B2B Hub, or SWIFT’s GPI. Additionally, and reinforcing these
trends, it is foreseeable that FinTech companies will continue their expansion of services for
cross-border payments, with more investment flowing into these types of firms. For example,
in 2021 Remitly and Wise went public, and Neobanks (e.g., Chime, Revolut), according to a
report by Grand View Research, will grow close to 50 % from 2021 to 2028.
The international dominance of the US dollar rests on factors that are difficult to replicate in
the short-term, unrelated to having a digital currency. Among other strengths, the depth and
liquidity of a global and accessible US financial market; the fairness and stability of the US
legal system; the reliability of US monetary and financial policy; and lack of barriers to
international capital flows are the pillars of such dominance and no country or region is close
to replicating them in the short-term. However, successfully developing and implementing a
digital currency has its advantages. China, one important global competitor, seems to be
ahead with its digital yuan (DCEP), currently in a pilot program. Once fully deployed, the
digital yuan could expand rapidly through its usage by foreign companies operating in China,
or the internationalization of Chinese payment companies. Moreover, according to a report
from the Hoover Institution (Digital Currencies: The US, China, and the World at a
Crossroads) China is even testing its e-CNY at a wholesale, cross-border level with the
central banks of Thailand, United Arab Emirates and Hong Kong. This will probably expand
business opportunities and increase China’s global influence. There are important barriers to
‘yuanization’, due to factors such as capital controls, distrust in its rule of law, lack of
deepness of the yuan bond market, and the quality of Chinese financial institutions, among
others. These factors are precisely the reason for the US dollar dominance, as previously
mentioned. Nevertheless, as Professor Darrell Duffie and Elizabeth Economy state, there is
an important opportunity for the US to gain global influence by ensuring the USD continues to
play a key role in internet native payments. If the US develops its own CBDC technology and
standards, it could lead in the development of global standards for cross-border payments
using CBDC. Multiple countries would probably subscribe to such standards, especially to
avoid a digital dollarization of their economies, which would interfere with the normal
operative of their monetary policy. This leadership cannot be obtained without the US
developing and testing CBDC technology. Developing such technology and standards does
not imply that the Federal Reserve must deploy its CBDC. However, by not pushing ahead
with a fully developed and ready-to-deploy CBDC, the US could forfeit its opportunity to lead
the world in this matter, and such a void will be filled by another nation. Therefore, aside from
the economic gains, the US should study closely what other countries are doing, related to
the issuance of CBDC, especially in terms of cross-border standards.
The potential risks the Federal Reserve is most concerned about, presented in its report,
include changes to financial sector market structure, safety and stability of the financial
system, efficacy of monetary policy implementation, privacy and data protection and the
prevention of financial crimes, and operational resilience and cybersecurity. For the first two
risks, the document suggests a design choice for the CBDC: non-interest bearing and limited
amount of CBDC to hold or to accumulate over short periods. However, there are more
design options that could be assessed. For example, a multi-tiering remuneration scheme, in
which the remuneration applied to the CBDC depends on the amount held; above a certain
level the CBDC pays a lower interest rate (which could be negative in times of stress).
Furthermore, this multi-tiering design could include limits on daily transfers. Additionally,
differences in frameworks (e.g., limits on CBDC holdings, applied interest rates, or
combinations) could be imposed depending on which entity holds it: businesses categorized
by industry, and households. Framework disparities could be based, for example, on
exhibited excessive take-up or variability in holdings of CBDC. Importantly, some of these
measures could be temporary, which could be deemed necessary during the implementation
phase of the CBDC, or in a crisis. It is necessary to emphasize that there are offsetting
effects to the aforementioned financial system risks; so risk management measures, although
available, could not be necessarily implemented. For example, implementing a CBDC would
bring new opportunities for innovation that could benefit incumbent and forthcoming
participants of the financial system. They could offer more diverse payment services, such as
programmable payments, or more affordable ones, with less intermediation services,
including micro payments capabilities that could enable new and innovative business models
currently unachievable due to cost and functionality related restrictions inherent in the
traditional financial system. This more competitive landscape could bring in innovative lending
services by non-banking institutions. It is impossible to say how significant the counter-risk
effect would be, but this might be discovered or clarified as more data and research are
presented. In that sense, it is fundamental to study the most advanced CBDC projects around
the world in detail, and to structure CBDC pilot projects with operating experience and
lessons learned in mind. On privacy data protection, the intermediated CBDC model, where
personally identifiable information (PII) is segregated from the CBDC transaction network,
offers the best balance of customer privacy and regulatory oversight for illicit financial activity,
as explained in the following question. This is a multi-pronged solution consisting of plenty of
control points, abiding by the corresponding regulatory norms. Accountability tools such as
auditable user logs, tamper detection, role-based access permissions, and other governance
tools will play a key role in preserving privacy and arriving at an optimal design for a US
CBDC. Finally, regarding security, the multiplicity of hardware and software risk management
solutions should be comprehensive and based upon extensive risk assessment.
More than one approach to consumer privacy can be incorporated into a CBDC design. For
instance, it can be mandated that low-level CBDC transactions of a certain amount do not
require the same KYC requirements and, as such, can be completely anonymous. Similarly,
these low-level payments can have additional restrictions e.g., a limit on the number of these
transactions that can be initiated by any one CBDC wallet holder. This would restrict the
ability to use multiple low-level CBDC wallets for illegal activity. For more general usage
however, an intermediated CBDC model where personally identifiable information (PII) is
segregated from the CBDC transaction network offers the best balance of customer privacy
and regulatory oversight for illicit financial activity. Under an intermediated model, the CBDC
is distributed to the public via intermediaries approved by the Federal Reserve. These
intermediaries are responsible for KYC, KYB and other compliance related information
gathering necessary for the onboarding of CBDC users. In conjunction with this, PII is
divorced from the transaction network so that anyone monitoring the network cannot identify
the specific user behind a transaction. Customer data never enters the core CBDC
transaction network, but, instead, resides with the approved intermediary that onboarded a
customer. Regulatory agencies will be able to query the transaction network for suspicious
activity, where they can obtain wallet addresses and associated CBDC balances, but not the
PII of the user who initiated the transaction. It should be noted for clarity that the Fed will have
operational oversight of the network and responsibility for network monitoring, regardless of if
this is outsourced to a third party or not. Regulatory agencies can make valid legal requests
to the intermediary, based on the suspicious activity identified, to obtain the associated
customer behind a wallet address. In this way, the Federal Reserve, or other regulatory
agencies, cannot see what individual customers are transacting on a daily basis. They will
only see transaction activity attached to wallet addresses. Thus, customer privacy is
maintained, but there is a verifiable process for obtaining customer identity if illicit activity has
been found. Furthermore, accountability of CBDC system administrators is of the utmost
importance to ensure transaction data is not accessed for nefarious or unjustifiable purposes.
The unwarranted access of individuals’ or businesses’ transaction information could be
significantly harmful, which is why any individual with access to the CBDC transaction
network should be held accountable for all instances in which they query the network for
transaction data. Auditable user-logs, tamper detection systems, and other organizational
procedures should be implemented in order to mitigate this risk and provide the requisite
assurances to all who transact on the CBDC network. Such design options will require the
support of a robust legal and policy framework that spells out the requirements and
responsibilities of each of the stakeholders in the CBDC network to ensure the protection of
user rights and the safeguarding of customer privacy. For instance, the technical approach to
the separation of customer PII from the transaction network, the legal and regulatory
obligations of intermediaries in their KYC capture, as well as the legal process for requesting
customer information from an intermediary, where evidence of suspicious activity has been
identified by the Federal Reserve or other regulatory agency, should be clearly identified.
To foster operational and cyber resiliency, a CBDC design should incorporate three key
elements: network redundancy, offline capability, and interoperability with other payment
systems. For instance, a CBDC based on Distributed Ledger Technology (DLT), if deployed
in a truly distributed manner, will not have a single point of failure due to the inherent network
redundancy of the system. Ledger balances of the CBDC network could be replicated across
the various nodes making up the network ensuring that in the event that one node fails, the
network does not collapse since all nodes maintain the state of the ledger. This provides
greater resiliency against the concentration risk found in centralized payment systems, which
need costlier redundancy methods to remain operational due to risk events. In addition, DLT
networks can be permissioned (private) or permissionless (public), with central banks
preferring permissioned networks. With permissioned networks, nodes can be deployed and
managed by the central bank, and other relevant stakeholders, and data is authorized on the
network according to the central bank governance structures implemented. Network
redundancy also increases the level of network security in the system by reducing or nullifying
the effect of cyber-attacks. A possible future for CBDCs could include a variety of
stakeholders, from multiple central bank departments to regulators to financial institutions, all
running nodes with functionality that correspond to their institutional mandate. All nodes
should constantly validate the state of the network, but could also be tailored to suit the
specific requirements and mandate of the operating institution. One of the main
value-propositions of DLT is distributed governance structures, which can apply to CBDC
networks. Offline capabilities in a CBDC provide strong operational and cyber-resiliency by
enabling transactions to carry on even in the event of a natural or man-made disaster, or
major outage in one of the critical service providers. Disruptions are a part of life, whether
they are power outages or telecommunication breakdowns due to storms or other
phenomena. The ability to function and transact, during such periods, strengthens the
resiliency of the CBDC network and the entire payment ecosystem. The Fed can also deploy
the nodes of its network in a number of ways to ensure resiliency (e.g. multi-region,
multi-zone or hybrid cloud basis). Each deployment has its own advantages. Network
distribution should, nonetheless, factor in the ability of entire regions to be affected by an
outage and ensure (e.g., with a geographical distribution) that the regions hosting the nodes
are insulated from one another as much as possible. Some unavoidable operational and
cyber-risks are human error, insider attacks and natural or man-made disasters. Persons can
be a major weak link in any security system. For instance, human error, through failures in
judgment or lax protocol, can compromise the system enabling unauthorized access by
malicious actors. Similarly, an insider attack, where an internal team member accessing the
system with malicious intent, can have disastrous consequences for operational and
cyber-resiliency. While these human factor risks are unavoidable, they can be mitigated with
strong policies and protocols designed to deter or make it extremely difficult to exploit the
system. Accountability mechanisms for system users such as: non-editable user-logs which
create an audit trail of users and their work in the system, and tamper-detection systems
which broadcast stakeholder system alerts when suspicious actions are done in the system,
are a few of the ways these risks can be managed. Management controls, such as the
separation of decision-making activities from control activities, and the restricting of access to
various parts of the system, and where access is valid that there are M of N approvals to
enable that access i.e. more than one person must approve an action for it to be effected.
The legal tender definition, according to the Coinage Act of 1965, Section 31 U.S.C. 5103,
states that: “All coins and currencies of the United States (including Federal Reserve notes
and circulating notes of Federal Reserve banks and national banking associations),
regardless of when coined or issued, shall be legal tender for all debts, public and private,
public charges, taxes, duties, and dues.” This means that cash cannot be refused when
paying for debts. This is an important endorsement by the government to cash which,
consequently, engenders public trust and security when using cash,as a reliable means of
payment. It also provides stability of value, because cash, as legal tender, precludes the need
for cash to be backed by other assets to maintain its value. That trust, as a medium of
exchange and store of value, thanks to the legal tender trait, has an extended effect beyond
settling debts. This is why cash is regularly accepted, for example in retail stores or
supermarkets, even though legally, those businesses could perfectly refuse to accept cash,
and instead set-up whatever medium of exchange they deem adequate. Regarding a US
CBDC, the Federal Reserve would hope that, if deployed, it is highly and rapidly trusted and
accepted. To that end, making it legal tender would be a powerful incentive for swiftly
generating a critical amount of trust in a US CBDC as a medium of exchange and store of
value. It probably will not equalize the trust embedded in physical cash, due mostly to the
tried-and-true history of the latter, but enough for fast acceptance and usage. Hence, the U.S.
CBDC should be legal tender. If the Federal Reserve decides to make the U.S. CBDC legal
tender, there are issues to consider. First, there is a potential reputational risk in case the
CBDC is not widely accepted. With a legal tender status, the Federal Reserve is bolstering
the CBDC, and putting its reputation at stake. This is not a minor issue when reputation for
the Fed is crucial for managing expectations of the public, and the effectiveness of the
transmission mechanism of monetary policy. Second, the issue of financial inclusion could
be exacerbated. If the deployment of the CBDC is successful and its acceptance is ample (in
part due to it being legal tender), but the design of the CBDC does not tackle the matter of
financial inclusion, then unbanked households will likely keep using mostly physical cash. In
that case, the downward trends of physical cash usage in the US would not favor these
families, in terms of reaping the benefits that come with being financially included and using
CBDC. Finally, the Federal Reserve should analyze the possibility of strengthening the legal
tender role of cash, be it digital or physical. The current trend in physical cash usage for
transactions is downward, and a successful CBDC would accelerate that trend. Eventually,
physical cash could be rejected for daily transactions. This is happening already in Sweden,
and the Riksbank is analyzing this situation. The Federal Reserve should consider whether it
is necessary to amplify the legal tender definition to include transactions other than debt
settlement.
There are multiple design options for and effects from a remunerated CBDC. From the
public’s perspective, a positive interest-paying CBDC is more attractive than any
zero-interest-rate alternative. It is an almost perfect substitute for deposits, and, as such, its
adoption and usage would be faster and more ample, but would deepen the issue of financial
system stability given the likeliness of fleeing from deposits to CBDC. The similarity of an
interest-bearing CBDC to deposits would make the transmission mechanism of monetary
policy more potent and swifter, since, in that case, more money is linked to interest rates
under the influence of the Federal Reserve. Moreover, the Federal Reserve could decide to
utilize the interest rate on CBDC as an additional monetary policy tool. The Federal Reserve
could opt for temporary negative interest rates to deal with recessions. For this policy to be
successful, it would have to overcome the zero-lower bound, which is determined by the
existence of physical cash. Therefore, the physical cash in circulation should be zero or low
enough so that when setting negative interest rates on CBDC, there would be no shift
towards a zero-interest rate instrument (I.e., physical cash). In addition, the expectation that
there could be negative interest rates could affect adoption of the CBDC in the first place.
The Federal Reserve has more complex options for designing the interest rate to be paid to
the CBDC. In addition to a flat positive rate, or a negative one, the interest rates could be
non-linear or adopt the form of a fee applied to CBDC not used in specific time-frames to
stimulate spending during a recession, or to foster or punish expenditures of particular
interest to the central bank. These designs require more analysis, due to their potential
welfare and reallocation effects on the overall economy. Besides the designs focused on
monetary policy, a CBDC could be remunerated as a countermeasure to potential financial
disintermediation and bolster financial stability, but this requires a particular design. One
option is a multi-tiering remuneration scheme, in which the remuneration applied to the CBDC
depends on the amount held above a certain level the CBDC pays a lower interest rate
(which could be negative in times of stress). Furthermore, this multi-tiering design could
include limits on daily transfers. Additionally, differences in frameworks (i.e., limits on CBDC
holdings, applied interest rates, or combinations) could be imposed depending on which entity
holds it: business and households. Framework disparities could be based on exhibited
excessive take-up or variability in holds of CBDC. Importantly, some of these measures could
be temporary, which could be deemed necessary during the implementation phase of the
CBDC or in a crisis. In conclusion, the Federal Reserve currently has many tools to conduct
conventional and unconventional monetary policy. Therefore, this should not be a reason to
remunerate the CBDC. The design for reducing disintermediation could be useful and has a
valid motive of implementation. However, it would be better not to add too much complexity
initially to the CBDC. Therefore, the CBDC could start without remuneration, which will allow
the Federal Reserve to earn experience and knowledge managing its digital currency, but
with the technological and legal possibility to add in the future a more complex design, such
as a multi-tearing approach.
Setting a quantity limit on the individual amount of CBDC will help mitigate the risk of
significant migration from deposits to CBDC. This is especially important if the CBDC pays a
positive interest rate, thereby becoming more attractive for business and individuals to hold.
However, a cap on CBDC amount per individual introduces frictions in its role as part of the
payment system. For example, there is a risk that a payment is rejected, due to the receiver
having reached the CBDC limit, unknown to the payer in advance. A possible solution to this
issue is to institute a waterfall mechanism, by which any excess beyond the limit is accepted
but transferred to a linked bank account, or, perhaps, held in smart contract escrow until the
wallet balance is diminished. Tiered wallets have become the norm for CBDC infrastructure
solutions, typically increasing the amount of KYC required to be collected by end-users as
holding and transaction limits increase. Some monetary authorities are considering
implementing a base-tier wallet with minimal KYC requirements (eg. Email address) and
minimal transaction and holding requirements that would not be a concern in the context of
AML or CTF, but could facilitate small payment use cases such as groceries, bus fare, or
other items. This design could play a role in achieving financial inclusion, especially in
situations where individuals may not have the necessary KYC documentation required for
higher tier wallets. In summary, capping the amount of CBDC held by a single user has
important advantages, and is a valuable option to be added to the design of the CBDC that
could be activated if needed. It is also easy to understand, compared with a multi-tiering
interest rate design, is transparent, and reduces uncertainty to banks and central bank alike.
An intermediated CBDC would foster diversity and innovation from the participant firms in
terms of provision of payment services associated with the digital currency. Intermediaries
should be firms that can provide the technology to enable stakeholders, of all types, to
perform a variety of CBDC transactions, allow users to pay through offline processes, and to
execute transactions between multiple type of wallets (including competing firms’). Therefore,
besides commercial banks, intermediaries should include other non-banking payment service
providers or fintechs that have developed solutions that meet well-defined standards for
integrating with the CBDC network. Standards should include both technical and AML
Compliance requirements. Technical standards are required to ensure that functionality is
consistent and that there are no risks to user funds. App marketplace standards are a
comparable example for standards that intermediaries should abide by when successfully
integrating with a CBDC network for payments. AML Compliance standards can be applied
based on requirements set forth in regulations, but also demand adequate protections of user
information, especially PII.
The ability to conduct a secure offline transaction is an important element to improve financial
inclusion. Research shows that unbanked households (5.4% of total households as of 2019)
are more likely to have limited or no access to home internet, a smartphone, or a cell phone
service. The 2019 FDIC Survey of Household Use of Banking and Financial Services
corroborated the latter. Specifically, two of the main reasons cited for being unbanked were
“minimum balance requirements”, with almost one out of every three households citing this
reason, and “fees too high”. Having a low-cost method of payment, whether it be a minimum
balance wallet tier or an offline capable card, could offer a new way for the financially
excluded to transact in a powerful and digital manner. An offline solution could act as a
backup should internet disruptions occur. With offline capabilities, a CBDC could serve as a
backup in instances where the cloud is down, the mobile network is not working, or there is a
power outage. There are multiple examples of outages occurring for similar reasons, for
example: the Amazon cloud failure in December 2021, or the Facebook outage in the same
year, concurrently bringing down WhatsApp, Messenger, and Instagram for about six hours.
Mobile networks could go down for a myriad of reasons related to hardware (equipment
malfunctions, a fire, a storm) or software (coding errors, a hack). In addition, an offline
solution could offer a lifeline during outages caused by negative weather conditions. Different
segments of society will have differing requirements and benefits for the introduction of an
offline solution. For example, those living in remote areas without electricity and/or internet
infrastructure and those living where it is inconsistent. An offline solution that meets the
requirements of all users could mitigate future outages. Offline capabilities can be achieved
in three ways: Offline digital cards, SMS or USSD (Unstructured Supplementary Service
Data) transactions, and software solutions. As for the first option, these cards would be
completely self-contained and tamper resistant, with their own power source and using
Bluetooth or Near-Field Communication (NFC) to send and receive CBDC. The cards could
be issued by an established agent, like a financial institution, or another approved entity, and
could be preloaded, with CBDC, by the issuer who also performs the Know Your Customer
(KYC) checks. The card would be programmable and could be installed with smart logic that
enforces regulatory requirements or restrictions such as transaction limits on spend or
maximum amount of CBDC to hold. Finally, all transactions between users would be
encrypted. SMS or USSD transactions would allow users to make banking transactions on
their feature phone without any access to internet connectivity. Finally, software-based offline
payment solutions function by allowing a wallet user, when online, to allocate an amount of
CBDC specifically for offline use. This amount is segregated and held separately to be used
in the event the internet or cell network is unavailable. More specifically, for Bitt’s offline
payments software solution, a wallet owner allocates funds from their online wallet to their
offline wallet. These funds, referred to as claims, are segregated from the online wallet
balance by Bitt’s offline system to prevent double-spend using immutable data structures.
Claims may be sent to other CBDC wallets via NFC, QR code, Bluetooth, or other means
available, in an offline scenario. Transferred claims may be spent by the receiving parties, but
ultimately must be settled on the online system when connectivity resumes. Additionally,
claims can be programmed to have expiration dates and will eventually expire, and, in that
case, they will automatically return to the owner’s online wallet.
sale? If so, how?
The ability of money to act as a medium of exchange, and thus pay for goods and services,
constitutes one of money’s basic but central functions. Money in the form of a CBDC should
consequently provide the same utility by enabling the public to conduct commerce in very
much the same way that cash and other forms of payment are currently used at the point of
sale (POS). This scenario would enable the widest possible acceptance of the CBDC from
both consumers and retailers. It is worth noting, however, that although CBDC acceptance at
the POS is important, a CBDC enables far more e.g., online purchases, use in virtual
environments (such as games), and other situations where physical cash simply cannot go.
This would be particularly important for financially excluded households. According to the
2019 FDIC Survey of Household Use of Banking and Financial Services, inconvenience of
bank hours and bank locations are two of the main reasons for not having a bank account.
Therefore, the convenience of being accepted at the POS is an attractive design for this
segment of the population. In terms of ease of usage, consumers must be able to spend
their CBDC balances at a retail POS without frictions, ensuring, for example, that government
payments made via CBDC to the vulnerable or financially excluded would not present an
additional barrier to those persons in the utilization of these payments. In general, ease of
usage would require intensive cooperation between the Federal Reserve, CBDC
intermediaries, and retailers participating in pilot projects, in an iterative way, so that optimal
processes are chosen. A pilot project is a robust mechanism for evaluating and addressing
the myriad issues which can accompany the move to a CBDC. Intermediaries and retailers
could receive support in the form of technical assistance, operational support and training.
The entire process, from onboarding customers to the use of CBDC under a variety of use
cases, can be monitored, evaluated, and adjustments made to suit the requirements of the
Federal Reserve prior to a wider deployment in the economy. In that regard, it is crucial to
consider the characteristics and needs of both consumers and retailers to ensure that a
healthy ecosystem is achieved (i.e., enough merchants willing to accept CBDC, but also
enough consumers who want to use it). On the consumer side, CBDC design needs to
accommodate the different categories of end users (e.g., low-income) and should be widely
available in ways that are accessible and easily distributable to all. To that end, in addition to
digital wallets, CBDC should be made available via other instruments such as digital cards,
vouchers, SMS, which is still widely used in the US, and the incoming Rich Communication
Services (RCS). This could cover the full spectrum of socio-economic levels of the public and
ensure that those who are most in need of the benefits of a CBDC have access to it in a
low-cost, user-friendly manner. On the retailer side, the acceptance of CBDC as a means of
payment is concerned with the extent of adoption by consumers and cost of accepting it:
initial investment and ongoing costs. For the former, CBDC design should encompass the
ability to interoperate with existing payment infrastructures in use by merchants, or operate
using smart devices, and, where technology upgrades are necessary, subsidization of these
upgrades via rebate programs could be implemented. Transaction costs should be minimized
(entrepreneurial services are expected to arise and take up the mantle in terms of
cost-minimizing innovations), and, at the very least, bring a reduction relative to other
accepted payment methods.
For CBDC to be transferable across multiple payment platforms, there should be mechanisms
for the transfer and exchange of payment information across the various platforms. Currently,
transferability is achievable in several ways. Firstly, by having common standards; secondly,
through the establishment of a single, multi-currency payment system; and lastly, via the use
of technical interfaces that interlink different payment systems. Common standards consist
of much more than technical specifications. They also encompass other factors such as data
and messaging standards, identity and authentication, security, legal and regulatory
frameworks (BIS, 2021). Having a common set of standards would yield the greatest benefit;
however, it is by far the most difficult to put into practice. The complexity required to
coordinate disparate systems, technologies, and legal and regulatory frameworks makes
designing common standards a lengthy and long-term process. Devising common standards
may also be difficult due to legacy systems operating on antiquated technologies. A single,
multi-currency CBDC platform would preclude the need for data integrations, since there
would be one system with one data and messaging standard. Access requirements for all
participants on the portal would be the same enabling uniformity in compliance regulations.
The use of technical interfaces is an option that enables CBDC transferability without the
need for implementation of new technology or new technical standards. Presently, Bitt,
through its use of application programming interfaces (APIs), software development toolkits
(SDKs), and other software suites, enables integration with existing financial infrastructure
such as core banking systems, national payment infrastructures, and international payment
infrastructures. The national payment infrastructures supported are ACH, RTGS, Real-time
payment, card networks, and ATM/Teller. Bitt’s Digital Currency Management System
(DCMS) also integrates with international payment infrastructures such as SWIFT and CBDC
Universal Bridge to permit transferability in the cross-border payments space. The DCMS
also supports REST-based interoperability with existing national systems. Lastly, by
supporting the standardization of current messaging formats to meet the ISO20022 standard,
CBDC solutions can ensure complete interoperability with legacy and new financial systems
worldwide. Interoperability, in itself, is a complex issue that takes into account a myriad of
conditions. However, given that digital currency is essentially “identity with a value”, a key
supporting factor for transferability to occur is a trust framework based on identity
management and verification. An accepted digital identity facility, independent of payment
platforms, could provide a base level of standardization enabling authorization of transactions
across multiple systems. Alternatively, the Federal Reserve, in its role as chief regulator of
the financial and payment, can mandate a minimum technical specification for all payment
platforms that would allow integration and acceptance of CBDC. A broad consensus of
industry players, with guidance and input from the Federal Reserve, could be constituted to
achieve this. Key items to be addressed would be settlement procedures e.g., atomicity of
transactions; KYC/AML requirements, since this may differ depending on payment platform;
data sharing; who bears the cost of the integration; and consumer privacy, although a transfer
of CBDC does not mean a transfer of private customer information.
CBDC?
The future is notoriously difficult to forecast, however the following future technological
innovations could dramatically transform CBDC design and policy choices: Developments in
Self-Sovereign Identities (SSI) have the ability to impact CBDC design approaches to
managing customer privacy with respect to CBDC transactions. For example, KYC
requirements and the need to collect information from customers could be vastly reduced with
an SSI. In this scenario, only the verifiable credentials and information necessary to complete
a transaction are required to enhance customer privacy and reduce the regulatory burden for
businesses. Advances in quantum computing represent risk and opportunity to the
underlying cryptography that is inherent in a CBDC system, particularly blockchain-based
systems. Encryption is based on the premise that computers currently need an inordinately
long time to factor large numbers. Quantum computers have the ability to accelerate the rate
at which encryption could be cracked which could simultaneously impact security and the
trust built up in these systems. Work is already underway to mitigate these effects and create
quantum resistant systems. The development of the Metaverse, and its impact on the real
and virtual worlds, represent additional risks and opportunities for the design and policy
choices of a CBDC. The Metaverse allows for unique social interactions in a virtual
landscape that are still being developed and refined. For instance, how commerce is
conducted in this virtual space will have a spillover effect into the real world and potentially
create innovations and structures that could fundamentally alter how CBDCs are designed,
used, and regulated.
benefits of a CBDC?
A CBDC system should be designed to support innovation and competition. In that sense, the
CBDC system should be able to build additional innovative services on top of its
infrastructure, and the system itself should be built to be flexible and accommodate a dynamic
future demand for digital currency. In addition, regulation should ensure that entry barriers are
minimal (which is important for small firms or firms with fewer resources, and non-banking
firms), and without unintended elements that could foster oligopolies or monopolies Two
important design principles that are intertwined are inclusiveness and efficiency. From these
two principles, the CBDC should be intuitive, user-friendly, accessible, fast, transparent,
low-cost, and reliable (i.e., capable of being used and transferred anywhere, at any time,
even offline). While this will largely be taken care of by intermediaries, underlying transaction
network functionality will likely need to evolve to achieve future use-cases. However, there is
a tradeoff between achieving a low-cost usage of the CBDC and financial inclusion. CBDC
transactions will need to be processed and that involves costs. The Federal Reserve may
want to shield the public from these costs, especially financially excluded households.
However, intermediaries should be able to earn profits, otherwise innovation would be
stagnant. The design of the CBDC, in relation to the operating model, thus entails a balancing
act for the Federal Reserve to provide a fair and cost-effective system to the public with an
adequate cost-recovery mechanism. Additionally, being operational and financially resilient
is a crucial design principle. The CBDC should be shielded against cyber-attacks, or fraud
schemes. The CBDC should also consider potential impact on the financial system and
monetary policy, and explore safeguards to build into the CBDC to address these risks.
Finally, a CBDC should be designed to be energy efficient and environmentally friendly. This
design principle would set the bar in terms of how a payment system could use energy
optimally (e.g., carbon-neutral). Notwithstanding, it could pose a challenge, since a CBDC,
while having the ability to provide faster, less costly transactions, may also do so at the
expense of energy efficiency, thereby creating negative externalities.
_________________________________________________________________________
Industry
Country
State
Minnesota
Email
The benefits are multi fold
Yes; It would require going back to a gold back system
inclusion?
It would be a positive effect on financial inclusion
It would make it easier to shift policies dependent on what is required
stability?
Positve
It would be backed by the gov rather than traditional debt or other assets that could be
manipulated by the market.
Open Sourced Non Profit that could be publicly audited.
Yes
CBDC?
They will dominate the US Dollar. If the US doesn't get on board with crypto soon it will be left
behind and won't be able to keep it's control over what the world uses for trading
goods/services.
Slow to Adopt Fast to Kill. Everyone is looking for a more reliable method of transfer, The
entire world saw the ineffectiveness of sanctions on Russia, this should not be taken lightly as
the US failed. CBDCs would allow interoperability between currencies easily. An open source
non profit network that could be used by everyone would allow the US to stay on top.
Yes many.
By using muxed accounts. A muxed account is an account that exists “virtually” under a
traditional account address (Think Bank and bank accounts) and can be used to distinguish
multiple “virtual” accounts that share an underlying “real” account. The bank will know the
owner of the virtual accounts and record the transactions on its real account, All transfer
would look like they are coming/going to a handful of wallets but those wallets (banks) will
have complete record of all transactions, making auditing a simple compared to current
methods.
24/7/365 trading. You can stop the markets now a CBDC will need to trade 24/7/365 with
99.99% uptime and no chance of blockchain splitting or rolling back. It will also require
finalized transactions not just confirmed blocks.
Yes. The world is moving digital and CBDC should be accepted everywhere like a debit/credit
card today.
Yes. Just like the US Dollar, CBDCs will need more in the future. Today the Treasury offers
interest to print additional dollars and CBDCs should be the same, though automatic. It is also
a great incentive for holding the US dollar via CBDC.
Yes. We are seeing the issue of money driven people destroying the world this can and
should be limited and applied equally to everyone and every corporation, especially with how
taxes are setup.
Banks and credit unions. The same rules and regulations for CBDCs as for the Dollar.
Yes; It can be achieved using SMS on even the most basic phone networks to ring the
transaction to a server that will publish the transaction as it's received. Else Satellites can be
used to keep blockchains in "sync" if world fiber optics were cut/sabotaged.
sale? If so, how?
Yes of course. You simply design the interface in a simplified way for the end users; similar to
how phone payment system work now.
In order to be cross blockchain compatible you would need to implement trustless anchors to
each blockchain or to another chain that is already has trustless anchor to other blockchains.
CBDC?
Like the checkbook revolutionized payments over cash, The same will happen with CBDC
over traditional fiat. Once the rules and regulations are set, clear, and fair, the world will flock
to CBDCs.
benefits of a CBDC?
The CBDC should be on a blockchain that is capable of offering fast block times, block
finality, and one that would halt rather than fork or else have the possibility of the chain rolling
back or splitting and causing mass loss. To be trusted by the people the blockchain will need
to be open sourced for public auditing of code and non profit to ensure the people are getting
the best rate and offer confidence that the user isn't being front run with potential to lose their
funds.
_________________________________________________________________________
Anza International Consulting
Industry
Other: Consulting
Country
State
California
Email
randy.gutierrez@anzaintl.com
The policy benefits of a CBDC when the program is designed correctly. The large segment of
consumers who are not financially included can be included in the financial segment of the
economy. If CBDC currencies are granted to consumers where savings and interest rates are
established for specific time-periods. This would be for segments of the population with
specific annual income criteria. A policy could also be for millions of undocumented
immigrants once Congress resolves disputes allowing them to become documented and are
eligible for CBDCs. The policy benefits of CBDCs for cross-border digital remittances when
they are available. The remittances could benefit immigrants that use CBDCs as a source of
value for sending to beneficiaries to recipients in destination countries such as Latin America,
Philippines, India, China, Pakistan, Cuba, and other countries where their family members
reside. Referenced on page 9 in the “Federal Reserve Bank’s Money and Payments: The
U.S. Dollar in the Age of Digital Transformation January 2022” is a quote “High costs for
cross-border payments also affect smaller businesses that make infrequent global payments
to suppliers. Reducing these costs could benefit economic growth, enhance global
commerce, improve international remittances, and reduce inequality.12 The policy
considerations would alter the flows of economic activity by reducing the price of each
transaction to each immigrant that would reduce the cost of cross-border digital remittances
by significant sums. The revenue implications reduce the income of major cross-border digital
remittances (money transfer) companies such as Western Union, Moneygram, Xoom, (a
PayPal service) and others. These cross-border digital remittances would be in various
formats; all would be proprietary. The risks include income loss from VISA, Mastercard,
Western Union, Moneygram, banks, and non-financial service providers. The income loss is
due to interchange fees and fees related to account-to-account transfers. This may not be a
risk necessarily, but a loss of income to the economy.
In the policy benefits questions requested in item 1, Anza was asked of potential benefits of
CBDCs. One response was cross-border digital remittances for undocumented immigrants.
There was a question in 9 in this document of cross-border digital that I assumed regarded
remittances (money transfers) on behalf of consumers and businesses, a portion of the
CBDC product suite. Anza would like to offer this feature is a potential benefit of a CBDC. It
cannot be offered in a different manner. This feature should also be offered to all consumers
and businesses. The product features of CBDCs as a whole operate as an “currency like”
account without the burdensome features of commercial banks, credit unions, regional banks,
financial institutions, and other companies. They provide payments services to businesses,
utilities, persons, and store of value for individuals in a rapid manner with few charges. No
alternative could occur without the act of government and private enterprise.
inclusion?
The CBDC would have a positive affect for financial inclusion if designed by a specific
implementation. The FDIC’s 2019 5.4 % survey of US household’s means 7.1 million were
unbanked lacks a checking or savings account at a bank or credit union. According to the
Brookings study the Treasury Departments - Federal Reserve Bank would not be an ideal
solution (here). A more ideal solution would be a non-financial solutions provider that would
provide interfaces to the Treasury Departments - Federal Reserve Bank with account “like”
services with the potential of moving to the commercial banking sector when the citizen was
trusting and bankable.
The effects of maximum-employment and price-stability goals due to monetary policy from the
Federal Reserve Bank’s use of CBDCs are unknown, although though to be minimal in the
short term. The effects of employment will shift over time due to potential reduction in
workforce in employees from commercial banks, credit unions, regional banks, financial
institutions, and other companies (interchange / account transfer / bill pay - pricing) and an
increase in employment for health care companies, manufacturing companies, and leisure
companies. The Federal Reserve’s ability to effectively implement monetary policy depends
upon the personal behavior of the habits of those who use the CBDC. Anza believes the
CBDC will have a positive impact on maximum-employment and price-stability goals in the
medium to long term.
stability?
The effects of CBDC financial stability are unknown as a follow-up to question 4 in this
document. The Federal Reserve’s monetary policy pursuit of maximum-employment and
price-stability does affect financial stability. The net effect for financial stability is positive in
the medium to long term.
The CBDC could affect the financial sector: The CBDC could affect the financial sector from
stablecoins or nonbank money:
Cash will always be necessary for the general public for technical disruptions.
CBDC?
In the absence of a US CBDC, digital payments evolved in the US with products by Western
Union, Moneygram, Zelle, Venmo, VISA, Mastercard, others, and soon FedNow. A recent
study conducted by the Federal Reserve Bank of San Francisco produced a report,
https://www.frbsf.org/cash/publications/fed-notes/2022/may/2022-findings-from-the-diary-of-c
onsumer-payment-choice/ that provided the following: Consumers continued to use credit
cards and debit cards for a majority of their payments, accounting for 57 percent of total
payments in 2021 compared to 55 percent in 2020 and 54 percent in 2019 (Figure 1). This
increased share of card use was because the number of cash payments declined from 10 in
2019 to 7 in 2021 and not because card use increased. In absolute terms, the aggregate
number of card payments (debit and credit) declined from 23 payments in 2019 to 21
payments in 2021.
The United States should develop the CBDC as it is currently, with questions gathered from
professionals including economists, policymakers, bankers, technologists, lawyers,
regulators, and others. No other nation should influence the United States on whether it
should issue the CBDC.
The risks of the CBDC as a matter of design. It is unclear how the CBDC is designed. How
are the funds deposited to the account / currency? Is it truly an account? Where is the
account? How are the accounts accessed? Are the funds deposited to the account? By
whom? How much? How are they accessed? Via a card, digital wallet, mobile phone,
Smartphone? How is the consumer / business registered? How are payments made? The
risks are technical with connectivity issues related to operator and password issues and
interoperability issues with connections between systems. Does the consumer access the
CBDC via debit card, mobile phone – Smartphone, or PC – Laptop, or does the consumer
have access to a CBDC without full anonymity?
Registration of a domestic CBDC is unnecessary for a consumer activity allowing for

facilitating illicit financial activity for US money laundering guidelines. For CBDC cross-border
digital payments consumer registration will be necessary for facilitating illicit financial activity
for BSA / AML compliance guidelines.
CBDC operational and resiliency and cyber risks and services supported by expert Security,
Network, and Encryption professionals. They must be consulted when the system is
designed, implemented, and supported.
CBDC should be legal tender.
CBDC should pay interest for those with income levels less than $29,999 to incentive
consumers to learn a trade, to become bankable, or both. The CBDC program should be
designed where the Federal Reserve is not involved in providing “interest” to consumers. The
CDBC program should be designed where the Federal Reserve should outsource to a third
party that provides “interest” as a licensed FDIC provider of services. The “interest rate”
should be agreed upon by repudiable global economists.
Single end-user should not be held to any quantity limits for no amounts.
Intermediaries should provide the role of financial firms or non-financial firms. They should be
licensed by the US Treasury, FDIC, FINCEN (depending on the CBDC cross-border digital
payments product) and other licenses for commercial banks and non-financial firms to
operate in the United States.
CBDC should have offline capabilities in the case of technical outages.
sale? If so, how?
CBDCs should be designed to support the point-of-sale. Consumers and business would
have the option of choosing to accept a card, mobile device or Smartphone. There are
several POS solutions in the market with contactless, striped, QR codes, among others.
There are several hardware vendors that require software solutions with multiple versions of
software.
Several payment platforms exist. From a product perspective by category domestic CBDC
digital account transfers, bill payment and online shopping, and others. From a product
perspective by category international CBDC digital cross-border account transfers, bill
payment and ecommerce. Interoperability is necessary to achieve transferability across
multiple payment platforms for CBDC to access each one. From a technical perspective
domestically and internationally, CBDC architecturally must be carefully designed to ensure it
retains structurally to meet the needs of the consumers and businesses long term. A number
of countries have started and / or implemented CBDCs and it would be best to collaborate
with professionals to determine their experiences and the technical solutions they have
designed and implemented. We have experience with several innovations domestically with
networks and standards, recently blockchain, the Federal Reserve sponsored work that
developed FedNow, SWIFT’s work with SWIFTnet, ACH and their rapid evolution with their
ACH products, recent evolution of programming languages – JavaScript, C++, Go), several
wallets. Interoperability with CBDC cross-border digital payments being difficult due to the
corridors having multiple formats mapped to several consumers in multiple countries based
on different companies. Economies of scale could be achieved by providing all CBDC
cross-border digital payments using one technical standard and having one intermediary map
to every non-standard route to several consumers in multiple countries based on one price
and one FX-rate at one low-price.
CBDC?
Those in charge of ensuring professionals have the technical vision, policy, innovation, and
personality to run things smoothly will keep CBDCs soaring.
benefits of a CBDC?
Anza lacks the time to offer detailed design principles other than general principles, they
are: Consumer CDBC Balance 1) Load value on the database (anticipated) a) by email b) by
phone number c) card with number d) mobile device with number e) Smartphone device with
number f) wallet with number g) Use to pay bills, provide account transfers, provide POS
purchases h) For Cross-border transfers to consumers in countries Business CBDC
Balance Consumer CDBC Balance 2) Load value on the database (anticipated) a) by email b) by
phone number c) card with number d) mobile device with number e) Smartphone device with
number f) wallet with number g) Use to pay bills, provide account transfers, provide POS
purchases h) For Cross-border transfers to consumers in countries
_________________________________________________________________________
Nick Egnatz
Industry
Country
State
Indiana
Email
"Money is the one thing we all need to survive in society. We know we need it, we know that
at least half of us don't have enough of it, yet we don't know how and by whom it is created.
U.S. printing presses physically make some of our money, but our government does not
create it. People, Planet & the Power of Money reveals who creates our money and how they
do it. It also provides examples in our own history of a just, democratic system of money that
we can easily put in place today, ensuring all Americans the opportunity for successful and
rewarding lives. "Both people and planet are overwhelmed with crises from climate change,
dying species, oceans and ecosystems to pandemics and potential economic disaster. Based
on justice and history, only the ancient lost power of publicly created money can deliver
money in sufficient amounts to heal our planet and ourselves." [People, Planet & the Power of
Money (PPPM) by Nick Egnatz is due out on Amazon in June, 2022] We need to have a
heartfelt national discussion on what the nature of money is and whether or not we should
keep our present bank-created debt-money system or change to a system of publicly created
money. The Federal Reserve itself admits that "After touring Europe to study its banking
systems and techniques, [Senator Nelson] Aldrich and the other commissioners [National
Monetary Commission] returned convinced that the United States should have a central bank
controlled by bankers and issue notes based on commercial paper."[ Federal Reserve Bank
of St. Louis, "Banking Reform 1907-1913"] Commercial paper is an unsecured common form
of short-term debt issued by a corporation. The National Monetary Commission then
published 24 volumes of research, that ultimately led to the creation of the Federal Reserve
System by Congress in 1913—all done without defining the nature of money. Our present
bank-created debt-money system is based on the concept that money is a commodity such
as gold and silver, historically procured by humans enslaved by those in power to mine the
gold and silver for them. PPPM relates the story of Europeans sent to the loot the gold and
silver of the New World to transfer their human slavery to our debt slavery to a bank-created
debt-money system in Europe that was eventually replicated in America. "It started with
goldsmiths. As early bankers, they initially provided safekeeping services, making a profit
from vault storage fees for gold and coins deposited with them. People would redeem their
"deposit receipts" whenever they needed gold or coins to purchase something, and physically
take the gold or coins to the seller who, in turn, would deposit them for safekeeping, often
with the same banker. Everyone soon found that it was a lot easier simply to use the deposit
receipts directly as a means of payment. These receipts, which became known as notes,
were acceptable as money since whoever held them could go to the banker and exchange
them for metallic money. Then, bankers discovered that they could make loans merely by
giving their promises to pay, or bank notes, to borrowers. In this way, banks began to create
money. More notes could be issued than the gold and coin on hand because only a portion of
the notes outstanding would be presented for payment at any one time...Transaction deposits
are the modem counterpart of bank notes. It was a small step from printing notes to making
book entries crediting deposits of borrowers...thereby "printing" their own money." The above
from Modern Money Mechanics, Federal Reserve Bank of Chicago, printed from 1961–1994,
describes the process of fraction reserve lending by which banks historically would create
money, allegedly backed by gold in their vaults, for amounts vastly in excess of the actual
gold in their vaults. The only word that properly describes the above money system is
fraudulent. We are not told that the banks create our money out of thin air and then loan it to
us at interest. The banks can only do so because all the other banks in the system are doing
exactly the same thing and because the Federal Reserve Banks (owned by the private banks
within their districts) move around reserve money after the money creation has taken
place. Money is an exclusive, abstract, social power of the state, which acts as a final means
of payment, facilitating commerce, enabling all our people to have meaningful lives, and being
there for us to confront the momentous crises that will inevitably arise in the future and it is
high time our nation treats it as such. A just system of publicly created money would actually
be representative of the way most of us intuitively and mistakenly believe our money system
is now: 1. Our federal government creates our money. 2. Banks loan us money that has already
been created by our federal government. 3. The Federal Reserve Banks are a part of our
government. These 3 reforms will give us a just system of publicly created money.
inclusion?
stability?
CBDC?
sale? If so, how?
CBDC?
benefits of a CBDC?
_________________________________________________________________________
Wespay
Industry
Trade Organization
Country
State
California
Email
cselmi@wespay.org
Over $2 trillion worldwide has been invested in the crypto economy. These digital assets are
increasingly being used as a form of payment, with varying degrees of operational, settlement
and liquidity risk. Wespay believes a U.S. Dollar (USD) CBDC could enable financial
institutions to provide a safe, digital payment alternative to cryptocurrencies for consumers
and businesses while providing BSA and AML safeguards. �Wespay members believe a policy
is needed to ensure a CBDC is fungible with a one-to-one fixed exchange rate to the USD,
minimizing opportunities for the private sector to arbitrage between the physical and digital
USD currencies. �A range of potential CBDC risks are identified by Wespay members.
Keeping the digital assets secure from cyber threats is a top concern. A more fundamental
concern relates to the disintermediation of commercial deposits and implications to retail and
small business lending.
No response submitted.
inclusion?
Responses to Wespay’s member survey indicate no consensus on the potential effect of

CBDCs on financial inclusion. Only 24% of members surveyed believed CBDC would have a
positive effect on financial inclusion, with 31% neutral or unsure, and 38% believing CBDC
would have a negative impact. �There are concerns that a CBDC would increase the
technology requirements for participation, which could present a barrier to participation, and
become a deterrent to a segment of the population. Privacy is another concern for some
unbanked individuals and a CBDC solution would not mitigate those fears. Also, if a robust
CBDC solution were delivered by non-bank intermediaries, expansion of the program could
cause individuals to discontinue existing banking relationships. �Robust education campaigns
would be needed to help explain CBDC to the unbanked and underbanked to help overcome
these concerns.
stability?
Wespay members generally agree that a well-regulated CBDC will provide a safer, more
stable alternative to cryptocurrencies, which are largely controlled by the private sector, are
highly volatile, and have a nascent regulatory framework. Wespay believes a CBDC could be
a viable, digitally native payment option that would be nearly universally accepted and
trusted. �Without appropriate safeguards, Wespay members are concerned a CBDC could
introduce credit disintermediation risk, resulting in negative implications to consumers and
small businesses.
Responses to Wespay’s member survey identified cybersecurity as the top risk CBDC poses
to the U.S. payments industry, followed by consumer privacy risk, and then reduced
commercial bank deposits. �If financial institutions do not have the ability to lend on CBDC
balances, it will result in lower available credit. The potential shift from commercial bank
liabilities to central bank liabilities will directly reduce financial institution funding and result in
credit disintermediation. Financial institutions will have less access to low-cost deposit
funding or be forced to raise rates.
Wespay members believe that a CBDC has the potential to be a valuable digital payment
instrument, and suggest the Federal Reserve prohibit associated benefits that create
competition with commercial bank deposits. To mitigate the risk to commercial bank deposits,
Wespay members support the Federal Reserve establishing two policies: �1.�CBDC accounts
should be non-interest bearing to safeguard the value of established short-term instruments,
which are used to fund retail and commercial lending.�2.�CBDC should have a fixed one-to-one
exchange rate to the U.S. Dollar to minimize opportunities for the private sector to arbitrage
between the physical and digital USD currencies. �Wespay members agree with the Federal
Reserve’s stated concerns that interest-bearing CBDC accounts could increase CBDC
demand, reduced commercial deposits, and drive higher bank funding costs. Households
and businesses could be directly impacted by reduced credit availability and higher costs.
Responses to Wespay’s member survey clearly indicate that a CBDC will have strategic
economic value for the U.S. Dollar. Nearly 74% of respondents to the survey ranked U.S.
leadership in the global monetary system as an important consideration, while 24% of
respondents believe a CBDC will have a positive impact on U.S. payments. Nearly 38% of
respondents expressed uncertainty of the of the ultimate impact of a CBDC. (Note, response
rates exceed 100% as the survey allowed high priority scoring with more than one answer.)
CBDC?
Wespay believes that U.S. payment systems are robust and continue to evolve to meet the
needs of consumers and businesses. Recent innovations in faster payments, and the
introduction of instant payments, represent incremental utility to payment system users while
maintaining integrity, trust, and safely in our financial infrastructure. �However, we cannot
ignore the growth of cryptocurrencies, which are being used for value exchange on digital
platforms. Many of these cryptocurrencies are highly volatile and largely unregulated.
Continued cryptocurrency growth could present new risks to a growing percentage of the U.S.
population that are participating in these systems. A USD-CBDC could be a viable digital
alternative that would allow financial institutions to act as intermediaries and provide BSA and
AML safeguards for all participants.
Responses to Wespay’s member survey indicate that 74% of respondent believe the most
important benefit of the U.S. implementing a CBDC would be to maintain its leadership role in
the global monetary system. However, it is not clear how the implementation of a CBDC
helps the U.S. to maintain that leadership position. �Wespay members do not believe the
CBDC attributes of speed and frictionless exchange will increase the attractiveness of the
USD in its reserve status. Are there additional features of a USD-CBDC that will result in
superior capabilities of the digital currency versus other payments alternatives? It is critical for
the Federal Reserve to communicate the benefits of a USD-CBDC that will incent adoption
and ubiquitous acceptance globally.
Wespay recommends that a CBDC be non-interest bearing to safeguard the value of

established short-term instruments used to hold commercial deposits. By maintaining a
CBDC with a one-to-one fixed exchange rate to the U.S. Dollar and no interest accrual, the
Federal Reserve will minimize opportunities for the private sector to arbitrage between the
physical and digital USD currencies.��Wespay members agree with the Federal Reserve’s
stated concerns that interest-bearing CBDC accounts could increase CBDC demand,
reduced commercial deposits, and drive higher bank funding costs. Households and
businesses could be directly impacted by reduced credit availability and higher costs. �As this
initiative advances, Wespay members request the Federal Reserve to clarify whether the
accrual of interest applies to an intermediary’s account with the Fed (i.e., wholesale CBDC) or
the customer’s account with an intermediary (i.e., retail CBDC).
Wespay members believe that CBDC accounts should be subject to quantity limits or caps to
minimize shifts from commercial bank deposits to central bank deposits. However, some
Wespay members are concerned that quantity limits for end-users may limit the viability of a
CBDC to protect the U.S. Dollar’s role as a global reserve currency.
Responses to Wespay’s member survey indicate that 71% of respondents believe that only
licensed and regulated financial institutions who currently offer central bank and commercial
bank-based financial services have the necessary experience to intermediate CBDC. This
supports the current U.S. financial structure where non-financial institutions do not have direct
access to central bank funds. Wespay members recommend that the Federal Reserve focus
on implementing CBDC for current central bank account holder intermediaries and explore
what changes would be needed for additional categories of intermediaries over time. �Wespay
members believe that if a CBDC is available to non-financial intermediaries, it is critical to
ensure that these entities are held to the same levels of regulatory compliance as financial
institutions. This will ensure a level playing field and help to instill trust and confidence for all
users in U.S. payments systems.
sale? If so, how?
Wespay members believe the payment solutions currently available at the Point of Sale
(POS), which include cash, are satisfactory and provide consumers with adequate choice.
Digital currencies hold the greatest potential for innovation in online environments as a means
of value exchange for digital assets. �In terms of improving financial services for the
underserved, a CBDC solution operable at the POS could be a more secure payment option
than handling cash. Larger purchases that require a significant amount of cash can lead to
greater risk of physical assault and possible loss in mishandling.
CBDC?
benefits of a CBDC?
_________________________________________________________________________
American Monetary Institute
Industry
Country
State
Illinois
Email
This survey response aims to look at CBDCs within the context of the major challenges facing
us today: pandemics, war, pollution, and climate change. The Fed needs a broader outlook
with increased responsibilities to reach its potential to help combat all of these. Ultimately, the
Fed will need to be aligned with other central banks and the BIS to work with governments
and the U.N. to promote economic harmony here-to unseen. While CBDCs will be a focus of
this paper, digressions will be commonplace. It is hoped this can be the start of a deeper
relationship to look at the possibilities for a better world.��Not raised in the "Money and
Payments…" paper is how a CBDC comes into circulation. One way is for money to be
initially issued/created through a loan or investment on the part of a commercial bank. A
depositor at that bank withdraws money, moves it over to their Fed account, and obtains
CBDC. Another way is for the Fed to decide how much money can come into existence. That
amount of money can be purposed by Congress to be loaned or spent into circulation.�The
American Monetary Institute (AMI) policy is that commercial banks are to be weaned off all
credit-originated money and indeed become true intermediaries between depositors (who
want to invest their money at interest) and borrowers. At this point, the Fed would have
greater influence and control over the amount of money - digital and paper money - in
domestic circulation. We can call the Fed originated money social equity money for
educational and practical purposes. It need not be considered a liability but definitely would
have to be issued in that sweet spot between inflation and deflation.��Along this path one
scenario (and there are other viable possibilities) for how deposits at commercial banks can
be handled is as follows: depositors would have a choice to earn interest or not. Depositors
wanting to earn interest would be told they are making an investment, and investments
involve risk. Depositors still interested in investing could choose to obtain a high, medium,
and low-interest rate for their investment. For example, investing in uncollateralized credit
cards would earn a high-interest rate. Investing in people's collateralized mortgages could
earn a medium interest rate while investing in commercial paper with certain preferred
guarantees might earn a low-interest rate.��Depositors not wanting to invest would have their
deposits given over to the Fed, and that money would be held there, and the need for FDIC
insurance would cease to exist. Besides these efficiencies and cost savings, other benefits
will be laid out in the rest of this survey.��One huge benefit would be that Treasury Bonds,
Notes, and Bills would no longer be necessary, as the Fed could create this money. The
government and taxpayers can save crucial money by not paying interest on Treasury
securities and thereby stay out of debt to private investors.��Businesses and other financial
institutions are now dependent on Treasury securities to meet various financial requirements
in our present world. These markets can wind down, and other mechanisms can be put in
place to replace Treasury securities.��How would all these adjustments be made? How much
money could be safely created to keep the economy safe between inflation and deflation?
How could the U.S. citizens be protected from the whims of Congress wanting to create too
much money? How should we think about money for employment purposes and getting the
needed money around to all the sectors of the economy? For better or worse, the Fed is at a
crossroads with choices. The choice to go forward in this direction would give the Fed an
educational role, policy choices, and to decide as intelligently and scientifically on the
aggregate supply of money. It is the belief of AMI that to monitor all these questions and
more, the Fed needs to become a public institution and become the fourth branch of
government.�
Let's continue looking at the world's challenges, including economic migration. That foreign
banks and American banks offshore create eurodollars goes beyond the scope of this paper
but remains an area for research and crucial policy development. Alternative proposals like
having an international currency along the lines of carbon credits and revisiting the previous
policies of parity and parity tariffs are also being considered. The goal is to make seigniorage
and regulate a dollar's value work towards justice and equality.��What is parity(?) and the parity
tariff?�Parity was, and is, a U.S. law that was in effect from 1942 until 1953 and is a period
worthy of study. These policies might be reformulated to meet today's challenges as they
successfully met the challenges of WWII and its aftermath. Parity works on the notion that we
are all interdependent in society and that we need to be paid sufficiently to have a healthy life.
The parity tariff is simplified here based on the principle laid out by Carl Wilken in 1947 titled
Prosperity Unlimited - The American Way (out of print presently).�Although this goal is beyond
the scope of this survey, a microcosm of this perspective is shared here to give an example of
the imagination we need to face today's challenges. The idea is similar to Henry Ford paying
his workers well enough so they could afford to buy his cars.��High domestic prices are
necessary for a higher standard of living, especially for the workers who produce those
products. Equivalent imported goods coming into these advanced economies at a lower price
have an import tariff tax equalizing the import and domestic price. The money collected goes
into a bank account. After some time, each country balances the accounts, with the poorer
countries receiving the profits that formerly went to the importers. The poorer countries could
then spend that balance of money in the country they exported to during that period and pay
for the goods at the domestic price level of that advanced country. By doing this, the domestic
price level in the more advanced country is maintained. At the same time, this parity tariff
program helps the poorer country bring up their standard of living.��Here is a simple example of
the above. A California producer of avocados sells in the domestic marketplace an avocado
for $0.75. The grower can pay their bills and make a small profit at that price. I live in Chicago
and can buy that domestic avocado from my favorite chain store for $1.00. The importer for
that chain store also buys an equivalent avocado from Mexico for $0.50 and sells that
avocado to me in Chicago for $1.00. The difference between purchasing the California and
Mexican avocado is $0.25. This money would not be profit for the importer or my favorite
chain store or savings to me. Instead, it would be hit with a tariff that protected the domestic
price in California. After the accounting back and forth was done over time, the tariff money
would assuringly show a balance of imported tariff money coming in from Mexico. Mexico
could use this balance to buy U.S. goods at U.S. domestic prices.��This parity tariff system
would be an economical way to bring the world up to our standard of living and reduce the
need for economic migration. A lot that goes on in the name of developmental economics
becomes a debt trap for poorer countries. Parity economics and the full employment goal of
the Fed would help eliminate suffering here and abroad.��The responses to the first two
questions give our perspective on how a CBDC should come into existence. The goal is to
make money neutral and not favor a private elite group of bank owners and officers, but to
make a system work that favors all people equally. If the New Fed is making jobs available
on-demand, there will be the money available for people to afford their mortgages with little to
no need to have a run on the banks. However, making things work well in this country does
not eliminate the pressing problems affecting the whole world. Rather than have a currency
that dominates the world with unfair privileges, we need to develop parity tariffs and other par
economic ideas to create a supportive and nurturing humanity and not wanton greed and
profit. By this time, we should know that the Earth cannot give us compounding interest rates
and unlimited growth but hopefully can meet our real needs.�
inclusion?
Imagine we had a monetary system where if a person wants to help society, there would be a
decent job found for them. There might be less violence and real helpful productivity gains. Is
this possible today? If you create money only for actual employment rather than to financially
speculate or simply throw money at a problem, the answer is yes.��Take the example of
Colonial Pennsylvania and the paper monetary system they created there. It says right in the
1723 law that issued the money that this law is�"… intended for the benefit of the poor,
industrious sort of people of this province, at an easy interest, to relieve them of the present
difficulties they labor under…."
(http://www.palrb.us/statutesatlarge/17001799/1723/0/act/0261.pdf, p328). �It was a paper
money system the purpose was to support a medium of exchange for all the productive
aspects of the economy. By the late 1720s, young Ben Franklin understood and wrote about
the procedure. We credit him for starting the Post Office, Sanitation, Fire Departments, etc.
He didn't have the money to do all this, but he knew how the Pennsylvania Assembly could
create the money (think Fed and CBDCs) and have it recirculated to put people to work.
Despite the French-Indian War in the 1750s, Colonial Pennsylvania ran the least inflationary
monetary system during the colonial period and, by one source (Lester, Richard; Monetary
Experiments, 1939, reprinted 1971, p.108) in any 52 years of U.S. history. They focused on
work and jobs and not on making certain people privileged rich. If the Pennsylvanian
Assembly could do all that with little background in political economy, then the Fed should
undoubtedly be able to do it today. Yes, inclusion all the way!�
We are now aware of climate change, pollution, and the need for humans and life on the
planet to harmonize with the Earth itself. This goal should help define where the jobs need to
be. The goal is to create money for jobs to meet the pressing needs of society and the planet,
not for financial instruments in a secondary market.��In a command economy you can create
money to employ everyone. Create money in excess of that is inflation. AMI does not want
to support a command economy, but does want the people hired who want to help society.
Priorities are employment with good benefits and retirement. Simply, if a person wants to
work, there is a job available to them. �We want this for ourselves, and by extension, our
family and neighbors, and outwardly to everyone. The goal for the New Fed is the full
availability of jobs without inflation.�
stability?
Let's consider the difference between commercial banks bringing new credit/money into circulation
versus the New Fed bringing new money into circulation. The New Fed can bring money into
circulation, not tied to collateral or interest rates. What is the difference?In a debt-based monetary
system with profit and growth as the central themes, collateral will tend to replace trust over time.
Finding collateral will be the basis for obtaining a loan and wealth creation (Milton
Friedman).Michael Milken has spoken about the need to collateralize the commons, i.e., the public
sector. He was saying that we are running out of private collateral to maintain growth. In theory, a bank
could, over time, own the water rights of Bolivia or own Antarctica.Besides the problem of
collateral, there is the problem of interest rates. In a debt-based money system, the loan principal
becomes the new money coming into circulation. The interest payments have not been created, and it is
paid along with the principal. In stagnant times with few new loans being made, this debt-based money
system can still work if the banks, who earn the interest rates, can get that money back out into
circulation so the borrowers can earn that money to make the payments on their loans.However, if
relatively few people and companies obtain an excessive amount of the money supply, there is less
money available for borrowers to earn and make their loan payments. Debt can increase beyond the
available income earned to pay off the debt. Human-caused or naturally caused circumstances all too
often means that bank loan officers lose confidence in the overall economy cyclically, and debt defaults
occur.Here is the monetary reformer and environmentalist's plea to ourselves and the people who
lead our monetary system: Interest Rates, Collateral, and 1,000,000 Living Species to Be
Lost:Interest rates put the economy on a treadmill in a debt-based monetary system. Everyone in
the aggregate has to push to pay the overhanging debt.Together, interest rates and collateral will
automatically push humans towards profits and growth over the needs of sustainability, a healthy
environment, and in the aggregate, a healthy planet. We are in the midst of losing a million species,
one-quarter of the plants, at a rate perhaps only exceeded by giant meteors hitting the Earth in earlier
geological times.We live in a system where the earth credits and humans debit. When will we pay
back Earth and have a pristine planet again? Our money and banking system today is like the
cheerleaders at a sports game, promoting more human debiting. Suppose a newly created CBDC
(purposed by Congress) is coming into circulation while the banks are still issuing new money via
loans. In that case, the Fed's action may serve as an occasional relief valve to one significant, onerous
tendency of our present debt-based monetary system in "side-by-side" money creation. However, the
overall challenges will remain in place to undermine our humanity, and perhaps competitively so.
Instead of money, profit, and growth leading the way, we need a monetary system that promotes
patience, love, caring, curiosity, and understanding so that a pristine Earth can meet our and everyone's
actual needs. The time has come, and if not now, when?
Yes, we can have private, non-profit, or public banking systems that can stand on their own
two feet, and if they do well, they can make a living equal to any other sector in the economy.
They can provide efficient fee-for-services and investment opportunities.��Suppose we have a
New Fed and a Congress concerned about jobs for everyone who wants them. Can the
Federal government still invest new money into the banking system for mortgages, student
loans, and business investments? The New Fed would have to help determine the level of
spending and perhaps coach Congress as its investment banker. Maybe instead of direct
student loans, Congress could allocate money based on student attendance at higher and
adult education places for jobs at those institutions. Perhaps Congress could give money for
new home mortgage loans knowing that money will put people to work.��After Alexander the
Great died (323BC), one of his generals, Ptolemy, obtained control of greater Egypt. Until the
Romans took over in 30 BC, a banking system developed and infused into the government.
For example, the government made investments in papyrus paper for writing purposes, which
was financially successful. Perhaps the New Fed could support Congress taking an equity
position in some adventure and making some profit(?). AMI has no present policy on this, but
this writer thought it was an idea worth mentioning (Heichelheim, Fritz M.; An Ancient
Economic History, Vol. III, 1968, p. 112-125; a marvelous description of this ancient but
sophisticated banking system).��Stablecoins and local currencies both have merits.
Cryptocurrencies are pretty problematic. Questions around seigniorage, energy requirements,
and fairness to the broader communities where they operate need to be considered
case-by-case. That Silvergate bought the non-profit Diem stablecoin technology makes me
curious, and at this time, the answers are not available.�
Some financial innovation products such as interest rate swaps and auction-rate bonds can
turn the banking world into a casino, and great harm can be done. If the New Fed controlled
the money supply with the purpose of funding society’s work, these questionable practices
could be eliminated.��Money Market Mutual Funds came about to meet the practical need to
get around the interest rate ceiling in the time of high inflation during the 1970s. If the New
Fed can do its job keeping the economy in-between inflation and deflation, the need to go
around the existing system can be avoided. People desiring high interest need to secure
credit cards or take an equity interest in a start-up company.��Suppose banks and financial
non-banks are allowed to continue creating the money for society as we have operating
today. In that case, the above problems and more will not change. CBDCs will simply come
into existence as part of the system that protects relatively a few people maintaining an unfair
privilege and its advantages. The Fed needs to work in an enlightened way with all citizens
and the legislature to remake itself to meet today’s challenges.�
It can be anticipated that cash usage would decline. However, as a medium of exchange,
cash would still offer the best privacy and, for many, an essential measure of confidence in
the monetary system overall. Next to holding gold and silver is cash for many people
worldwide.
CBDC?
At Chase Bank, Zelle and other products quickly make payments across the country within
those networks. In time, with or without CBDC, these products will develop, but much more
slowly than the potential of a CBDC internationally connected.
The old saying, “No one likes to change except a wet baby.” In the name of efficiency, we
move on. What will happen to Western Union and their business? How can they evolve into a
new future? The currency exchanges may have other products to keep them going, but they
may not wholly survive. The good news is that there will be other good jobs available to help
serve society. Being interested, having the ability, and applying oneself will help steer oneself
to the desired job, but being open and trying something different but valuable will also benefit
society and should be personally rewarding.��As far as CBDCs are concerned, one can only
imagine that U.S. citizens would not want to be left behind.
If cash is maintained, and the Fed is ready to look at maintaining full employment seriously,
everything else can be made to work out. Because of a pandemic and supply delays,
disruptions in the economy can be modeled and forecasted much like we forecast the
weather today. �In Colonial Pennsylvania, there was £85,000 in circulation before the
French-Indian War started in earnest in 1755 after Braddock's Defeat. For approximately five
years, that war continued in North America. A dramatic £485,000 was created and put into
circulation "for the King's use" to fight that war. Taxes took away nearly £85,000 leaving
£485,782 in circulation by mid-1760. By the early 1760s, there was price inflation, but not the
500+% predicted by the amount of additional money for some reasons. Another factor was
that the Pennsylvania Assembly, from 1762 to 1769, taxed out of circulation £25,000, which
helped lower prices by 13%. �Today, with modeling tools and education, the citizens can learn
what is needed to come out of a crisis with inflation. Citizens would know what is happening
and could support of their own volition what is required to get to the desired result.��This
transition to full employment based on worker desire would be a change in mindset.
Education would play an important role. Ultimately, the central banks would have to work
together with BIS and economists to develop a plan to accommodate the world's population
living in harmony on this planet.��As a past anthropologist and environmental science teacher,
this writer can tell you that there will be no lack of jobs to help maintain harmony with Earth.
The good news is that the Earth can be forgiving and patient as we give back the credit that
we have debited. Also, some will bring up population control. Instead, I would suggest using
the term "population education" and an honest explanation of how the monetary system can
support us individually and society overall. People can make good decisions.�
The lack of monetary privacy can bring up a lot of fear. Yes, there should not be illicit financial
activities, and today's governing bank money laws can be applied to CBDCs.
This question goes beyond the policy questions that AMI has considered. Learning from the
world of cryptocurrencies and stablecoins such as Diem might be a start.
Yes, it will give citizens more trust and confidence in this form of money.�
Naturally, interest might well kick-start the currency and then be dropped later. However,
interest should be unnecessary due to natural curiosity and the services that such accounts
will be able to offer. Interest should be associated with risk, and there is no risk here.
No. However, today, there is a problem along these lines in our monetary system. When you have
super-wealthy people, they can influence the markets. We might need laws to govern how large
amounts of existing money come into the American economy so that the Fed and Congressional
policymakers can make adjustments for needed job creation and price stability. For example, suppose a
rich person wants to open a plant and hire many workers with decent salaries and benefits. In that case,
the Fed and Congressional policymakers might not have to consider creating the money to put these
people to work if they need jobs or more work.
This question brings up fundamental structural issues and the meaning of "intermediaries."
The word intermediary in banking and money textbooks starts with a general meaning: "a
bank borrows short and lends long." Today, all the way up to the BIS website, you can find
"intermediary" used in this most general sense. The AMI uses this term more precisely when
a bank or non-bank financial institution uses actual depositors' money and transfers that
money to a borrower. The money used in that transfer is not the bank creating credit. It is the
depositor(s) investing.��Since 1971, when money market mutual funds were created as a move
toward financial innovation, the Fed and other central banks have gone on a faster track of
losing control over their respective national monetary systems. With cryptocurrencies and the
Diem promoting a stablecoin, the Fed and other central banks will continue to lose market
share and the corresponding seigniorage privilege.��The fundamental question is, to whom
does the seigniorage privilege belong? In the United States, the seigniorage privilege
belonged to Colonial Pennsylvania with its alternative paper money system. During the
American Revolution, the "Continental," despite England successfully counterfeiting it, the
seigniorage was gained by the Continental Congress. During the American Civil War and
after, the Greenbacks were the seigniorage privilege of the Union government. History shows
that if the bankers control the seigniorage privilege, then over time, they will control the
financial system and then the government.��If there is equality, where money is neutral, then
the seigniorage privilege belongs to the people or its representative government. It certainly
does not belong to a private class of citizens called the bank owners and their officers and
lobbyists doing their bidding.��Is the Fed important? Yes, it is, and it's so essential that there
should be a New Fed, and it should be the fourth branch of government, crucial in its realm,
and equal in status to the other branches.��How can seigniorage equality be achieved? The
answer is in many different ways. The Treasury could obtain the full seigniorage privilege, or
all the nation's people could gain the seigniorage privilege by having all new money go
equally into their Fed Accounts. An intermediate possibility is for cities and states to set up
public banks and be allowed the seigniorage privilege of issuing money for work. Or,
differently, the cities and states could simply obtain the necessary financial distribution to do
their hiring or procurement, or lending.��To avoid inflation means you do not allocate money to
solve a problem by throwing money at a problem; you create the financial resources when
you have the people and the resources to solve the given problem or achieve an opportunity.�
Yes. One idea is that a person could go to their post office or participating financial center
working with CBDCs. They could simply swap CBDCs for cash and use it offline.
sale? If so, how?
Yes, but maybe there should be limits, especially at first, as we go through a learning curve.
You are working on those capabilities now. Good luck, and we support all the technical
success that is possible and feasible.
CBDC?
One day we might want to separate banking and lending as two separate practices. The first
would be a fee for services. The second would be a worldwide peer-to-peer lending
platform(s). If you invested a $1,000, you might have 1/10 of a penny in a million homes - a
genuinely diverse and hopefully a stable investment.�
benefits of a CBDC?
It is certainly a different day. We have population and demographic challenges. We have

pollution, climate, and pandemic problems. We have resource problems. We have the
problem of a lack of collateral and trust in our present financial system. However, if you are
ready to tap into the love people have, you will find that while the Earth itself and the Fed may
not meet all the wants and greed, but will be able to work out a plan that amply meets the
needs of the people. It will be a society led more by curiosity than the need to win and have
more and more.��In one way, we are democratizing money with CBDCs. However, in another,
we, as a society, are ignorant and have lost our way in how a monetary system works. Slowly
and continuously, the Fed, as part of the banking system itself, has protected a plutocracy of
its kind that, in the words of my senator, Dick Durbin, "owns this town "- referring to
Washington, D.C. I don't think that was the intent of Congress when they passed The Federal
Reserve Act.��The Dodd-Frank law did make regulatory changes to prevent another Great
Recession. But, within a few years of its passing, the bankers' lobby had that law dismantled,
and we are at the place as we were prior to that law. Today, we are entering a whole new
territory of possibilities while, at the same time, we are patching this monetary system to keep
it functioning through today's challenges.��However, the inherent structure is driving humanity
off a cliff. Citizens look at their circumstances and don't understand them, and many follow
untruths and conspiracy thinking. In part, we have a fragile democracy and further potential
for political upheavals. This situation reminds me of early ancient Greece, where the citizens
would turn to a tyrant and hope for the best.��The way out of this is honesty and education and
acknowledging we need to work toward democracies on all levels and not a plutocracy. We
have to make money neutral again and not give some people an unfair advantage that recent
history has shown that they will use to privilege themselves at the expense of others.��The Fed
reminds me of the wizard behind the curtain in the Wizard of Oz. The Fed needs to come out
from behind the curtain, be with all the people, and work for all the people. Thank You for this
opportunity!�
_________________________________________________________________________
Propel Inc
Industry
Technology Company
Country
State
New York
Email
alan@joinpropel.com
Propel builds modern, respectful, effective technology that helps low-income Americans
improve their financial health. Our flagship product is the Providers App, used by more than 5
million families for banking and management of their EBT benefits. Over 1 million of our users
currently receive Disability benefits (SSI/SSDI). Over 1 million use the Women, Infants,
Children program as well,��All told, some 40 million American families live with low income, and
20 million will use government benefits delivered on an EBT card each year. We recommend
the Federal Reserve to explicitly conduct research into how a CBDC will create risks, benefits
and opportunities for the 1/3 of American households that are most frequently unbanked and
underbanked, most distrustful of financial institutions, and most likely to be significantly
impacted by changes to the fiscal operations of the Federal Government.��For these families,
we've found that every dollar really does count. A single dollar represents a basis point or
more of their net worth. Every day counts too. Receiving a Disability deposit a few days early
can dramatically reduce the risk of incurring fees, penalties or hard choices that impact their
health and nutrition.��The potential benefits of a CBDC for this section of American society is
tremendous -- potentially resolving small dollar liquidity issues, reducing the incidence of fees
relating to low balances, and reducing demand for expensive short-term debt. �However, the
impacts of of a CBDC on the operation of the social safety net is far from clear. A
programmable digital currency, if the use of those dollars could be restricted to certain goods
and services, raises questions about the future of the EBT processing network, and the
delivery mechanisms for both the SNAP program and the WIC program -- programs that are
actively lifting millions of children and their providers out of poverty. �In addition to conducting
research with these American families, we recommend that the Federal Reserve seek input
from stakeholders at USDA, HHS, the Treasury Department, and state human services
agencies about the pain points in these systems a CBDC might help address, and the risks it
may create.
inclusion?
stability?
CBDC?
sale? If so, how?
CBDC?
benefits of a CBDC?
_________________________________________________________________________
China Rose
Industry
Other: Artist
Country
State
Oregon
Email
Freelance Artists and content creators are already over-exploited and many remain outside of
a traditional, current marketplace without a: median, mean or mode to statistically quantify
they even exist. The Blockchain, Crypto, NFT system further exiles these millions of already
marginalized.��American Artists and their art forms are being relegated to and racketeered by;
the Crypto market through a portal of lies built-on sham ideals and misrepresentations. The
underlying fundamentals of this process are based in fraud. �Further the sham ideals put forth
in this marketplace are not accessible to populations of females in America, in any meaningful
or productive fashion. Artist's will be unable to make their contributions to social cultures
available and culturally relevant because the market space will be controlled by a new
monopoly in the Art space. The Art space will be forced, without any other options into a
monopoly by an economic need to conform. �Blockchain using Crypto is taking control of Artist
traditional assets in ways they can't control or have any-say about, as American citizens. �Art
funneled into Crypto NFTS is simply for the soul-sucking purpose of crafting fees and digging
channels that surround the art marketplace with toll booths. The NFT marketplace essentially
carves Artists and their social functional relevance out of the dea��The Art marketplace is
overrun by this "alternate" market that arrived with an outsized presence, not via organic
offshoots or actual human production-growth of artists, for Art but via hucksters trying harness
access to excess in a hyper-male only, extension of global VC markets. �People now in this
space are not life long advocates of Art for Artists sake but form a world of shifty finance and
back door money laundry programs. Block-chain's claim to market changes as innovative for
people like Artists is entirely false. The outer shell of marketing PR may be wearing a wrapper
of social good but they are anything but, social or good. �Artists don't need a clunky
blockchain/Crypto/NFT method that is not accessible, expensive, volatile and unsustainable.��If
our US government wants to go all-in for Artists as an excuse to create a functioning, fully VC
funded marketplace: they can create an artist collective, a coo-op and a government works
project to promote programs. There are models of systems that do work and provide teaching
tools for preservation and conservation of our one shared, Earth.��I've studied the market and
read what is happening in this space for the decade or so it's been pushing it's way into our
financial system. Blockchain is a fantasy that in real-practice is nothing it's mysterious and
nefarious creators claim it to be. It's a novelty by product of greed for the status quo. It's a
market that is capitalized for gamblers based on speculative fiction without assets or values.
�Even if this forced extension (called an NFT, a non-fungible token) which sits well outside the
reach of real market forces, day-to-day needs and process by real digital artists; it's still
essentially a grab by Crypto Players to exert more FMO (fear of missing out) using old
fashioned pump and dump schemes to the marketplace.��There is not a single artist anywhere
in the world who woke-up one day and said: what we need is a funky, clunky, inaccessible,
blockchain that capitalizes on the destruction of our the ONE Earth while exploiting us for
their own motives and agendas.��Currently the entire Blockchain, Crypto sinkhole is a drain on
Artists who want to get busy with authentic innovations and creative world solutions for
everyday concerns. But funds flow to this outer market rim, called Blockchain and Crypto.��To
expect Artists to join and compete and participate in a worthless marketplace of hype and
volatility that serves only the shadows that prop it up. There is no positive outcomes for art or
Artists here or Tax payers who would be funding a process that still carves out everyone but
the richest males and dumbest gullible people who are their mark.��Blockchain fantasy market
claims tell one story while in truth and practice the system operates differently and exclusively
for pump and dump Ponzi schemes with short shelf-life cycles and happen in direct contrast
to actual factual, data. This marketplace is overrun and riven by males who see themselves
as evangelists above others and their lies as a means to their nouveau riche and any method
they choose to maintain it. �As a digital artist and media maker the truth is that the Arts and
Artists don't need Blockchain based Crypto NFT's putting a choke hold on their on assets and
resources. It's not a fair game plan or sustainable method to preserve a legacy of Arts and
Artists in the digital realm. There are better ways but its a closed system so no ones asking or
looking.
Yes. A digital tag can be generated that has multi-functions and practical, affordable uses well
beyond the blockchain method in instances where a digitized frame work is needed to:
present financial assets, timelines, contracts, ownership, transactions etc. Its flexible
adaptable and correctable. Additionally this method I purpose can be used to create digital
assets in a functioning market much like a new type of bond offer. For the purpose of
establishing values for something constructive and tangible or non tangible services that are
useful. �It will be a digital token an American could exchange that would give the current
market price value when used at a checkout by reading a balance on the asset after it sold.
Similar but more flexible that Treasury bonds. Money spent to purchase them would and
could be used to finance causes to benefit social needs and consumer.��This method can be
used to integrate and expand the world of finance to all Americans. This Digital Token would
not need to operate on a block chain but rather like being issued a code on a new bill. Us
assets for treasury all have serialized codes and a similar system can be used to create
digital tokens for Americans. �But it does not need a blockchain. There is another more
straight forward,way to accomplish this objective for a digital currency that is more flexible,
more secure, more efficient, more accessible and non-harmful to the Eco system of our One
Earth's, continued human habitability. t��It will make the nefarious fantasy island of the clunky
blockchain system that depletes the Earth, obsolete because its a burden not a solution.��As a
digital Artist I can crate this today and it's an extremely secure method. Its a way to make
tokens transferable, accessible, usable and with an equal share of values. The new mode of
currency can even be used to promote and educate consumers as a form of savings, as a
market method to expand access and equability ot all Americans at every level of need or
desire to participate in the financial markets.��Americans already have to participate with
401K's and in other forms that are not direct modes. The market requires certain things and
the assets have lots of rules and other conditions. A new asset class in digital tokens could be
created so that Americans can invest in themselves, their lives, their neighborhoods, their
educations and a multitude of other tings for infrastructure and progressive climate changes
needed. But if they need to liquidate it it can be made whole at whatever current value that
code, holds. �They can be valued on the market prices of a secured token and then burned, or
used by giving-up a measure of value for short term gain (needs) and potentially profiting,
based on the length of time the token is held. The use of that digitized asset will automatically
be known by the government for good record keeping of losses, gains and purchases of the
digital assets. It can all be built in to the assets as it is formally created. Each can be tagged
and created at the purchase point for the consumer. �So a person, or a group can have a
stash of (these proposed) new digital tokens they use to buy an investment in social themes
they choose: selecting to support the environment, selecting to support infrastructure,
selecting to support helping with America burdens by poverty and to build places for the
homeless to be treated like people with dignity and a home. Or if the person who buys the
asset suddenly needs access the value to say buy gas because they are out of a job or
something... the digital asset they hold can be exchanged for use at the current market value
at the time it is used. �That value then goes away. It was burned or used. The asset won't
accumulate anymore value. But as long as the asset is unused it will grow based on it's age
and it's current market value.��The process I'm purposing is based on rendering assets so each
asset is its own store backed as a government asset class with parameters as I have laid
out. They can be gifted, transferred, held, stored, expended and each has it's own inherent
value to the whole. It doesn't rely on any of the current systems that are not sustainable. �An
analogy: think of it as a clam with a grain of sand that is creating a pearl.� �The seashell is the a
render of the asset, a digital shell that reveals what kind of token, make and model it is. The
render is the method to generate each secure tag. The grain of sand is the value spent
deposited inside the rendered, digital shell. The asset grows based on the agitation of market
factors of real values. The the longer the sand is creating a pearl inside the clam shell it
retains a steady value and potentially increasing (some more, some less) based on the type
of token purchased. As long as the clam is sealed that pearl stays and grows. And when you
crack it open it's value is static and it's asset use is recorded. �DART: digital asset rendered
token
inclusion?
Blockchain will never be inclusive and it's expressive outgrowth into the market is always
going to be limited and predicated on defaults. It is what it is and this idea that over time it will
become something else is ludicrous.��I'm calling my idea for a digital token a DART as just a
working title. for a digital asset backed by our government and used as a store of value)
because DART(s) can be used to target purchases as assets in unlimited categories that can
promote future education, recreation, home purchasing and starting or buying and existing
business or just to save.��My idea for digital assets can be built as a fully functioning asset that
can be easily integrated into current financial Eco-systems and if they existed now they could
be purchased to help Americans help stabilize economy to reduce inflation. The way they are
created (which I can explain if you'd like to know how) makes them 100% accessible to any
American. �A DART targets a bridge between investing, saving, spending, supporting and
growing our Nation as an advantage to raise all ships. For all Americans to be supported by
an equitable method of digital coins and tokens. But at it's most basic level a person can be
self sufficient to collect, store, trade and/or use the at will. This digital store will survive a flood
or fire and won;'t put any strain on the electric grids or drain any resources.
Oh that's an easy one. Block chain Crypto markets in real time are parasites who feed off the
frenzy in the market and want volatility to make them look attractive and potentially useful.
They are not. �A digital asset rendered token rendered is exactly the opposite. Funds spent to
buy them go straight into a government fund that forms pools of funds for a reasoned
outcome or value. �A processes as a store of value issued by our government could come in a
diverse variety of flavors. Americans would be investing in both themselves for asset store
and growth and a their chosen desire. �Maybe they want to build an education pool so they
buy tokens for education to be supported by progressive programs., This can fund anything
targeted at real time needs. Let's say we want to bring down inflation? Americans can buy
gas tokens that allow Americans to own and operate the gas stations and even the industry.
Americans can choose to invest their tokens into the things they need as a store of value for
future growth or needed personal liquidity. �Inflation would go down because this self sufficient
mode would allow for very targeted needs in the time and place they exist. Using them and
investing in them can in short period of time give Americans a wider sense of control over
market forces as their own shareholders of the store of value. By choice. Americans who
currently invest in the fossil fuel industry have little of no impact on its behaviors. But
collective buying powers can change that. Self sufficiency in Americans wallets can reduce
the need to buy into a fierce market and reduce consumption that is causing wealth
deterioration while enriching a few. �This would allow for a flexible, adaptable, alternative that
has power to shift trends for social good that is easy and cost effective to integrate into the
current financial system. I still want you to use the clam and pearl analogy but you could also
think of it as each token style and trend can be a collectible, collective. The funds of the
government in digital coins would act somewhat like a co-op. Each set or series can have a
unique appeal like postage stamps. �And in some cases then a person (group, company, corp
or non profit) can in certain asset categories create their own style or series of digital assets
to sell their brand and create their own legacy assets. Based on my method described above
the asset would also: always be discernible for taxes purposes and even if whoever holds the
asset goes bankrupt the asset purpose, values and holders are all easy for the court to know
and understand. There are no shadows in the back room.
stability?
The Blockchain and Crypto will always be negative because the system itself is static. It is
said to be unalterable and that's not a good thing because with money, it's like water. It needs
to move and circulate and flow. Crypto holds it in a choke hold.��My DART asset would flow
and grow the economy because it means Americans can buy their choices in the market to
grow what assets they need to supplement what they have or start when they have nothing.
The only loss for a DART would happen if the Government as we know ceased to exist.
Absolutely. The current market players in the top of the current global markets want absolute
control and every digital asset will have some way for them to earn transaction fees or other
perks that drain off the values the asset holder should get direct form the investment through
a co-op of other Americans in our treasury system. control how this happens so they can
control the asset. Otherwise the market movers now will try to control it for their own greed
and gains.
Well the more you have a core group of private interests; let's say right now the world of
pension funds, i.e., Fidelity are chomping at the bit to get Crypto into their clients portfolios.
Because then that forces tax payers to fund the always failing always flaying lies of the Crypto
Market. �It takes away the Tax Payers choice to fund these programs with Crypto because of
matched funds. It creates an financial eco system where Americans are forced to pay fees
and manage volatility where they just want security. So it's another scheme to pump up these
failed market tokens by creating tolls along the way that hack away at the funds Americans
worked for and want to save for retirement or some other purpose. �The funds are no easily
accessible and if they were it would be at exorbitant costs. The hype needed to market them
is also not practical or ethical.
Yes. But not as Crypto. Not on a Blockchain.
CBDC?
They will be exploited and people will be pirated.
Not at all. The United States should not be pushing the cart for Blockchain or Crypto. The
united states has a chance to crate a new marketplace that can be accessible, equitable and
a good store of value when backed by deposits used to purchase tokens but expanded to
have a vested component, a choice in their uses of each tokens funds and even to fund their
own businesses so it can bridge a big opportunity and we should be the forerunners not the
followers chained to a bunch of greed mongers who use fantasy over value and speculation
over truth. �The current block Crypto market tells us one very important key fact: Americans
and other people want a portable, digital currency, they want PDC's and if we are conscious
of what we are doing we can create a store of value system that will be the model, unchained.
Develop a new system that functions on all the points that make it accessible, portable,
store-able, usable and invest-able. And nowhere near the Blockchain and Crypto. Let that
system fail. We can do way better, more practical, infinitely more useful and highly adaptable.
I've already answered this in my version of a portable digital asset given above. So I can say
that Crypto will always be a pirates booty. Blockchain is designed that way. A different style of
portable digital asset can have profound effects on reducing illicit financing because all the
assets issued will have a serialization coded to each one as a tag rendered for it as it is
issued. �A DART is a digital token (coin) that is monetized, when its monetized (someone buys
it) it then is rendered with a tag of its own: that can be stored, used, transferred, traded, sold,
or burned-for-use. It's traceable, track-able, stack-able, collectible and the code is the key is
only known by the issuer, treasury and the holder. �In my idea the tokens themselves are
decentralized in that the cooperatives that issue them do so through a system where they go
through the government much like we make stamps for the post office or commemorative
coins for collectors. It's a kinda-similar theme. �So it's much harder for anyone to hack a whole
bunch of individualistically, discreet tokens and that reduces the external forces that can pilfer
funds in assets classes. �DART: Digital Asset Render Token is a clam with it's own grain of
sand that can over time become a pearl. Its a store of the asset indie its own shell and
cracking that shell won't spill all the others. Ask me more if you'd like me to share this digital
method is done.
It can be used to provide a safe secure store of value that is portable and allows whoever
buys it to vest their assets as they choose, for the purposes and support they are seeking.
�The type of asset style I'm purposing would have very little exposure as a holistic system
because the digital assets are discreet to the person(s), group, company, corporation or
cause that issues the series. �Each discreet token purchased becomes a building block that
holds and flexes with market needs yet retains a steady value and potential for growth.
�Operationally the government would simply need to keep their store front (the US Treasury)
free of criminal hacking. Individually if a person lost their wallet or when/if it is stolen they can
report it and the anti-theft process built in can burn the stolen asset leaving it worthless and
reissue an asset to replace any lost or stolen token. �That's about the worst case scenario
based on my method of rendering tagged coins or digital assets. It would not be a creation of
a behemoth that like banks can fail and Crypto can thwart and drain the system in a exclusive
model. �My DART model uses a claim shell. So once the shell is cracked the system knows
and if a large scale crack happened it would know and isolate it. How could that happen? An
example would be a corporation that holds a sizable amount of the digital tokens as stores of
branded assets might have a reason to sell them all at once. The government issued
overnight liquidity for private investors for several years running as a run up to our current
Crytpo and inflation crush. �In this example of a big burn of a corporate entity it would not be of
any harm for the government to issue itself the needed liquidity for such a load because it's
stores are safe and it's main holdings in digitized assets are diversified in the public
marketplace for the people who use them. �So the DART system is centrally secure,
portable and its uses are entirely discreet because they are truly decentralized and dispersed
versus a decentralized, and unmanageable Block Crypto system that does not allow, discreet
use but requires a complex interfaces and unstable carriers by contrast. �
No for Blockchain or Crypto.��But for DART, yes it could be a class of tender with asset value
rules based on it's purchase value, purpose, collection, storage, investment growth and use.
Again there are two options here one is that no, Blockchain and Crypto are not sustainable or
usable or functional. They do not work for anyone except those who pump and dump based
on fear and hype. The dangerous nature of Crypto mining is a risk too far.��But a different type
of digital asset can be made to acquire value so that can be considered interest like savings
or T-Bills. CD's and monetary vehicles most similar to what we already use but as a hybrid of
new forms for vesting in tokens for a wide use of reasons and choices.
That depends on what the model for a digital asst is.
You are making this way to hard. It can be a branch of the US Treasury and think upon it as a
person buying a forever stamp. It will always be face value backed by the government.
�Whenever its used that value is 100% and those purchase limits can be similar to bank
insurance and likely sufficient if our government wants to insure a branch of itself.��Issuers of
the currency can only be our government but the form a token can be is very flexible as a
asset vehicle. You can offer other models based on what the consumer wants to create and
buy or consumers can select from choices that the government offers. There is a wide variety
of diversity and flexibility depending on how you design this. �So instead of buying a forever
value type for short term asset value storage a person can buy a token that is invested in
government assets like green infrastructure and if they hold it it can grow like a pearl and be
based on market values when used.��You can have both.��With Blockchain and Crypto it's not
flexible it relies on checkpoints, toll booths and hidden costs and nefarious Crypto mining that
is designed to pay less over time while creating a market scarcity to drive the FOMO. As
those choke hold values unravel into the market we see values evaporate except for those
who take the asset and run before the air is gone.��
It can be designed that way but it is a digital currency and so it should have its basis mainly in
that format.
sale? If so, how?
Using a different model of Digital currency. Not Blockchain or Crypto. �A "Digitally Acquired
Rendered Asset" Model is what I call a DARMA. �Above I used the working title of a DART to
explain how this can be done by issuing something similar to a stamp. A DART stands for:
Digital Asset Rendered Token. So I sed that to discuss the tokens. But the system is a
DARMA model. �Considering the concept of a DARMA:��It's purchased, it's coded when
rendered and tagged for its owner. As an asset that goes based on what the purchaser
decides: it can go straight into the vault for long term storage and growth or it can be sold as
a forever token to be used for a specific value purchased and sent to a wallet. �So based on
what the purchaser wants once the asset is rendered (coded and tagged) it goes into an
investment vault or wallet. �Example: Let's say my daughter is in college and she needs funds
for a program that has to be paid thats over the budget we had thought. I can buy some
forever DARMA and send it to her wallet. She then accepts it and it has a constant use value
like a bank balance. �Let's say she's going to school and isn't there yet for another few years.
Her mom buys a token for $25 every-time she gets paid so it can accumulate in the vault and
when she removes it, it could have stored values to offset education costs. �So one model can
have many flexible applications. No one owns DARMA/ or DART because they are public
utility assets. They belong to American tax payers as its their government treasury. That
means it's going to be a big driver and market player as an asset class for taxpayers to own
and operate which can fund social goods. �But not as a VC model that exploits consumers
through another monopoly or or so-called, decentralized group of unknown shadowy figures
which play hack and run. �The vault offers long term storage for investment gains based on
the category a purchaser wants to buy and can be assessed to remove the asset to make it
"spendable" by paying a fee to convert it to a forever value. Even if it hasn't fully matured and
the purchaser can have emergency access to their own private liquidity even before it
matures.��Or let it grow and hold the asset and only borrow to use equity which is returned
before an asset is converted or deducted if its needed and debt is still on the asset. A type of
margin.�� These kind of digital assets can have certain age limits and modes to guide values. �
Again I stress I'm not considering Blockchain or Crypto viable for this but the DARMA: digital
asset render model (the type of asset purchased) can be a DART.��Digital Asset Rendered
Token (or target) and then be vaulted (stored) or valued with a stamp for use that is a static
value like a bank account balance. So that is pretty adaptable to systems we have because a
wallet chip can open a card of digital assets and inside those forever values will be constant
at anytime. So pretty much its going to adapt into existing systems.
CBDC?
That sounds like a political question? I guess it depends on whether these assets come out
for an accessible source of value for all Americans or just sets a standard where the entry
barriers are to gross (not truly functional) to make it useful for most. �If the currency is made to
be cooperative for all Americans to use and enjoy to build and grow to manage emergencies
and what all then innovations will evolve in its new culture to make the framework more
resilient and expandable.
benefits of a CBDC?
Yes. the design principles that should be considered is to develop a new model and not
anything based on block chain or its offshoots. This a farce and its has limited applications. Its
being set up as an ongoing pump and dump PONZI scheme that is based on Hype and
FOMO. Ad agencies are like other tech industries in that they can be morally bankrupt. Mega
institutional Fintech systems only have one mindset and that's to grow profits for themselves
and milk their customers dry. �In trying to achieve equitable and accessible digital currencies
with multiple modalities the benefits can lift Americans out of poverty on their own footing and
build confidence in their economic system to be working for them; not just for stock markets
CEO's, fill-in-the-blank-childish names wealthy Billionaires give to themselves, stakeholders
and share profits. �The wealth class only knows who to do for themselves and not America as
a cooperative financial system so keep in mind your biggest challenge will be to keep the
system a fair, open, model for the good of all not just to profit a few. The systems I express
here have great potential for financial banks and institutions to use them to build their profit
margins too but on an equal footing. They will have more to contribute to invest but the
system won't just favor huge financial behemoths like Black Rock or whoever is given a
monopoly. �It should fundamentally be designed to work as an true asset class and system for
Americans functionally, ethically and environmentally so that its not just another method of
exploitation. �I'd like to say my comments here are purely in are a first draft form. The ideas
and responses are not edited for clarity. That there maybe typos or errors in the dialogue that
should not diminish the ideals set forth. It's just a first draft. Over look the typos. Thanks.
_________________________________________________________________________
Americans for Financial Reform Education Fund and Demand Progress Education Fund
Industry
Country
State
Email
markhays@ourfinancialsecurity.org
The Fed white paper assumes that a central bank digital currency, issued by the Federal
Reserve and promulgated using distributed ledger technology (DLT, e.g., a blockchain),
would be the primary and/or preferred means by which a federally issued or ‘public’ digital
currency might be issued. This paper also assumes that such technology and its associated
institutional architecture may be able to address key financial inclusion issues, such as lack of
access to bank accounts, the need for faster, more secure and reliable payment systems,
etc., and can do so while offering sufficient privacy and consumer protections for CDBC
holders and users. For reasons related to efficiency, privacy concerns, consumer protections,
and financial inclusion, we urge the Fed to reconsider this fundamental premise and work with
other financial regulators to make room for a more polycentric institutional and technological
architecture, which may or may not incorporate blockchain-based tokens, if they prove to be
as or more effective than other option and do not present comparatively higher risks. Indeed,
that structure could incorporate both existing Fed systems and new innovative approaches
that are not dependent on DLT technology. �For example, we would support the acceleration
of the FedNow program, with consumer fraud protections incorporated, which would expand
the availability of real-time payments as a first step. We would additionally see promise in the
deployment of a privacy-protecting FedAccounts system that would expand the capacity of
the Fed to provide account-based deposit and payment systems, with low or no fee services,
beyond commercial banking institutions to retail customers. Such a system could be coupled
with proposals to implement a postal banking program where the post office, which already
provides payments-based services such as money orders, could serve as a front-end point of
contact for retail users. Finally, we support proposals to create “e-cash” – offline,
hardware-based digital cash, built using existing technology, and issued by the Fed, Treasury
or some combination of agencies – that could serve the same function as physical cash,
without the risks to privacy, consumer fraud and structural imbalances that a Fed-issued,
blockchain based digital currency may present. Indeed, such systems already exist outside
the US, where payment systems using SIM-card based hardware tied to mobile phone
platforms are a popular means of making payments. Card and chip-based hardware already
in use for commercial smartcards and U.S. military payments technology could be modified or
altered to serve as digital cash, and there are many measures that could be employed to
ensure the safety, security and authenticity of such digital cash using existing or modified
technology to make such e-cash comparable to paper cash by these measures. �There is
precedent for such a diversified approach to providing different forms of money via varied
technology or systems. Currently, account-based systems of money and token-based
systems of money (e.g., cash) already coexist, are distributed in tandem, and converted from
one system to the other effectively, with known and understood points of friction. This is also
true for other public service systems that not only deal with cash, but have unique payment
systems for that service - such as transit systems that allow customers to pay fares using
both store valued ‘cash’ cards, as well as account-linked cards, to serve diverse needs of its
users (e.g., short-term riders vs. long-term commuters). The same can and should be true for
digital currencies and payment systems. �Additionally, while the Federal Reserve plays a key
role in managing monetary policy both historically and currently, the Fed is not the only
federal agency with the capacity, expertise, and mandate to offer payment system services
and issue currency. The Mint, the Bureau of Engraving and Printing, Treasury and the Postal
Service have all played this role or continue to do so. Indeed, situating a US digital currency
outside of the Fed may help address concerns regarding credit allocation, run risk, and other
structural issues that could arise with having the Fed become the issuer of a US digital
currency. It might also distribute responsibility for monetary policy more evenly between the
Treasury and the Federal Reserve, such that the Fed would have comparatively more
capacity to focus on oversight of the banking system. �By expanding the scope of options
beyond solely blockchain-based currency vehicles and payment approaches issued by the
Federal Reserve (with the risks and limitations such an approach is likely to bring) the
Administration would be better able to ensure individuals, commercial entities and other
parties have access to a diverse array of publicly issued digital financial instruments and
tools, each offering unique properties with respect to efficacy, reliability, speed, security, and
privacy.�
The Fed could accelerate implementation of FedNow - with measures to protect Fed Now
users against real-time payments or ‘inducement’ fraud - thereby increasing the speed of the
current payments system in ways that could directly benefit consumers – particularly
low-income consumers who are more likely to be negatively impacted by slow rates of
payment processing. Fed Now not only has the potential to increase real-time payments, but,
if deployed using the ISO 20022 standard, could increase the utility of the system to contain
more information, and offer options for more sophisticated payment activities (such as
encoding invoices within a payment), without the need for DLT-based system. �The Fed could
also pursue a “Fed Accounts” program that extends the account-based money services it
provides to commercial banks to retail consumers. Such an accounts-system – which will
need to balance AML compliance with robust privacy protections for consumers – need not
rely on a CBDC as the ‘fuel’ for such transactions but could use the current form of money
issued by the Federal Reserve. Doing so would avoid a costly and time-consuming effort to
generate a new form of digital, DLT-dependent currency that could meet robust privacy and
security standards. �Critically, the Fed should seriously consider how the roll-out of this
program could address longstanding distrust of both government and financial institutions.
One way we believe this could be accomplished is by renewing the Postal Service’s capacity
to provide low or no-cost banking services as well as other financial services, including
access to and management of Fed Accounts. �The Postal Service played this role in the past,
until such activities were largely phased out or scaled back in the 1970s. The Postal Service
is a familiar, accessible agency for many that operates as a public service for all, regardless
of wealth or income levels. The service is not without its challenges and has faced malign
political interference from various angles in recent years. However, the Postal Service’s role
in providing vital services during the pandemic despite these challenges showcases how the
agency can offer essential infrastructure in times of crisis. Additionally, the recent passage of
the bipartisan Postal Service Reform Act of 2022 will provide much needed funding and
financial stability for the service, which could set the stage for further expansion of postal
banking services to facilitate Fed Accounts. A form of public banking service relying on
FedAccounts and a lead agency could also coordinate or partner with similar public banking
proposals being considered or developed at the state level, such as in California. Doing so
could provide a broader array of accessible, low or no cost financial services to underserved
populations while leveraging both the state/national banking infrastructure and oversight
mechanisms. �Finally, as described above, other agencies could produce a non-blockchain,
non-ledger, truly peer-to-peer form of digital fiat currency, that would replace the functionality
of physical cash as it is currently used, ensuring that individuals and communities unlikely to
fully embrace or be integrated into account-based systems (public or private) still have a
method of payment that is secure, reliable, private, easy to use and is backed by the
government. �It is worth noting that these services could work not only on their own, but in
tandem to provide some of the services that CBDCs are intended to provide. For example,
future proposals to directly deposit or issue government assistance in the form of tax credits
or direct payments could be distributed either by Fed Accounts, e-cash, or combination of the
two, with the postal service playing an intermediary role where needed.��Outside of these
public innovations, the Fed could require commercial banks to offer Bank On accounts, which
have low or no monthly fees, as a condition of receiving Fed masters accounts. Additionally,
the Fed and other financial regulatory agencies could make sure existing remittance rules and
infrastructure are adapted to streamline payments hurdles, and address hidden costs, without
the use of CBDC as a payment infrastructure. And, beyond the Fed’s remit, the CFPB could
adopt rules to prevent the abuse of overdraft and insufficient funds fees, which have
significant negative impacts on low-income banking consumers.��Lastly, while somewhat
beyond the scope of this paper, we would strongly urge the Fed to resist arguments that
privately created and circulated cryptocurrencies are a viable alternative to a CBDC. Digital
assets have flaws and vulnerabilities too numerous to name in full, but the concerns we and
many others have about these assets’ security, reliability, volatility, stability and viability as
payment systems should be enough to move the Fed to keep digital assets largely ‘off the
table’ as a realistic solution for financial inclusion.
inclusion?
Regarding potential negative effects, a CBDC (in general, or a poorly designed/deployed one)
might: 1) Expose users to undue violations of privacy; 2) Undermine access to and availability
of physical cash; 3) Push the Fed to take more of a role in the economy and financial markets
than may be wise, either by buying more assets to offset CBDC liabilities, or by exercising
more control over bank’s debt and credit decisions, constraining banks’ and consumers’
access to credit; 4) Impact funding or support for the community reinvestment act program,
negatively impacting access to banking services for low income communities; and 5) Be used
or abused to unfairly restrict people’s use of public benefits, or to garnish wages to serve
private or government debts. �Regarding positive effects, it’s difficult to determine how to
enumerate the potential positives without a clearer understanding of and more detail
regarding which CBDC approach the Fed intends to put forth. However, as a starting point, a
CBDC would need to demonstrate some of the following attributes (as well as others to be
determined) in order for it to be adequately equipped to address financial inclusion challenges
properly. First, a CBDC would need to establish principles, systems and standards of trust.
For example, CBDC users would need to have confidence in the safety of the credit being
used and issued via a CBDC. Users would also need to have confidence that the CBDC
issuer would minimize the generation, collection and retention of data produced by the use or
holding of a CBDC. Users would also need confidence that the issuer, related government
agencies or infrastructure would be treated as a public utility under ‘common carrier’
standards - meaning all users would have equal access and use of the CBDC and would not
be subject to tiered access based on cost or other criteria. Similarly, users would need to
have assurances that a CBDC would not be used as a means of political censorship.��Second,
a CBDC would need to be well-designed from a user interface (UI) and user experience (UX)
perspective. Prospective users already have experience using digital tools and apps that are
designed with UI and UX in mind. The best of these apps are clear and easy to use, reliable,
accessible for different users, and enjoyable to use. A CBDC should strive to meet this same
standard, both to provide its users with a similar level of service as private sector tools, and
also to ensure uptake and mainstream use of a CBDC. �Finally, a well-implemented CBDC
should be widely accessible and interoperable. Anywhere a consumer might be able to use a
private payment system (e.g., credit cards such as Visa, Mastercard; payment apps such as
Venmo or Paypal), CBDC users should be able to use a CBDC with comparable levels of
ease. This has implications for both how the CBDC would be issued to users as well as how
vendors would need to be engaged to ensure this standard is met. Doing so would not only
address equitable access concerns, but would also ensure CBDC use becomes mainstream,
a critical measure of viability for a CBDC. �While these measures might help, as expressed
elsewhere in these comments, alternative measures could also promote inclusion and avoid
or more easily address some of the challenges to doing so than a digital currency based on
distributed ledger technology, and we’re concerned that a CBDC using an intermediated
model would more likely fail to achieve the assumed financial inclusion goals from the start.
�Lastly, a CBDC might also run afoul of problems with digital inclusion; many people still do
not have widespread access to reliable, affordable high-speed internet. Surveys indicate this
digital divide persists across racial, class and ethnic lines today. For example, a 2021 Pew
Research Survey found that while eight-in-ten white adults report having a broadband
connection at home, smaller shares of Black and Hispanic adults reported the same – 71%
and 65% respectively. Meanwhile, adults living in low-income households (making less than
$30,000 a year report having significantly less access to smartphones, desktop or laptop
computers, tablets, or home broadband than more affluent households. Low income
broadband users also report more trouble paying for their high-speed internet service, in
particular during the height of the COVID-10 pandemic. This lack of access to internet service
and computing technology could mean that low-income, African-American or Hispanic
households would have less reliable or affordable access to digital currencies or payment
systems, relative to more affluent, white households. While calls for expanding broadband
access have been long standing, there is no clear path for extending universal coverage that
we are aware of. Hence, relying primarily on a digital currency that is distributed online and
on-chain under current digital access conditions could perpetuate or exacerbate efforts to
increase financial inclusion.
stability?
If and as the use of physical cash declines, it is important that people have access to a form
of digital fiat currency that can be widely used for payments which provides the same features
of physical cash – in particular, the ability to conduct transactions ‘offline’ with a reasonable
expectation of privacy, no transaction costs, no need to have access to special purpose
equipment, and reduced chance of public authorities unduly ‘censoring’ individuals by
constricting their financial activity. Physical cash has been in existence and has coexisted
with the use of ledger-based accounting systems for thousands of years. Even today, the use
of physical cash is a necessity for tens of millions of individuals in the US and abroad, many
of whom are unbanked or underbanked, and use cash to conduct financial transactions,
purchase goods or services, or engage in peer-to-peer exchanges of value in a low or no cost
manner, with some reasonable expectation of privacy. �Account-based money uses ledger
systems that record payments which represent contractual obligations between the account
holder and account manager to be settled on demand. This system has attributes that,
properly administered, can provide benefits to account holders, including fraud prevention
and consumer protection. However, relying on account-based money also involves trade-offs.
An individual's account deposits can be exposed to risk should the firm holding those funds
become insolvent. Additionally, accounts held with financial institutions are subject to
AML/KYC monitoring and compliance, which necessarily reduces an account holder’s
expectation of privacy, even in situations where a ledger records transaction or other
identifying information, without an account manager involved. As such, some people may
have legitimate reasons for wanting to use a means of transaction that is less dependent on
financial intermediaries, ensures some measure of privacy and allows people to take direct
custody of the assets they own. �Physical cash, or token-based forms of money, differs from
account-based money in that such tokens are transferable bearer instruments. The legal
ownership of such tokens resides with the person who currently possesses them - either as a
stack of physical cash under a bed, in someone's wallet, or existing in digital form on a server
or in a piece of offline hardware. This distinction means an individual does not need to rely on
a third party to claim this asset, nor make reference to a historically continuous ledger of
ownership transfer. They don’t receive the protections that account-based money might
provide, but neither do they incur the potential liabilities involved. Additionally, two individuals
can use token-based cash to transact in goods or services without a financial intermediary,
and without generating a default record of the transaction that persists beyond the two parties
involved. �Reliance on physical cash is not merely an adherence to more ‘traditional’ means of
payment but is rooted in long-standing economic inequities and institutional racism which
have fostered distrust of commercial banking institutions and related government entities.
Unbanked individuals often lack the income, identification documents or credit worthiness that
private financial institutions often require for even basic checking or savings accounts. There
is also a long history of exploitation of marginalized populations by private financial
institutions. This has come in many forms - discriminatory lending policies; exclusion from
traditional financial advisory services; predation by firms offering sub-par alternatives, such as
payday lending, and more. Finally, low-income, and marginalized communities have
experienced decades of unequal and unfair surveillance, harassment, and policing by law
enforcement agencies. Finance itself has been used to facilitate such discriminatory policing
via practices such as civil or criminal asset forfeiture, bail requirements and other exorbitant
fees and punitive measures levied by the criminal justice system. �These practices have
fostered within these communities and individuals a deep distrust of both private financial
institutions as well as government efforts to extend the financial services franchise to them
unless or until profound measures are taken to restore trust, reduce barriers to access, and
protect individuals’ privacy. Thus, access to physical cash and cash-based transactions
without use of intermediaries is already highly desired by many and perceived by some to be
a necessity. Furthermore, should more aspects of the financial services sector become
digitized and subject to either private or government surveillance without transformational
changes in privacy law, that need or demand may grow.
CBDC?
A DLT-based government issued digital currency presents a conundrum for anyone who
holds the following positions: 1) Illicit finance is a critical global problem that harms untold
numbers of people and must be addressed by regulators, law enforcement, and governments
using a range of effective and fair tools; 2) The suite of laws and regulations that constitute
the US AML/CFT regime has serious flaws and has been misused or abused by law
enforcement and national security authorities in ways that have disproportionately harmed
low-income and BIPOC communities, many of whom are often victims of the crimes facilitated
by illicit finance in the first place. This includes the selective application of the AML/CFT
regime, such that often, major financial institutions or wealthy individuals have easy access to
financial services while avoiding full prosecution or penalties, while ordinary individuals - say,
immigrants seeking to send remittances home - face disproportionate restrictions, scrutiny
and penalties; and 3) The US lacks comprehensive laws that protect individuals’ digital
privacy and has a history of regulation and judicial jurisprudence that has greatly undermined
individuals’ right to privacy as understood under the Fourth Amendment.��It is certainly possible
that technological approaches exist for developing DLT systems that could provide a
measure of privacy for those individuals using a CBDC. However, we believe these
technological fixes are unlikely to be sufficient to address the manner by which intrusions into
CBDC users’ privacy would unfold. One use case for a DLT-based digital currency is that the
ledger itself provides both transparency (regarding transaction activity and holdings) and
anonymity (with respect to the identity of holders of tokens and/or wallets). There is some
validity to this insofar as, at least under some scenarios, law enforcement has been able to
directly gather data on-chain, or via intermediaries (exchanges) in order to investigate illicit
finance, while at the same time, wallet holders who hold their tokens off-chain in private
non-custodial wallets may achieve some degree of privacy (though most individuals still
purchase crypto assets with bank deposits, and regulators are asserting some jurisdiction
over wallets and wallet issuers). �With a publicly issued DLT-based digital currency, in theory
such a balance could still hold. Transaction information about digital tokens would exist on a
government created chain; tokens themselves would be held in private wallets, likely issued
either by private entities (banks, or non-bank payment providers) or by government entities
(say, for example, by the post office). �However, it is unclear how regulators and the courts
would differentiate or distinguish between the privacy protections that exist for an
account-based payment system (either through a private institution or government entity) and
a DLT-system where individuals hold digital tokens in digital wallets which may or may not be
linked to accounts held by private or public entities. In theory, an individual has more
assurances of privacy regarding their physical wallet versus what is held in their bank account
(though as mentioned elsewhere, privacy rights for one’s physical assets are also not secure
under current law). However, it doesn’t take much imagination to envision how, when all
these elements are connected by one stream of data, such distinctions might be eroded,
either explicitly (through court rulings or new statutes) or implicitly, through suspension of
privacy restrictions in the name of national security; via information sharing agreements
between agencies after initial use of the data for a specified purpose; or the deanonymization
of flows from digital wallets by cross-referencing such information with other data.� �The
situation becomes murkier when third party digital service providers play a role either on the
back end or front end of such a system. Major digital service providers have business models
that harvest data from individuals’ online activities. Securing access to an individual’s financial
transaction data record as well would be hard for such companies to resist. As such, we’re
concerned that legislative or regulatory attempts to bar access to such data would be
insufficient or subject to regulatory capture by the industry. Lastly, in the past, such service
providers have either offered or have been compelled by law enforcement to disclose data
previously deemed private. It’s reasonable to assume the same would ultimately hold true for
CBDC data collected and stored by such digital service providers as well. In sum, unless
there are fundamental reforms to data privacy and financial privacy laws, it will be difficult to
ensure that a CBDC, regardless of its structure and concept, can provide sufficient privacy for
consumers that is well-balanced with respect to the competing need for access to financial
information for AML/KYC purposes.
While we have foundational concerns about the use of an intermediated model overall, one
key concern we have is the possibility of non-depository institutions serving as intermediaries.
Non-banks (and ILCs) are not held to the same supervisory and oversight standards, and
have had problematic records - allowing fraudulent accounts to be opened while also unduly
freezing or shutting down legitimate accounts in overreaction; KYC compliance, and other
issues. At a minimum, only insured depositories whose parent companies are subject to the
Bank Holding Company Act should be eligible to be intermediaries. �Even so, relying on
intermediaries, as mentioned above, could create problems with credit allocation, expand the
Fed’s balance sheet, and, ironically, could end up excluding individuals using traditional
banking accounts and systems from greater access to preferred financial services. �We’d also
note that one argument for introduction of a CBDC is to bring government issued money -
ostensibly, a public good - into the digital age. Yet, pursuing an intermediated CBDC model
could in some scenarios bring about a sort of backdoor privatization of that good, with
commercial banks continuing to play an outsized role in determining how financial services
are operationalized. Embedding that dynamic within a CBDC system could simply perpetuate
some of the existing inequities in our current system. �Given these risks, as discussed earlier
in this comment, we would generally prefer a system that relies more on public institutions or
agencies, such as the Postal Service, the Mint, Treasury or other appropriate agencies, to
play an intermediary role if needed. This could help address privacy concerns and conflicts of
interest that may be present when private entities play a custodial role, and could also ensure
there is a viable public option for a digital currency and payment system that can provide vital
public services and good directly to people without intermediaries - an arrangement that can
offer resilience in times of crisis when private sector supply chains and production processes
founder.�
sale? If so, how?
CBDC?
benefits of a CBDC?
_________________________________________________________________________
NASCUS
Industry
Other: Professional Association
Country
State
Virginia
Email
brian@nascus.org
As highlighted in the paper, the potential creation of a CBDC raises numerous policy issues.
One policy issue that would benefit from more discussion is that of the cybersecurity of, and
access to, the data generated by consumer engagement with a CDBC. From a cybersecurity
perspective, the potential creation of a central repository of a vast amount of consumer
banking data related to CBDC transactions heighten the risk of large-scale consumer
information compared to the current commercial bank decentralization of data. While an
intermediated CBDC design might mitigate the centralization of all related data, it is likely that
material amounts of data related to CBDC transactions would still flow to a centralized
database even in an intermediated system.��Another policy issue related to the transactional
data created by consumer engagement with a CBDC is what regulatory, law enforcement or
private sector entities would have access to the CBDC related transaction data. Management
of CBDC transaction data will need to balance the need for robust consume privacy
standards with ensuring that intermediaries have access to data needed for compliance
obligations and state regulators have access to data needed for supervisory obligations. �
inclusion?
In theory, a CBDC could help reach the unbanked. If the goal is to create a form of digital
cash that does not require a bank account, this could be a positive for those without a bank
account. However, the Federal Reserve is proposing a CBDC that would be intermediated
through the banking system, so it is not clear if there would be any improvement in access for
the unbanked. Not intermediating a CBDC through the banking system might resolve the
unbanked challenge but would in turn give rise serious concerns about the impact to the
legacy banking system’s liquidity of a widely adopted CBDC absent the
intermediation.��Questions related to widespread government access to CBDC transaction data
could raise trust issues with unbanked and underbanked. A CBDC could introduce a high
level of privacy concerns related to identity verification and recorded transactions and have
the net effect of encouraging further withdrawal from the financial system due to heightened
concerns about government monitoring. This is one reason the privacy concerns and data
governance would be essential to address in a clear and transparent manner.�
stability?
A CBDC could easily pose a competitive threat to the legacy banking system. Structurally, our
current banking system is one in which the Federal Reserve provides liquidity to the banking
system and the banking system provides liquidity to the public. However, a CBDC represents
a profoundly different model. Even with an intermediated interface using banks and credit
unions, the money itself would be issued by the Fed, not a bank or credit union.��Without more
details about how a CBDC would be “intermediated” through the banking system it is difficult
to meaningfully analyze the disruptive impact of a CBDC. However, in addition disrupting
liquidity, a CBDC could also disrupt the NII of legacy banks and credit unions. It will be
important for the Federal Reserve to clarify the incentives and fee structure related to
financial institutions facilitating access to a CBDC.��The Federal Reserve would also have to
consider how to ensure that all banks and credit unions, regardless of size, have the
opportunity to participate in whatever CBDC framework is established. This might require
assisting in tech stack buildouts and other resource intensive infrastructure builds. Without
such a commitment, the offering of a CBDC might also exacerbate the challenges confronting
modestly sized institutions. �
The Federal Reserve should give some thought to the fee structure related to the
intermediation of the CBDC. Financial institutions should be paid some fee for processing
transactions in the CBDC. This would help mitigate some of the direct competitive effects.
See response to question 6.
CBDC?
Chartered banks and credit unions should serve as intermediaries for CBDC. It would be
helpful to begin with these regulated institutions before expanding the intermediation to
non-banks. This could help mitigate the potential competitive threat to depository institutions.
If depository institutions are the gatekeepers to CBDC, they would still have an important role
to play in the financial system.
sale? If so, how?
CBDC?
benefits of a CBDC?
_________________________________________________________________________
Matt Kemp
Industry
Country
State
Illinois
Email
In the "efficacy of monetary policy" section it discusses the way that a CDBC may impede the
current monetary policy tools. I think some consideration should be given to the fact that
given an interest bearing CDBC the Fed may have a much more direct method to implement
monetary policy as it could instantly impact the rate at which saved money earns interest,
rather than waiting on updates to the federal funds rate to proliferate through the economy
inclusion?
The technology required to utilize a CDBC (smart phone, high speed internet or wireless
network access) could result in negative financial inclusion impacts
stability?
CBDC?
Users could automatically be assigned a unique identifier that does not have PII in it. The
Fed can have more descriptive PII data, but this anonymous unique identifier could be used
to track account balances in a public blockchain that would allow the Fed to take advantage
of the benefits of a blockchain structure.
I think including interest would make for a more effective product because more control could
be had over the rate that holders of the currency can save. Banks could always offer higher
rates of return or other favorable conditions to have people keep money with them. This could
result in net positive benefits for financial services. Consideration would also have to be
given to how the interest would be funded by the central bank.
While this would be ideal, I think a more effective solution would be to create this with online
functionality only first, and do research on areas where wireless network connectivity would
be at risk and perhaps this could be a catalyst to have government help increase resiliency of
wireless networks. Offline functionality would introduce a lot of risks and would have to be
thoroughly designed, vetted, and tested.
sale? If so, how?
Yes, otherwise other recent payment technology would be used in place of it. Products like
Apple Pay have identified ways to quickly verify identity and process payment, I would look to
replicate that product, or even see if a tech company would be wiling to sponsor it and
leverage it's existing technology and network.
CBDC?
benefits of a CBDC?
_________________________________________________________________________
Industry
Academia
Country
State
Wisconsin
Email
See attached response submitted by email.�Kent Mollenkamp�Guest

Auditor�
inclusion?
stability?
CBDC?
sale? If so, how?
CBDC?
benefits of a CBDC?
_________________________________________________________________________
nChain Ltd.
Industry
Technology Company
Country
State
Email
s.naik@nchain.com
Additional Benefits and Policy Factors�1.�Improved Payments�1.1.�Improved access�Provide the

unbanked, seaman and those in remote areas, instant, global and efficient
cash.�1.2.�Safer�a.�Recover lost funds without a third party via backups – when a wallet is lost or
stolen, a second device holding a backup can automatically transfer the funds to a safe
address. �b.�Anti-crime – immutable logs and identity systems can reduce welfare fraud, money
laundering, and shadow banking crime.�Where courts issue freezing orders, specified funds
cannot be spent, allowing recovery from illicit activity.�c.�Financially stable – address risks from
stablecoins, anonymous coins and today’s fragile systems. �d.�Health-conscious – reduce
disease transmission risks associated with physical cash.�1.3.�Cheaper�Micropayments. 10x
cheaper than cards. Costs will decrease further as volumes scale. Sub-20¢ payments will
power new industries (see 4).�1.4.�Faster�Near instant global payments.�1.5.�More resilient and
available�“Anywhere, anytime”. 100% uptime. Trade during outages thanks to offline
payments.�1.6.�New payment types�a.�Micropayments – see 1.3.�b.�Multi-party – pay all parties
on events. Unlocks real-time taxation.�c.�Peer-to-peer – like handing someone cash. Avoids
relying on fragile, distant servers.�d.�Offline – instead of “cash or lose the sale” merchants can
accept offline payments with reasonable credit risk via a simple client and broadcasting on
reconnection. Thresholds (lower values only) can reduce risk further.�e.�Programmable – new
innovation and competition opportunities, increased policy scope and effectiveness, improved
latency and fraud protections.�1.7.�Inclusive�People without phones or bank accounts can enter
the economy with less friction (smart cards).�1.8.�Improved cross-border payments �From days
to milliseconds; 9-5pm to 24/7.�1.9.�Improved privacy�Via the AML/CFT compliant New Privacy
Model (Nakamoto, 2008).�1.10.�Immutable traceability�Unalterable evidence trails.�2.�Improved
Monetary Policy�2.1.�Programmability�Convert $20 notes to $19. See 1.6.e.�2.2.�Programmable
stability�Programmable now and in fifty years. A foundation for stability.�2.3.�Instant rate
changes�See 2.1.�2.4.�Zero-lower bound�Cashback (Skovorodov, Retail CBDC Cashback Rates
and Optimal Monetary Policy, 2021) can expand policy and avoid deflationary
spirals.�2.5.�Real-time insights�Atomic data (location (merchant to country), source (KYC), etc)
enables new insights (currency audits (minting to last payment), improved liquidity and asset
programs, etc.) without compromising privacy.�2.6.�Improved precision�Impact price
distributions instead of sector averages (Skovorodov, 2021).�3.�Improved Fiscal
Policy�Empower innovative governments and Treasuries.�3.1.�Frictionless real-time taxation
and rebates�From burdening payers with tracking, reporting, and paying tax and rebates, to
automatic multi-party payments.�3.2.�Fiscal transfers�Bypass indirect transmission to achieve
objectives more directly (Jones, Pandemic pushes CBDC into top gear, 2020) whilst reducing
cost and risk. �4.�Accelerate Innovation�Unlock new industries, innovations, and growth.�4.1.�New
business models and industries�a.�Transaction Processing: delivers micropayments, jobs, price
improvements and sustainable energy.�b.�Interoperable services: Digital Passports will remove
friction, save time, cost, and privacy across all industries.�c.�Micropayment industries: a new
economic era. The internet after ads. See
https://nchain.com/creating-the-internet-of-value-through-bitcoin-data-interchange-and-iot-tec
hnology/.�d.�Direct models: micropayment fees. Pay-per: byte, watt, CPU-cycle, etc.�e.�Indirect
models – providers cover costs for other benefits (new customers, data, interactions,
etc.).�4.2.�Improved PKI (KYC/AML)�From annual checks to instant revocation of (invalid KYC,
AML, etc) certificates with “9000 certificate issuances, revocations, or updates per second at
a cost of less than 0.005 USD per event” (A Blockchain-Based PKI Management Framework,
2018).�4.3.�Enhance existing banking systems�CBDC does not replace banks nor threaten bank
money, but can improve bank efficiency, settlements, issuances (credit, bonds),
etc.�4.4.�Improved compliance�Automated audits, real-time compliance, triple-entry accounting,
real-time reporting etc will free labour to pursue new growth.�4.5.�Improved accountability�Staff,
committees, etc can issue, hash, timestamp (to the blockchain) and distribute (publicly or
privately): orders, reports, legislation, etc.�4.6.�Less crime, errors, and fraud�CBDC and
connected services (see above) will reduce crime, errors and fraud, improve stability and
prevent risks in real-time.�5.�The USD’s international role�See Q2.�Risks�1.�Design error�Ignoring
public ledger transcendence of legacy trade-offs; incentivising waste (private ledgers, Proof of
Stake); blocking innovation (lock-in effects, platforms over protocols), etc.�2.�Class systems�See
Q2.
Although some of CBDC’s potential benefits could be delivered by the private sector (albeit
with credit and liquidity risk), there are social, speed, and geopolitical advantages of
reasonable government involvement.��The United States’ and Federal Reserve’s participation
in CBDC is vital in setting the USA’s (yet to be determined) Web3 policy framework, which will
have significant impacts on global commerce and the Dollar’s international role.��In the new
Web3 internet era of decentralised networks and thus, decentralised ownership, the
opportunity for innovation will flourish. The Federal Reserve can, and arguably should, play a
critical role in protecting US citizens and their economy because Web3 ownership and control
is more peer-to-peer and decentralised.��“Decentralization is a commonly misunderstood
concept. For example, it is sometimes said that the reason crypto network advocates favour
decentralization is to resist government censorship, or because of libertarian political views.
These are not the main reasons decentralization is important” (Chris Dixon, Why
Decentralisation Matters).�Users and builders can now have digital ownership and control of
data and services using a variety of fungible and non-fungible tokens. The Federal Reserve
and Treasury may wish to regulate such tokens to improve the discharge of duties, provide
protections and more.��Because of the immutable ledger’s new architecture and thanks to
programmability, executing these functions need not compromise efficiency gains nor cost
reductions as observed in traditional payment and settlement systems. By taking a thoughtful
approach that considers these advances, the US Government can become significantly more
effective and efficient in serving its citizens. In doing this, to mitigate the risk of a class
system, the Federal Reserve Act and possibly the Currency Act may programmatically extend
the issuance of more than one form of money which is at par with cash.��However, the United
States will be unlikely to realise even base benefits if persuaded by the many entities who
stifle innovation and growth by avoiding the significance of the choice of ledger technologies
or by framing the ledger question around centralisation – that is, the choice between
centralized ledgers, decentralized ledgers (distributed ledger technology) or a combination
thereof. Why? Because this framing hides the most significant innovation in the history of
digital ledger technologies since their inception: the world’s first public immutable ledger. That
is, a peer-to-peer solution to the double spending problem that lowers the digital payments
cost floor to micropayments, introduces a New Privacy Model (providing markets with choice
of an alternative to reliance on trusted-third parties), and delivers true data security and data
integrity because the ledger cannot be changed (Nakamoto, 2008). �Stewards of the public
interest will recall that private encrypted communications can occur over a public channel and
that much wisdom can be found in answering the question: why do we make thinks public? �It
is also contextually helpful to acknowledge that it was Nakamoto’s breakthrough in ledger
technology that not only initiated the global interest in digital assets and then CBDC, but
provides the key to realising the potential of CBDCs, reinvigorating the social contract, and
unlocking a new era of trade, innovation and prosperity for honest people and
governments.��Consider for example: �•�How can a U.S. CBDC that does not utilise the New
Privacy Model (Nakamoto, 2008) hope to match the privacy benefits compared to others that
do?�•�Could a U.S. CBDC relying on the internet’s fragile security model, reversible databases
and innovation blocking architectures, that are slowed by excessive network hops and fragile
to internet outages, compete with the operational resilience and cybersecurity benefits of
competing CBDCs which leverage the world’s next generation network?�•�Would the United
States be able to meet the future needs and demands for payment services or consider itself
fully supporting the Dollar’s international role by settling for anything but the most powerful,
efficient and innovative technologies?��The evolution of finance in the United States and
abroad has resulted in a tight coupling between electronic payments and the credit system
and a decoupling of credit creation and scarcity. Corruption, infiltration, fraud and money
laundering remain ongoing challenges for even the most advanced states and many of the
outcomes reaped today have their seeds in the policies of the past. CBDC on a public
immutable ledger could provide the United States with a new system that can operate in
parallel to, and as a bridge from, status quo legacy systems, to a more efficient, resilient, and
productive future that values merit, honesty, and a level playing field.�
inclusion?
Yes, CBDC operating on a public immutable ledger that is capable of micropayments and the
New Privacy Model (Nakamoto, 2008) can improve financial inclusion with a net positive
impact by addressing barriers to inclusion. CBDC can fundamentally change inclusion, assist
the homeless and improve the lives of the most vulnerable people in society.�1.�CBDC benefits
to financial inclusion �1.1.�Improved accessibility�CBDC offer a highly inclusive and scalable
gateway to provide the unbanked and under-banked with access to electronic payments and
a wide variety of products and services. �Instead of typical branch work-hour constraints (9am
to 5pm, 5 days a week), CBDC can offer 24/7 payments, anytime, anywhere.�The unbanked,
who receive payment in cash, can choose to receive CBDC (digital cash) and send it to family
or friends or otherwise use it without the overhead of visiting a bank in person. Overseas
servicemen such as seamen need not be required to arrive at their destination before being
able to receive and send funds. These types of transactions are significantly more expensive
in physical cash.�CBDC can maximise financial inclusion via integrations with:�a.�USSD
(Unstructured Supplementary Service Data) to allow CBDC text message support via the
Global System for Mobile Communications (GSM).�b.�Web and smart phone
applications.�c.�Smart cards and devices – to provide a very low-cost way to deliver CBDC to
non-phone users which can additionally support government agency onboarding, and welfare,
food stamp, transport and other programs.�1.2.�Fees and cost�CBDC operating on a public
immutable ledger enables true micropayments, that can eliminate or substantially reduce any
cost objections or barriers to economic inclusivity.�1.3.�New services and innovative
solutions�Innovative private and public sector solutions (including a wide variety government
agencies) can further improve inclusion by allowing people with and without phones or bank
accounts to enter the economy with less friction, more availability and more security, such as
by using smart cards and other innovative capabilities and devices.�1.4.�New revenue
opportunities and business models�CBDC can help create a world where anyone can quickly,
easily and securely setup a small website and begin earning CBDC for their small
business.�New business models enabled by CBDC and the micropayment economy will
enable people unable to leave their homes and those in remote areas to participate and earn
money in new industries. Reduced compliance burdens will lower barriers to entry and allow
participants to seamlessly pay taxation at the source.�1.5.�Addressing trust, privacy and KYC
concerns�CBDC approaches not utilising the breakthrough capabilities of public immutable
ledgers seem unlikely to improve financial inclusion because relying on the trusted-third-party
privacy model transfers private information away from the security of the individual and
establishes a cost floor which limits payment efficiency and prevents micropayments.�In
October 2021, the House of Lords Economic Affairs Committee inquiry into the Central Bank
Digital Currencies commenced with the issue of privacy. When Lord Bridges inquired about
banks and other institutions providing KYC services, a known barrier to financial inclusion,
David Birch responded, “you’d have to present me with some pretty concrete evidence that
the current system actually works before we decided to replicate it in CBDC. I imagine CBDC
as being built as a parallel system. Not on top of the existing system. And if you look at the
amount of money that’s spent on KYC, AML, CTFP… in the current system compared to the
criminal funds that are intercepted, it’s not a cost benefit analysis that would be considered
acceptable in most businesses”.�Given existing critiques concerning cost efficiency (Ronald
2018, Anti-money laundering: The world's least effective policy experiment? Together, we can
fix it) coupled with the known risk of significant loss of privacy (for e.g., DigiNotar 2011), this
space warrants further research and investigation.�2.�Net benefits for financial
inclusion�Informed by history, we suspect that the net effect of CBDC on a public immutable
ledger utilising micropayments and the New Privacy Model will deliver net positive benefits for
financial inclusion, both domestically and internationally and could play a critical role in
supporting and extending the Dollar’s international role.�Since the question of whether the net
effect is positive or negative for inclusion depends on a variety of factors interacting in a
complex environment, and given the significance of the issues at play, we recommend the
Federal Reserve and United States invest in researching what impacts the New Privacy
Model and micropayments might have for a U.S. CBDC.�If you would like to discuss further,
please contact us and we would be honoured to provide further assistance.�
A well designed CBDC will provide powerful new tools for assisting the Federal Reserve to
more effectively implement its monetary policy in pursuit of its maximum employment and
price stability goals, including.�1.�Immediate policy rate changes – through remunerated or
"interest-bearing" CBDC. In cases where cash is not readily available, it could also provide a
delivery mechanism for negative interest rates.�2.�A new monetary policy tool addressing the
zero-lower bound – via conventional monetary policy and cashback payments on
expenditures paid in CBDC, see Skovorodov (2021). Potential benefits include an increase in
policy space, reduction of incidences of effective lower bound and avoiding deflationary
spirals. �3.�Direct transfers – could bypass existing limitations of indirect transmission (such as
delays and agency problems), to achieve policy objectives more directly, such as in the case
of financial aid during covid-19, though would likely require an integrated national identity
system.�4.�Real-time monetary and economic data and insights (traceability) – CBDC could
address traceability limitations of physical cash such as, such as answering questions like:
�a.�Where are the banknotes and coins? �b.�How often is it used? �CBDC metadata concerning
payment locations, costs, flows, sources of funds (for KYC and AML compliance) and other
information can power a new era of real-time public monetary and economic insights. Who
owns, controls and can access this data can be managed with atomic precision, allowing for a
tiered approach that respects individual privacy, KYC/AML requirements and provides society
with the ability to audit currency from its initial minting to the last known transaction in-real
time. This unlocks new possibilities for improved economic management, liquidity operations
and asset purchase programs (improving traceability and reducing capital flight) and much
more.�5.�Improved precision in dealing with sectoral issues – CBDC could enable atomic
precision in the monitoring and management sectoral fluctuations in prices. CBDC could act
as contingent monetary instruments with sectoral conditionality, impacting the distribution of
prices as opposed to their average level and directly incentivising final consumption
expenditure decisions of households that might deliver higher welfare levels than under the
current status quo (Skovorodov, 2021).�Finally, CBDC issued on a public immutable ledger,
though lowering fees to micropayments (significantly lower than the Visa and Mastercard
networks) can enable new business models, presenting a parallel means of improving
employment.�
stability?
CBDC is a controlled coin. All CBDC can be traced (by geography and other attributes as
desired), frozen, thawed, recalled, etc. CBDC facilitates non-bank banking, without inherent
risks associated with shadow banking, due to system-wide transparency and implicit policy
adherence at point of execution.�CBDC, if delivered on a public immutable ledger (see
Nakamoto, 2008) that is separate from the legacy system, could improve financial stability by
decoupling large sections of the digital payment system from the more fragile credit and
banking system, improve contract enforcement, and facilitate the transition of the public and
private sectors to a significantly more private, efficient, and innovation friendly architecture. �It
is worth noting that the Federal Reserve’s definition of “financial stability”
(federalreserve.gov/financial-stability/what-is-financial-stability.htm) emphasises credit,
accounts, cash management and underwriting services whereas the Bank of England’s
stresses the “vital services that the real economy demands from the financial system (which
comprises financial institutions, markets and market infrastructures)” and specifically calls out
payment and settlement systems (bankofengland.co.uk/financial-stability).�The tight coupling
between electronic payments and the credit system is a critical vulnerability and threat to
financial stability that a CBDC operating on a separate and independent payment rail could
start to address.�Additionally, a programmable CBDC could further improve financial stability
by reducing or eliminating threats to stability upstream, via the automated enforcement of
CBDC terms and conditions – spanning issuance, monitoring, reporting, seizure, compliance
with court orders, and other critical management operations. CBDC programmability means
the law itself and terms and conditions get written into the CBDC. This unlocks significant
opportunities for governance and economic efficiency. For e.g., prohibited actions can be
stopped before happening, financial statements and audits can be conducted in real-time, tax
collection can happen automatically, and past events can be replayed or set to a specific
point in time. Regulatory and governance requirements (as they apply at any given moment)
can be enforced with unprecedented scale, integrity and efficiency in real-time. And the
immutable evidence trail allows for replaying events to a specific outcome or point in time.
Consider the following governance examples and the associated implications for financial
stability:�a.�Monetary policy terms and conditions – the Federal Reserve could trace and replay
events from a monetary policy meeting, to the moment of transmission, to how transmission
flowed across the financial ecosystem in the seconds to years following.�b.�Compliant or
approved uses – if the Federal Reserve specified that CBDC could only be used for compliant
products (based upon an immutable and integrated registry), they could prevent fraud and
mistakes arising from trading non-compliant assets. Imagine for e.g., the situation where a
CBDC user wished and attempted to purchase a non-compliant mortgage-backed security
(MBS) from a provider. Programmability could require that the user’s payment queries the
government MBS registry and, upon finding that the provider is non-compliant, notify the
payor. By doing this, the government could help commerce advance beyond the reputation of
firms alone by enabling real-time, immutable, and automated due diligence. This would also
decrease the potential for moral hazard by protecting the victims in society who otherwise pay
for these mistakes. If the idea of moving beyond a ‘buyer beware’ reputation policy model to
one of integrated real-time registries sounds extreme, remember that the SEC stipulated that
Pension funds should only trade in Tripe-AAA (reputation) rated securities. And yet, those
same rating agencies afterwards, claimed that their Triple-AAA rating was covered under
Freedom of Speech.�It remains difficult to see how a commitment to a steady decline in
purchasing power coupled with a credit system that facilitates unproductive money creation
can avoid the eventual costs of financial instability necessitated by such policies. However, a
CBDC could provide a net benefit in assisting honest governments in transitioning towards a
more stable and resilient economic order and is absolutely worthy of further research and
investigation, which we should be delighted to assist with upon request.�
1.�CBDC�CBDC does not replace banks and need not adversely affect the financial sector.
CBDC is an improved and digital version of physical cash: faster, programmable, traceable,
and significantly more efficient. CBDC can deliver net benefits to the financial sector and
reduce costs and crime associated with physical cash. Public immutable ledgers can extend
these improvements more broadly to the financial sector through triple-entry-accounting and
improvements to bank money, bond issuances and other debt products.�A non-interest
bearing and more cash like CBDC, mimicking physical cash, is least likely to adversely affect
the financial sector and most likely to provide the greatest array of benefits without additional
risks.�2.�Unnecessary bank runs?�One alleged source of adverse risk to the financial sector is
that CBDC could threaten bank runs by reducing deposits which banks require in order to
remain compliant with capital and reserve requirements regulations. These capital and
reserve requirements have historically been justified as reasonable measures that seek to
reduce bank run risk arising from the fractional reserve theory, and later the intermediation
theory of banking. However, these theories have been empirically challenged and questioned
(Werner, A lost century in economics: Three theories of banking and the conclusive evidence,
2016), casting doubt on whether this risk is real or superfluously self-inflicted. If the credit
creation theory is correct, as the Bank of England has suggested (Money creation in the
modern economy, 2016), perhaps the risk of bank runs can be eliminated entirely by
reassessing existing regulations in light of these economic revelations.�Even with such
regulations, “this bank-run scenario is highly unlikely” thanks to deposit insurance programs
(RBA, Retail Central Bank Digital Currency: Design Considerations, Rationales and
Implications, 2020).�3.�Stablecoins �Stable coins have credit and liquidity risks that a CBDC
might not and could operate in a way reminiscent of the Scottish Free Banking and American
Free Banking Era (1838-60), with competition and redeemability in part addressing problems
of over issuance (“wildcat banking”) (Reputation Formation in Early Bank Note Markets,
1996). However, such systems still suffer from moral hazard, which seems significant in
today’s environment, and a lack of transparency and protections.�The largest stablecoin as of
this submission, Tether, with a market capitalisation of almost $80B, is one such example.
Tether initially assured the market they were fully backed by USD but by April 2019, an
affidavit lowered this to 74%. By 2021, it was 2.9% (Financial Times, Tether says its reserves
are backed by cash to the tune of… 2.9%, 2021). As with Tether and the shadow banking
system more broadly, we have little insight into the mismatch in maturity dates of assets and
liabilities and the potential for a crisis.�In 2022 , the Terra stable coin lost over 90% of its value
in a short period. Some have speculated that a large player caused this collapse to profit from
it (WSJ, Crash of TerraUSD Shakes Crypto, 2022). While unproven, this does highlight the
possibility that essentially anonymous players could crash stablecoins. Many small investors
lost large amounts of money and this could’ve been avoided or mitigated if the Federal
Reserve had issued a U.S. CBDC allowing the market to choose a risk-fee alternative to such
opaque and risky instruments.�4.�Non-bank money and the blockchain�Other forms of non-bank
money, including digital assets such as Bitcoin, seem unlikely to adversely affect the financial
system because Bitcoin is a peer-to-peer electronic cash system. It is not a currency, does
not negatively impact banking nor the credit system, and does not preclude or prevent any
state from governing their financial system. Bitcoin has a fixed supply, and whilst it can
encapsulate or run flexible issuance systems within or on top of it, it is not a debt system.
Contrary to popular opinion, Bitcoin has no encryption, is recoverable by court order, and can
be seized by police and authorities.�The introduction of the public immutable ledger
(blockchain), micropayments and an immutable evidence trail does provide an infrastructure
that could advance, de-risk and improve the existing financial sector by reducing or
eliminating legacy system payment fees and attack vectors which allow for various types of
fraud, crime and errors. �To appreciate the transformational power of what the blockchain can
do for the financial sector, consider the following questions: �•�Why should a financial sector
intuition ever need multiple different copies of their accounts or books? �•�If we now have a
fast, secure, private and highly efficient way to ensure that financial sector institutions have
one set of books, such that Enron, Madoff and countless other financial frauds could not have
happened, could state allowing the means for such deceptions to con
Firstly, CBDC should take the form of digital cash, that is, a non-interest-bearing bearer
token, because this form is most similar to physical cash and allows banks to continue
offering interest on any CBDC deposits, thereby mitigating the potential for adverse
impacts.�Secondly, limiting the amount of CBDC held by any one person, giving it an expiry
date, or providing dynamic interest (which could become negative) could potentially mitigate
adverse effects.�Thirdly, as discussed in our response to Question 6, shortcomings of the
financial sector should not unduly restrict nor constrain the advancement of systems that
improve the overall wealth, resilience, and efficiency of society. Unless it can be empirically
demonstrated that the either the financial intermediation theory or fractional reserve theory is
empirically correct and the credit creation theory is incorrect (Werner, A lost century in
economics: Three theories of banking and the conclusive evidence, 2016), then capital
adequacy and reserve requirements regulations seem worthy of re-examination in favour of
more empirically sound policies. Addressing root cause problems of the financial sector may
prove to be the most powerful and effective tool for reduce crises and advancing real
economic growth arising from the financial sector and seem likely to significantly outperform
the alternative strategy of seeking to limit promising new technologies.�Finally, as the question
suggests, adding friction to a CBDC, such as through excessive KYC and compliance that
does not mirror physical cash (such as holding limits) could significantly detract from the
benefits of CBDC and at the extreme, so destroy its demand as to defeat its purpose entirely.�
If cash usage declines, it is important to preserve the general public’s access to a form of
central bank money that can be used widely for payments.�Private enterprises can and do play
an important role in providing services that central banks do not. However, such enterprises
over the long term have, for the most part and for various reasons covered by the BIS and
others, generally failed to provide more trusted and sustainable monetary products than the
public sector and central banks.�As with the postal service, electricity, railroads, and many
other industries which have passed from private hands to state monopolies and back again,
there is significant value in reasonable and empirically justifiable regulation. �Denationalisation
is generally regarded by economists as more efficient and productive, and in part explains the
decline in physical cash in some but not all economies. However, preserving the general
public’s access to digital cash through a CBDC could be advantageous for fiscal, monetary
and other reasons. For example, enhancing payment system resilience, could, in the case of
an internet outage or collapse in the credit system, provide a parallel system through which
commerce could continue.�It’s important that the Federal Reserve supports digital cash to
facilitate micropayments in the national currency on the blockchain because banks and other
financial institutions alone are not able to do this for the USA like the United States
government can. There are certain payments that Nakamoto called “small casual payments”
that legacy providers have been unable to provide. A CBDC would be the perfect medium for
these transactions in the United States and for the economies of the future. As new business
models emerge that require say, the payment of 1 cent, it will be beneficial to pay for such
services using the U.S. national currency. For example, instead of Software as a Service
subscriptions, you will be able to pay 1 cent or more to read a single article, webpage, data
field or other piece of content. A well designed and constructed CBDC can provide this and
introduce new people (the unbanked) and new services (that were previously
uneconomically) to the economy.�The introduction of the public immutable ledger also
provides compelling fiscal and other innovative reasons for preserving access to central bank
money in the form of a CBDC for innovative states seeking to advance economic growth and
facilitate new industries and jobs. For more detail, we recommend seeing our other
responses, in particular, to questions 1, 4, 10, 12, and 13.�
CBDC?
If the Federal Reserve does not issue a U.S. CBDC, domestic and cross-border digital
payments might evolve in ways that undermine the international role of the U.S. Dollar,
exacerbate risks posed by stablecoins, money laundering, terrorist financing, child sexual
exploitation and other crime, and strengthen existing monopolies and business models.�1.�Loss
of U.S. monetary sovereignty�Failing to issue an efficient, flexible, and innovative CBDC will
likely result in a gradual loss of monetary sovereignty as the market increasingly migrates to
competitive private or public international mechanisms (including stablecoins, other new
entrants from large technology providers or foreign CBDCs) that may also harm U.S. financial
stability.�In some cases, certain jurisdictions may lose control over monetary matters
(Brunnermeier, et al, Measuring and Allocating Systemic Risk, 2019), (G7, IMF and BIS,
Working Group on Stablecoins Investigating the impact of global stablecoins, October 2019).
�Even in cases where a globally preferred stablecoin is denominated in U.S. Dollars, the
payment system and its associated data may not be. And even if it is, users would still be
exposed to its counterparty risk, presenting a threat to U.S. citizens and the financial stability
of the U.S. economy.�2.�Increased crime�Whist CBDC on a public immutable ledger can
disincentive crime, a lack of CBDC and a failure to crack down on anonymous privacy coins
may increase crime.�For example, the UN's Office on Drugs and Crime, warns anonymous
crypto-currencies have made fighting criminals involved in global child sexual exploitation
networks harder by adding a new layer of secrecy that favours criminals (ABC,
Crypto-currency makes child slavery trade harder to break: UN, 2019).�Untraceable ‘privacy
coins’ such as Monero may continue to pose problems for law enforcement and empower
ransomware gangs, money launderers, and the sale of guns and drugs (Financial Times,
Monero emerges as crypto of choice for cybercriminals, 2021).�3.�Continued dominance of
pay-with-privacy monopolies and business models �The lack of a U.S. CBDC may further
consolidate the dominance of pay with privacy monopolies and business models, especially
big tech internet and social media firms.�Without a U.S. CBDC enabling U.S. entrepreneurs
and citizens to more easily advance beyond the ad-based tragedy of the commons on the
internet today, ruled by ‘pay with your privacy’ business models – which are often marketed
as ‘free services’ – the U.S. may remain limited to existing incumbents who have the power to
own and control nearly everything you do online.�4.�Continued dominance of card networks
and payment providers�The absence of a U.S. CBDC may further consolidate and entrench
card networks and existing payment providers’ power over the digital payments space.�
The question of how should decisions by other large economy nations to issue CBDCs
influence the decision on whether the United States should do so depends on a variety of
dynamic factors in a continuously adapting environment.�One important and perhaps
underestimated area of interest concerns their choice of ledger technology when issuing
CBDC because this may have under appreciate geopolitical and national security
consequences. For example:�a.�What is the underlying ledger technology they used to issue
their CBDC? Is it a public immutable ledger (public blockchain) or a permissioned mutable
ledger (“permissioned blockchain”, Proof of Stake system, etc.)? �b.�Are these large economies
offering their infrastructure as a platform for other states of geopolitical interest to launch their
CBDCs? And if successful, does this provide them with some informational or other strategic
advantages?�The answer to the first question is useful because CBDC on a public immutable
ledger is more likely to strengthen global interoperability, trust, trade, and efficiency whereas
CBDC on a mutable ledger is more likely to result in fraud, higher costs, and high barriers to
entry. All these factors impact the United States’ interests. �Dishonest regimes will almost
certainly opt for conventional mutable ledgers because they allow for two key flaws that
fundamentally undermine security and efficiency:�1.�Mutability – the ability for good or bad
actors to rewrite the digital ledger's history. Despite the best efforts of accounting and
database management regulations, auditors and judiciary systems, digital ledger mutability
necessitates errors, fraud and crime; and�2.�A 'Governance Ledger Management' conflict of
interest – the conflict of interest arising from allowing one party to be responsible for both
ledger management and monetary governance. Despite the best efforts of payment systems,
regulations, and tender processes, coupling these responsibilities in one entity incentivises
anti-competitive behaviour, removes the ongoing incentive for efficiency, innovation, and
competition with respect to the ledger management, and allows the governance system to
corrupt its own ledger.�Western republics have long realised the value of separating
governmental power by function or specialisation – for e.g., the executive, judiciary and
legislature – and implementing publicity and transparency as a control to balance powers with
accountability. Nakamoto applied this strategy to the domain of ledger technologies, taking it
to its logical Schumpeterian end: an open transaction processing market organised by a
unilateral agreement. �This created a new kind of ledger system that incentivises and
promotes honest governance by decoupling the Governance Ledger Management conflict of
interest into two separate participants: �a.�Transaction Processors – who compete in public to
manage the ledger (so that errors, fraud, and other attacks can be more easily detected and
actioned); and �b.�Token issuers – who manage their own monetary or token system policy
using the ledger.�As a thought experiment, imagine you are a steward of the public interest
faced with the choice of procuring the same fundamental transaction processing service.
Which approach is most likely to generate the greatest innovation, competition and efficiency
over the next decade: a 10-year lock-in contract with a single private provider or an open
marketplace where an unbounded number of market participants compete furiously to win
successive 10-minute contracts for service?�The legacy, Proof of Stake approach to
transaction processing – to award a 10-year lock-in contracts to a single contractor –
incentivises idleness, because, having won the contract or tender with a single investment,
there is no compelling incentive to continue to innovate or improve efficiency beyond the base
terms during the contract’s term. Such contracts may last decades or even longer. For
example, the UK’s recent RTGS tender is scheduled to last 16 years. By contrast, the public
DLT approach incentivises ongoing competition, innovation, efficiency and inclusiveness
because each Transaction Processor must compete to produce and claim the next block
every 10 or so minutes. �Organisations have long used service agreements with multiple
providers for utilities such as energy and water. They may now extend this practice to digital
payments.�A challenge for the United States and other common law jurisdictions is that special
interest groups and factions, may, if allowed, seize and hijack CBDC infrastructure for their
private benefit at the financial and opportunity cost of the public.�If the United States, its allies
or other states concerned about the risks of communism and totalitarianism, see an
increasing number of states choosing to issue CBDC on private mutable systems offered as
infrastructure by large economies, this might influence their decisions concerning CBDC and
how to ensure honest governments
1.�Agency problems�One important additional way to manage the potential risks associated
with CBDC is to reduce the potential for agency problems by ensuring that CBDC operates on
a public immutable ledger instead of traditional mutable legacy systems because this
approach decouples and reduces conflicts of interest arising from having one party manage
both ledger management and other policies. For a deeper understanding, see our response
to Question 10.�2.�Reassess theories�A second way to manage the potential alleged risks of
associated with CBDC is to check and review whether all of the underlying axioms framing
the risks and questions are empirically supported. For example, is Werner correct in stating
that the intermediation theory is not empirically supported and that the credit creation theory
is? (Werner, Can banks individually create money out of nothing? — The theories and the
empirical evidence, 2014) and (Werner, A lost century in economics: Three theories of
banking and the conclusive evidence, 2016). �If yes, then given central bank objectives to
deliver financial stability and maximum employment, existing policies should be reassessed,
and additionally, Questions 5, 6, and 7 and their answers deserve review, to mitigate any
potential for unnecessary compromises to financial and economic stability arising from theory
and associated policy errors.�3.�The public immutable ledger�The transparency of a public
immutable ledger, without compromising the ability for privacy, can also manage a wide
variety of risks through disincentivising, reducing or eliminating crime, fraud and errors. �Fraud
is harder to perform and easier to prosecute on a public ledger because of its inherent
transparency and immutable evidence trail time stamp server system (Haber, How to
time-stamp a digital document, 1991). �With increased risks of being caught, crime and fraud
can be minimised, and the risks of database corruption significantly lowered or eliminated.
Also see our response to Question 13.�
CBDC can introduce a new era of improved privacy to consumers without providing complete
anonymity nor facilitating illicit financial activity by utilising the New Privacy Model (Nakamoto,
2008) and a public immutable ledger instead of a conventional mutable ledger.�This
breakthrough approach enables the following. �1.�CBDC users can own and control their data
with unprecedented flexibility and in compliance with the law.�Instead of the private sector
monopolising digital payment dataflows and associated value, CBDC can improve user
privacy and return some or all of the value payers help create through their purchases back to
the individual and the public sector. For e.g., by providing central banks with anonymised
access to certain anonymised data fields, such as EMVCo message fields, including payment
amounts and merchant IDs to power real-time economic insights. �This new and more flexible
approach allows CBDC to provide digital payments without exposing the same amount of
data to the financial industry as occurs in today’s banking and card networks and with the
potential to significantly lower illicit financial activity.�2.�Unmatched convenience and
transparency through new levels of interoperability and the ability to see an immutable record
of which parties have read access to their specific data fields.�Today’s apps are siloed. An
innovative approach to CBDC privacy – see the New Privacy Model (Nakamoto, 2008) –
could unlock a new economic era of data portability between services, advancing competition,
innovation, and consumer choice across all industries. Data portability is your ability to control
and move your data. Few systems today offer real-time and rich data portability. Various
systems preserve technology lock-in effects by ignoring data portability.�Entire classes of
frauds, risks, errors, and frictions can be eliminated from the payment experience,
significantly improving the safety, efficiency and convenience of payments.�For e.g., instead of
requiring customers to continually disclose private information to merchant after merchant by
filing out form after form so that each merchant can meet their KYC obligations in their own
isolated systems, customers need only swipe a button or otherwise show their prior KYC
verification. The merchant can then store and show to this verification to authorities on
request.�3.�Law enforcement and other parties can maintain necessary oversight controls with
improved accountability through tiered access to atomic data fields.�Law enforcement can
execute and order the unlocking of specified information that is also recorded onto the
blockchain to achieve KYC and AML compliance, thereby balancing public powers with new
levels of accountability to prevent corruption and abuses of power. �4.�A new era of identity
service providers can deliver improved and interoperable KYC, AML and CFT services
through non-interactive verification and zero-knowledge proofs.�Instead of trusted-third parties
holding all their clients’ personal information for which they must manage KYC, AML, and
CFT in addition to their normal service offerings, the New Privacy Model can help identity
providers operate with improved interoperability and efficiently, freeing up non-identity
services to focus on their core business. For example:�•�Identity service providers can continue
offering KYC, AML, and CFT to clients such as when they apply for a new account or service,
but now using zero-knowledge identity proof certificates that are timestamped on the
blockchain. �•�A user can use CBDC to pay for transactions pseudonymously below existing
cash KYC and AML laws without requiring identification. And when transaction thresholds are
reached and exceeded, merchant request to pay templates can automatically request and
receive KYC and AML certificates from service providers that can verify the buyer’s identity
without engaging the issuer directly nor leaking private information (non-interactive
verification).�Modifying the routing of identity information in this way allows society to adopt a
new separation of powers in the identity industry that can reduce risks of totalitarianism and
the descent into social credit systems. This approach also allows CBDC to address the root
cause of distrust that remains a barrier to further financial inclusion.�States could alternatively
limit their CBDCs to the trusted third-party model which undermines privacy by transferring
personally identifiable information to centralised databases that, with growth, become
increasingly attractive targets for hackers.�The genius of Nakamoto’s approach is to invert the
fragility of the legacy approach that incentivises attack with scale, to a model that protects it
with scale. With this novel approach, private information is stored towards the edges of the
network, making it harder for attackers to steal your information yet allowing authorized
parties – users, merchants, authorities – to maintain authorised access.�
CBDC can be designed to maximise operational and cyber resiliency by operating on a public
immutable ledger because this eliminates legacy system trade-offs (also see our response to
Q22).�Legacy payment systems suffer from at least five root cause flaws including: 1) the
internet’s fragile privacy and security model; 2) reversible ledgers and databases; 3) a closed
and innovation blocking architecture; 4) delays due to excessive network hops; and 5) fragility
to internet and network outages.�The world’s first public immutable ledger, introduced by
Nakamoto in 2008, addresses these problems, enabling a new era of improved operational
security and resiliency. By eliminating central points of failure, reducing the number of
participants needed to validate and process transactions, simplifying transaction validation,
clearing and settlement, and minimising the number of payment gateways required to accept
payment, Bitcoin (BSV) has achieved unmatched resiliency with a track record of over 11
years continuous uptime.�We identify five reasons why the public immutable ledger can deliver
unmatched operational resilience and will likely make conventional mutable ledgers
obsolete:�1.�Interoperability�As E&Y quipped, “If everyone is starting their own network,
eventually these disparate networks will need to work together to get anything done, which
introduces the potential for problems” (EY, How public blockchains are making private
blockchains obsolete, 2019). Mutable ledgers suffer from the same fatal flaw that caused the
demise of private intranets: a lack of interoperability.�2.�Immutability�As Virgil stated, “Evil is
nourished and grows by concealment.” Tyranny and crime are often aided by deletions.
Public immutable ledgers make such attacks uneconomical because attackers must now risk:
1) Significant Capital – to out-compete Transaction Processors with significant skin in the
game in the form of data centres and network infrastructure; and 2) Prison – attacks are
public and provide all with immutable evidence of bad actions, raising the risk of being caught
compared to legacy cloud infrastructure attacks.�Even if successful, compromises are smaller
(one address, node, or account) because the architecture distributes value to the network’s
edges. Who will spend millions or more to publicly commit a crime for a relatively small
reward?�3.�Sybil resistance and self-healing: Improved security and resiliency through a near
complete graph�Risk of Sybil attack increases with the number of hops between nodes. Sybil
resistance cannot be achieved with a network distance greater than 4 (On Bitcoin and Red
Balloons, 2012). Bitcoin is Sybil resistant with around 1.32 hops between nodes (Transaction
Processors) because it incentivises them to form a near complete graph and compete in
accordance with the rule of law to secure the network (though block propagation). The result?
The most secure, sybil resistant, and resilient self-healing network to date. 97% of
Transaction Processors could fail and the system could still operate (Self-healing networks:
redundancy and structure, 2014). AWS, Microsoft, and other cloud providers could not
survive such an attack.�Mutable ledgers on mesh networks remain vulnerable to sybils and
can fail even in the absence of attacks, such as the Eurozone’s Target2 and T2S payment
systems which suffered a “major incident” on 23 October 2020 and was offline for 11 hours
(ECB, Communication on TARGET incident from 23/10/2020).�4.�Guaranteed innovation and
efficiency though competition�The public immutable ledger guarantees continued innovation
and efficiency by replacing the reliance on a single provider with an open market of
Transaction Processors who must constantly compete and innovate to survive competition.�By
contrast, private centralised ledgers, private DLTs, and other Proof of Stake systems lack any
inherent innovation incentive beyond the initial investment. Today, organisations manage this
inefficiency through fixed contact terms before returning to the market with new tenders.
Bitcoin takes this dynamic to its logical Schumpeterian end: an open transaction processing
market organised by unilateral agreement.�5.�Improved privacy via The New Privacy
Model�Public DLTs are just as private as traditional ledgers, using similar privacy tools such as
encryption and obfuscation. However, the New Privacy Model further improves resiliency by
disincentivising attacks (see 3. Sybil resistance). �Operational or cyber risks that might be
unavoidable include threats to ECDSA and political corruption undermining the rule of law
and effective operations of courts.�For further reading, see
https://nchain.com/why-public-blockchains-will-thrive/.�
Yes, a U.S. CBDC should indeed be legal tender because Section 31 U.S.C. 5103 defines
United States coins and currency as such, and it would seem confusing and inconsistent for
the digital to not be treated as legally equivalent to the physical form, from which it derives.�A
U.S. CBDC is effectively a digital version of existing and future Federal Reserve issued
banknotes. �Legal tender serves a beneficial and useful function in the economy and a CDBC
will enable more inclusion and more participation in the economy thanks to micropayments,
improved privacy and other factors as outlined elsewhere in our response.�As the
micropayment economy grows in coming years and decades, the public and private sectors
will need to have a stable, reliable instrument that acts as legal tender and assists U.S.
innovation. A U.S. CBDC is the obvious candidate.�U.S. CBDC micropayments have the
potential to power many innovations spanning the Internet of Things, 5G, identity
management, supply-chain management, and more. Given the U.S. Dollar’s international
role, and the evolution of the United States constitution and its laws, it makes sense to have a
modern, efficient, U.S. CBDC that can pay and settle debts to support the United States’
future as well as many other jurisdictions who presently rely upon the U.S. Dollar for trade
every day.�If the United States and the Federal Reserve lead this space, the U.S. private and
public sectors may enjoy many benefits and strategic advantages.�A well-designed U.S.
CBDC could allow U.S. entrepreneurs and private enterprises to innovate new solutions that
interface with the CBDC, renewing economic growth and advancing the USA’s innovative
culture and legacy.�The Federal Reserve will not need to provide these innovations itself but
merely design a U.S. CBDC in such a way that maximises innovation and interoperability
whilst ensuring compliance with the law. For recommendations on how to achieve this, see
our response to Question 17 or contact us for further information.�
CBDC should not, at least initially, pay interest because physical cash doesn’t and this model
is most likely to minimise cost and risk. With this approach, people can still loan their CBDC
to banks or other parties who may pay them interest on it in the form of commercial bank
money. And of course, any balances could be converted back to CBDC upon
withdrawal.�CBDC is programmatic and extensible. Therefore, a central bank can issue
non-interest bearing CBDC with the option of converting it to interest bearing in the future
should they wish to do so. �CBDC based on digital cash represents the most prudent and
cost-effective way of advancing CBDC whilst minimising risks to the existing system. Over
time, more exotic models of CBDC that deviate from the legal foundation of cash can be
experimented with.�A non-interest bearing and more cash like CBDC, mimicking physical
cash, seems less likely to generate any negative impacts to the existing financial sector whilst
providing the greatest array of benefits because it allows for the delivery of major efficiency
benefits without, it would seem, additional risks.�If CBDC is issued on a public blockchain, it
can also be the basis for non-debt lending (see
https://www.linkedin.com/pulse/non-debt-lending-wp-0091-craig-s-wright?trk=public_profile_a
rticle_view). This approach could provide an important alternative to the debt-based paradigm
of today.�For jurisdictions that wish to, CBDC can additionally support interest payments. This
can be deployed by simply updating the CBDC Terms and Conditions, which can themselves
be programmatic.�An interest bearing CBDC can allow governments and central banks to
explore new monetary and fiscal policy tools, such as outlined in our response to Question 1,
see 3. Improved Monetary Policy and 4. Improved Fiscal Policy.�This opens up a wide variety
of possibilities. For example, interest could be paid to some groups and not others, though
this may have implications with existing laws.�Interest bearing CBDC on a public immutable
ledger can also facilitate improved data collection and empirical analysis of novel monetary
tools that might help address recent challenges to monetary theory (Lee, Werner,
Reconsidering Monetary Policy: An Empirical Examination of the Relationship Between
Interest Rates and Nominal GDP Growth in the U.S., U.K., Germany and Japan, 2017).�
CBDC, being digital cash, should not be subject to single end user quantity limits because
physical cash is not. �It has been argued that by limiting holdings, the financial sector might
reduce the risk of bank runs (Reserve Bank of Australia, Retail Central Bank Digital Currency:
Design Considerations, Rationales and Implications, 2020). �However, as we have mentioned
numerous times, if Werner is correct in concluding that the credit creation theory of banking is
empirically supported and the intermediation theory is not (Werner, A lost century in
economics: Three theories of banking and the conclusive evidence, 2016), then this risk of
runs would appear to arise from possibly unnecessary and inappropriate reserve and capital
adequacy requirements implemented on the assumption of the intermediation theory and in
need of review. As the old proverb states, in the land of the blind, the one-eyed man is king.�A
second argument is that holding limits may be required to trigger KYC and AML requirements.
But doesn’t it make practical sense for these arise at the point of purchase? Where what is to
be purchased demands compliance with KYC and AML? CBDC operating as programmable
digital cash on a public immutable ledger capable of the New Privacy Model (Nakamoto 2008)
can deliver this and provides states with the opportunity to return digital operations to the
domain of the individual, rather their exclusive dependence on trusted-third parties. �As CBDC
evolves, it remains critical to ensure that its potential is not crushed by the frictions of
government overreach or private interests.�
Firstly, the Federal Reserve can issue digital cash without providing any accounts to the
public. CBDC does not need to be ‘intermediated’ like electronic bank transfers because it
need not be account based. As a bearer instrument, CBDC can enable peer-to-peer digital
payments just like physical cash but with improved legal compliance and traceability. �For e.g.,
Alice uses IP-to-IP, RFID, or another form of connectivity to send Bob a CBDC request to pay
(payment template), which Bob signs and then broadcasts to the network for confirmation.
Reintroducing and requiring intermediation back into the payment flow (for e.g., Alice instructs
her intermediary to transfer funds from her account to Bob’s account) is unnecessary and
undermines resiliency, security, and efficiency.�We therefore suggest abandoning the term
“intermediaries” entirely for something more technically accurate, such as “suppliers” or
“service providers”.�In our recommended design, The Hybrid Model (Direct and Intermediated
Access) using a Private Permissioned CBDC on Public DLT, we identify 5 main types of firms
or ecosystem participants and 2 key components with the following roles and regulatory
structure.�1.�The Central Bank Issuer:�a.�Issues an inherently programmable CBDC onto a
single, core ledger (The Core Ledger).�b.�Defines the Terms of Service that are inherited
automatically by any and all participants interacting with their issued CBDC. The CBDC itself
is the API.�c.�Manages the CBDC in accordance with the Terms of Service. This may include
actions associated with digital cash such as new issuances, freezing, thawing, and
withdrawing CBDC funds, complying with court orders, managing policies, etc.�2.�The CBDC
Capabilities Provider: provides to the issuing central bank, CBDC capabilities and various
overlay services that interface with the core ledger. This allows central banks to retain
complete control over their private permissioned CBDC whilst enabling private enterprises to
design and build innovative services on top of the Core Ledger to maximise the CBDC’s
functionality and innovation opportunities.�3.�Users (individuals, citizens, households, and legal
entities such as small businesses): �a.�Hold CBDC themselves with directly responsibility. As
an electronic bearer instrument similar to cash, those who choose to hold CBDC themselves
are responsible for securing and safeguarding their claim to their CBDC. Any loss or
compromise is the responsibility of the individual. However, unlike physical cash, central
banks may elect to allow (natively or via Payment Interface Providers) services for recovering
lost funds.�b.�Make payments.�c.�Access additional services provided by Payment Interface
Providers.�4.�Payment Interface Providers:�a.�Can be automatically regulated entities who
provide services that programmatically interact with the CBDC and therefore, the Terms &
Conditions set by the issuing central bank. Layering networks over the Core Ledger to
integrate with Payment Interface Providers allows the central bank to permission and manage
who can interact with their CBDC, enabling improved visibility, security, efficiency, control and
transparency over circulated money as the system scales.�b.�May provide a wide variety of
services to users, including but not limited to:�(i)�Account management services — particularly
in helping households and small businesses protect access to their CBDC. �(ii)�Digital identity
services — ensuring KYC, AML, and CFT compliance.�(iii)�Payment services — particularly
sending and receiving payments, bill payments, online payments, peer-to-peer, and offline
payments services.�(iv)�Smart contract services — including templates, compilers, IDEs,
networked services for management, procurement, dispute resolution, etc.�(v)�Tokenisation,
registry management, distribution, and secondary market services.�(vi)�Legal and dispute
resolution services — notarisation, arbitration, and court integration services.�(vii)�Account
reconciliation and automated audit services.�(viii)�Analytics and reporting
services.�5.�Transaction Processors: Compete publicly, risking significant capital investment, to
write and store CBDC transactions into blocks and appended those blocks to The Core
Ledger. These entities may be listed on public stock exchanges. Central Banks may operate
(or tender for the provision of) additional Transaction Processors to provide further CBDC
resilience for their jurisdiction beyond the network baseline.�The 2 key components:�6.�The
CBDC: functions as public digital cash for the issuing Central Bank and is recorded in the
Core Ledger.�7.�The Core Ledger: provides a single, highly secure, available, resilient, fast,
efficient, immutable, and interoperable digital ledger for recording private permissioned CBDC
transactions at the cost of micropayments. This design ensures that only a single ledger
exists to represent the status of all issued central bank money.�
What if the internet or any provider in today’s digital payments chain (such an issuing bank or
card scheme) goes offline? In many cases, trade stops. Yes, some exchanges may be saved
by reverting to the redundancy of physical cash payments. But the root cause problem is
clear: today’s digital payments network is fragile to a single network outage in the payment
chain.�For e.g., the Royal Bank of Scotland (RBS) was fined £56m by regulators after a 2012
software issue left over 6.5 million customers unable to access accounts for over several
weeks (BBC, RBS fined £56m over 'unacceptable' computer failure, BBC, 20 November
2014). In 2018, the TSB outage left 1.9 million without access to payments (BBC, TSB
customers hit by online banking outage, 1 April 2020). Also in 2018, Visa suffered their first
outage in over 7 years because of a failure in their authorisation service which had an
estimated economic impact on retailers approximately £105m (Based on debit card spend of
£530billion a year in the UK). In 2019, the Reserve Bank of Australia flagged ‘concern’ over
bank outages, which are not improving.�As society goes cashless, we are increasingly
dependent on digital services that are fundamentally fragile. If the root cause issue is not
addressed, we are highly likely to see further system outages in the future, affecting millions
of people and resulting in the significant economic losses.�CBDC can and should address this
fragility by introducing a new, parallel and “offline” capable digital payment system. How?�The
best way, in our view, is to use our recommended design: The Hybrid Model (Direct and
Intermediated Access) using a Private Permissioned CBDC on Public DLT because this
empowers CBDC with breakthrough benefits, such as the New Privacy Model, Simplified
Payment Verification (SPV), immutability, ~100% uptime, offline payments, micropayments
and more (see Nakamoto, 2008), at the lowest cost and risk to the state and citizen (see our
response to Question 17). �Unlike traditional payment systems, where a merchant facing
internet outages or disruptions to their acquirer or scheme must revert to cash or risk losing
the sale, CBDC enables offline payments: the merchant can continue accepting payments
with reasonable credit risk.�When offline, merchants can still get paid with reasonable credit
risk using the following payment flow: 1) The customer pays the merchant peer-to-peer; 2)
The merchant validates the transaction using SPV; and 3) upon reconnection, the merchant
broadcasts any unconfirmed transactions to the network. �Merchants can further minimise
risks of accepting offline payments by implementing transaction thresholds to only allow lower
value payments. Merchants can do all this without the cost and inconvenience of operating a
full network node and instead, by simply running a lightweight client that provides SPV
validation logic.�Techniques such as SPV also allow merchants and other parties to identify
illicit transactions or attempted ‘double-spend’ attacks without storing or validating the entire
public DLT but merely one or more block headers. And Transaction Processors can use alert
key systems to signal the enforcement of court orders associated with freezing funds to all
parties on the network.�
sale? If so, how?
CBDC should not maximise ease of use nor acceptance at the point of sale at the cost of
compromising other core features suggested by the BIS and ECB requirements (Central bank
digital currencies: foundational principles and core features, 2020; Report on a digital euro,
2020). �Fortunately, CBDC can maximise ease of use and acceptance at the point of sale,
even during periods when merchants are offline, as we have discussed in Question 18, by
developing CBDC as a private permissioned CBDC on public immutable ledger because this
approach supports both direct and intermediated access and offers developers and the
private sector the greatest potential for providing novel approaches that maximise ease of use
and acceptance at the point of sale.�CBDC need not be limited to one payment method or
technology but can be extensible to include the widest variety of innovation and technologies
via a flexible, Turing complete scripting language that allows for real-time compliance with
U.S. laws (Wright, Turing Complete Bitcoin Script White Paper, 2018). This can allow the
competitive power of the private sector to continually innovate and maximise ease of use and
acceptance at the point of sale. Many new techniques can improve the payment experience
through wallet applications, smart phone, smart cards and internet of things devices.�Fees
should also be kept at minimum, which is best achieved through the open Transaction
Processing market and industry resulting from the public immutable ledger (Nakamoto, 2008)
which will drive down costs further as volumes scale. We believe fees of as little as one
thousandth of a cent will be possible once a public blockchain in the original design proposed
by Nakamoto scales. This reduction in cost compared to present bank, card and e-money
payments can exponentially increase the point of sale to every device connected to the
network.�It’s important to remember that CBDC on a public ledger helps expand the “point of
sale” to new business models derived from micropayments – the ability send tiny amounts of
digital cash. This capability enables new ways to pay for internet services. For example,
purchase a secure webpage or piece of content on the internet for a fraction of a cent and
without having to subscribe. Such tiny amounts, can, but need not be finalised immediately as
the cost and trouble of attempting to double spend them is uneconomical.�Finally, the United
States should beware any providers or private interests seeking to maximise ease of use and
acceptance at the point of sale, by implementing some method that obfuscates the base layer
with a closed and innovation blocking architecture, such as that suggested by the Bank of
England’s discussion paper in 2020. To proceed with such a design would risk critically
wounding any CBDC’s chances at interoperability and wasting public funds. �
As the failed ‘intranet’ and private ledger money systems of the 1980s and 1990s
demonstrate, centralised ledgers and private DLTs are fundamentally innovation blocking,
adding cost, friction and barriers when compared to the more open and interoperable
protocols that gained global dominance, such as TCP/IP. Today’s interoperability and data
portability exists largely because of fragmented and concentrated private payments markets
built inside of TCP/IP – which itself did not include a native payments system. Central banks
and governments seeking to avoid repeating the anti-innovation practices of history, should
avoid private DLTs and centralised ledgers, and instead develop CBDC on a public and
highly interoperable DLT that can open up a new era of innovation, consumer choice and
data portability.�Interoperability, openness to innovation, improved competition and
transferability across multiple payment platforms, can be best achieved by issuing CBDC onto
a public ledger that incorporates a Turing complete scripting language. This design approach
guarantees interoperability at the base layer and avoids the innovation blocking
consequences of alternative legacy architectures. With legacy architectures, interoperability is
sacrificed for manual controls to enforce terms and conditions – often with cost, delays, and
varying degrees of success. However, because CBDC on a public DLT or blockchain is
inherently programmable, issuing central banks can automatically and frictionlessly gain
complete control over their CBDC without the need for high barriers to entry and two-tier
abstraction layers that add cost and block innovation. By providing a digital means to
exchange value and data, CBDC can fundamentally improve the interoperability of business
systems across all industries, allowing organisations and citizens to move between services
more flexibly with less friction, increasing innovation and competition.�CBDC can be
implemented in a variety of ways, each of which can be objectively assessed. Choosing to
build CBDC on private systems that do not operate on open public blockchains is possible,
but ultimately inferior, compromising payments resilience, interoperability, efficiency, and
transparency. Private permissioned ledgers running on mutable ledgers ultimately fail
interoperability, though continue to be promoted by some of the same software vendors that
successfully promoted and, in some cases, sold to governments for millions, failed ‘intranet’
systems of the 1980s and 1990s. Central bankers and states would be wise to avoid
repeating the open vs closed (internet vs intranet) past lessons of interoperability when
considering the appropriate infrastructure for their CBDCs. �The conflict of interest that exists
in legacy centralised and private DLT systems between ledger management and monetary
governance also deserves reassessment in light of more recent innovative alternatives,
specifically, public DLT.�We recommend innovative central banks, governments and
organisations prioritise CBDC efforts towards a private permissioned CBDC on a public
immutable ledger because this approach:�•�allows Central Banks to retain absolute control over
their CBDC issuance and management as the private permissioned issuer of their own
CBDC;�•�offers unmatched price and speed efficiency;�•�offers unmatched network resilience
and uptime (including offline payments); and�•�offers unmatched innovation opportunities –
avoiding technology lock-in effects and empowering all users with access, whilst maintaining
the Central Banks ability to control and govern users interacting with their CBDC tokens.�The
core technical innovation of the public ledger infrastructure already exists well as some of the
CBDC capabilities and overlay services. Additional work, research and focus is needed to
advance these areas and ensure CBDC’s consistent and predictable operation across all
major use cases.�In addition, international agreement of technical standards can streamline
adoption, cross-border payments, and other aspects of CBDC.�For more design insights, also
see our response to question 17 and please contact us if you would like to discuss.�
CBDC?
Future and existing technological innovations could affect design and policy choices related to
CBDC by influencing consumer, provider and regulator expectations and introducing new
capabilities. Future technological innovations of interest to CBDC include the following.�1.�The
public immutable ledger (blockchain)�The introduction of the public immutable ledger
(Nakamoto 2008) affects design and policy choices relating to a CBDC because it
fundamentally improves the ability to deliver CBDC in accordance with the BIS’ requirements
(BIS, Central Bank Digital Currencies: Foundational Principles and Core Features, October
2020) to a level higher than possible with legacy systems because it transcends legacy
trade-offs. Before the invention of public immutable ledgers, it was considered acceptable to:
�a.�compromise the system’s efficiency and speed to achieve resilience; and �b.�compromise
speed of settlement to achieve high transaction throughput. �Following the introduction of the
first public immutable ledger, these trade-offs should no longer be tolerated because
development on top of a public immutable ledger (DLT) can eliminate them. For more
information, see our response to Question 22 at point 2 Redundant Legacy Trade-offs�The
public immutable ledger also extends the following capabilities and strategic benefits to a
CBDC, expanding its potential for innovation and economic growth:�•�a highly scalable,
immutable, resilient and secure ledger; �•�a triple entry accounting model that promotes privacy
but not anonymity; �•�programmable, Turing complete money (Wright, Turing Complete Bitcoin
Script White Paper, 2018) through a flexible scripting language (Script) enabling smart
contracts, atomic swaps and the establishment of new data economies; �•�micropayments; �•�the
ability to support true peer-to-peer payments; and �•�a design that allows for improved legal
compliance and provides an immutable evidence trail.�2.�Internet Protocol version 6 (IPv6)�With
CBDC payment channels and IPv6 jumbo blocks, the United States has a path to introduce
U.S. citizens to an on-demand internet of value that can serve people on any income and
anywhere in the world while protecting their privacy. These capabilities could significantly
improve Dollar’s international role.�IPv6 solves many of IPv4 shortcomings including too few
IP addresses and a lack of native security, thereby unlocking powerful new capabilities and
new industry opportunities for the future.�‘Secure network mobility’ will allow user devices, or
clients forming the edges of the network, to not give unauthorised access to sensitive
information even when compromised. User locations will no longer present an attack surface
or software vulnerability, enabling truly mobile cloud experiences that protect user privacy.
�IPv6 and CBDC also enables direct and secure communications between an increasing
number of innovative IoT, RFID, and other devices that can create new innovation
opportunities, new jobs, and new industries, including:�a.�Secure web server access, whereby
web servers can implement CBDC transaction functionality to charge clients for access. This
includes CBDC micropayments which lower the cost floor to commerce enabling new digital
and commercial interactions;�b.�Local link CBDC payments, whereby IP transactions would be
useful when making a payment to someone located near you;�c.�IP messaging, including any
type of messaging (such as email); and�d.�public transport terminals, whereby an IP address
can be associated with a transport terminal permitting a traveller to pass through upon CBDC
payment.�3.�Quantum computing�Quantum computing is not an issue (Wright, Bitcoin and
Quantum Computing, 2018).�
benefits of a CBDC?
This BIS’ three foundational principles of, “Do no harm”, “Coexistence” and “Innovation and
efficiency” and 14 core features mentioned in their 2020 paper, CBDC foundational principles
and core features, are an excellent start.�We also recommend the following.�1.�Two additional
design principles in the form of additional core features.�1.1.�Data integrity�How can you trust
that your CBDC data has integrity, is authentic and hasn’t been tampered with? �In Report on
a digital euro (2020), the ECB pointed out the importance of this feature, albeit under the
heading of ‘cyber resilience’, “Requirement 14 (R14): cyber resilience. Digital euro services
will need to be highly resilient to cyber threats and capable of providing a high level of
protection to the financial ecosystem from cyberattacks. In the event of successful attacks,
the recovery time should be short, and the integrity of the data protected.”�Data integrity is
critical to certificate issuance, governance, dispute resolution and other foundational services.
A single attack on today’s legacy digital systems can compromise the logs and data integrity
of significant economic systems running on top. For e.g., in 2011 an attack on DigiNotar
compromised the Dutch Government, Google and many others. �CBDC systems lacking the
requirement of ‘data integrity’ or a modern understanding of immutable ledgers are likely to
deliver significantly inferior, more vulnerable and therefore more costly and inefficient CBDC
systems that undermine financial stability.�Nakamoto’s introduction of the world’s first public
immutable ledger in 2008, finally allows humanity to advance into a new era of data
integrity.�1.2.�Privacy�A minimum standard of privacy is desirable and necessary for any CBDC
design to encourage use and protect privacy rights enshrined in law. Privacy has become an
increasingly significant issue as evidenced by legislation such as GDPR.�The introduction of
the New Privacy Model (Nakamoto 2008) along with micropayments and of atomic data field
controls mean there is no longer a reasonable excuse for states to deny citizens sovereignty
over their private information.�The addition of these two core features, in combination with the
other 14, are likely to improve the potential for maximising positive CBDC outcomes.�The
invention of the public immutable ledger (Nakamoto 2008) also has important consequences
in achieving the potential benefits of CBDC because it eliminates conventional digital system
trade-offs entirely, unlocking for powerful new opportunities for economic growth and
innovation through new systems with significantly improved levels of security, privacy,
efficiency, auditability, and so forth. �Designers who fail to appreciate the implications of
immutable ledgers for system design risk settling for what are now superfluous legacy
trade-offs and suffer compromised results. �For e.g., before the invention of public immutable
ledgers, it was considered acceptable to: �a.�compromise the system’s efficiency and speed to
achieve resilience; and �b.�compromise speed of settlement to achieve high transaction
throughput. For example, see Bank of England, ‘Central Bank Digital Currency: Opportunities,
Challenges and Design’, Discussion Paper, 2020, page 43.�Following the introduction of the
first public immutable ledger in 2009, these trade-offs should no longer be tolerated because
development on top of a public immutable ledger (DLT) can eliminate them.�2.�Redundant
Legacy Trade-offs�2.1.�Transaction throughput versus speed of settlement – building a private
permissioned CBDC on a public immutable ledger eliminates this trade-off because both
throughput and settlement can be simplified to one step and achieved simultaneously. If
users require settlement delays, such as for verification of high-value or real-world asset
transactions, this can be embedded into the transaction agreement (or smart contract) itself
so that settlement is not delayed by technological constraints but rather by business–imposed
constraints, captured in the terms of an agreement.�2.2.�Resilience versus efficiency – building
a private permissioned CBDC on a public immutable ledger largely eliminates this trade-off
because the resilience of the node infrastructure is no longer dependent on a single cloud
operator or operating system. Instead, the central bank’s CBDC can be securely and
compliantly serviced by the entire global and open market of Transaction Processors.
Meanwhile, having all participants operating on a single and immutable Core Ledger whilst
maintaining integrity achieves efficiency above beyond that of the unsynchronised and
mutable ledger of legacy systems.�The significance of public immutable ledgers in negating
the above legacy trade-offs should not be overlooked. CBDCs that utilise a public immutable
ledger will achieve superior resilience, efficiency, scale, and speed compared to CBDCs that
don’t.�
_________________________________________________________________________
Industry
Technology Company
Country
State
California
Email
As a matter of policy, any CBDC developed by the United States must utilize facial verification
for transacting in the CBDC. Please see the attached white paper: "THE CASE FOR FACE
PAY IN CBDC SYSTEMS"�
Please see the attached white paper: "THE CASE FOR FACE PAY IN CBDC SYSTEMS"
inclusion?
stability?
PAY IN CBDC SYSTEMS"
CBDC?
PAY IN CBDC SYSTEMS"
Yes, any CBDC developed by the United States must utilize facial verification for transacting
in the CBDC. Please see the attached white paper: "THE CASE FOR FACE PAY IN CBDC
SYSTEMS"
Any CBDC developed by the United States must utilize facial verification for transacting in the
CBDC. Please see the attached white paper: "THE CASE FOR FACE PAY IN CBDC
SYSTEMS"
sale? If so, how?
SYSTEMS"
SYSTEMS"
CBDC?
SYSTEMS"
benefits of a CBDC?
SYSTEMS"
_________________________________________________________________________
Emily
Industry
Individual
Country
State
Arkansas
Email
I cannot think of a single additional benefit that could be raised, considering there is not one
benefit in this entire paper. The risks are many. Inability for those that have little access to
digital technology or broadband wifi being unbanked, the government's ability to enforce
"stimulus" through negative interest rates, and spending rations on whatever the
establishment deems an unappealing market. Think about this as if you aren't the party in
power.
No, the "benefits" of a CBDC already exist in online banking. Current banking at least allows
citizens that feel more comfortable with physical cash and checks to utilize those methods of
payment as well.
inclusion?
Absolutely, and it would be a net negative. There is a population of people that will never
bank online and will never trust applications like Venmo, etc. Even as a millennial, I don't use
Apple pay and I don't swipe my credit cards over sensors as opposed to inserting the chip.
Also, this will be used to exclude political opponents from the market. If not now, eventually.
It would give them complete authority over the markets and basically usher in communism.
The Federal Reserve was always supposed to be a separate administrative industry working
in tandem with the government in our best interests. You may meet the goals of maximum
employment and price stability...because we all would be expected to work, own nothing, and
have only one option on the shelf for whatever we want to buy.
stability?
There would be no financial stability because financial stability would be completely

manufactured by the state. I would consider that a net negative effect seeing as I'm not an
authoritarian.
It would eliminate it entirely. The government already regulates the financial sector...it can't
offer a "competing product" that would stand up against the financial sector. It will force
everyone on to the CBDC with unrealistic introductory promo rates, annihilate the financial
sector, and then once that's gone lock us in to whatever the government allows.
Do not create a CBDC. That's it.
No, cash usage has already declined dramatically over the past decade. No one uses money
because they care about a central bank, they use it because they need stuff. If you create a
central currency, other methods of value exchange will emerge no matter how much you try
to quash it.
CBDC?
They won't. They'll just have more scrutiny (unless you're a billionaire off-shoring).
They shouldn't. Maybe focus more on the Petrodollar.
Yeah, I didn't see a section on Communistic, authoritarian, Orwellian (even though it's
overused) concerns with this gross overreach. It would be nice to read those opinions as well.
HAHAHA, this has to be a joke. Privacy without complete anonymity is an oxymoron.
You're the government, you should know the answer to this one considering you have all of
the agencies of defense at your disposal. I am a mere citizen.
Sure, as long as it's not required.
Yes, because checking/savings accounts pay interest. Otherwise, it's the digital version of
putting your money in your mattress but with the risk of the government taking it from you at
any time.
No, that's insane. But if you wanted to do that, they should be able to move their money to
other accounts. I assume that's not where this question is leading, it seems like it's implying a
wealth cap....so where would the excess funds go? The government, I assume?!
None, because there shouldn't be a CBDC.
You'd need to have offline capabilities unless you just want to starve the poor out of society,
but it's on you to figure out how that would be achieved.
sale? If so, how?
All products should maximize ease of use and acceptance at point of sale. Considering
CBDC doesn't exist yet, I can't provide any constructive advice. Perhaps your experts would
know this and not have to rely on the public.
Ask Elon.
CBDC?
If there is a CBDC, I don't anticipate many technological innovations or focus on design

because we will live in a very bleak world.
benefits of a CBDC?
What I would ask you to consider is turning away from your need to control the people that
you deem unworthy or incapable of making decisions for themselves and looking internally
into your need to control others. Perhaps seek humility, absorb the beauty of nature, and
come to terms with the fact that life here is finite and you'll never control it despite your
strongest desire to do so.
_________________________________________________________________________
The National ATM Council, Inc.
Industry
Trade Organization
Country
State
Florida
Email
bruce@natmc.org
The Board is being appropriately careful and cautious in considering creation of a US CBDC.
This is a step that once taken cannot easily if ever be retracted. As the world's leading fiat
currency, such a step must of necessity require close examination before making a policy
decision will decades long implications for our nation. It is also a very legitimate fundamental
question to ask at the outset whether a US CBDC in fact makes sense in the real world
marketplace and, given all the existing digital payment alternatives now in place, whether it
will in fact bring added value to consumers, or instead wind up as an unnecessary "flop".
Moreover, the structure and features that attach to the initial format/features of any potential
US CBDC will likely be vital in the ultimate success or failure of a US CBDC. In addition to
the risks and concerns already recognized in the Discussion Paper, NAC would point out two
critical policy considerations associated with the notion of a US CBDC: 1. How will a US
CBDC be "distributed" on the streets of America? Will there be a role for a physical ATM in a
US CBDC world and what will that role look like?; and 2. How will the Board ensure no
"discrimination" between traditional cash and a new potential US CBDC, along with a ready
means for everyday US citizens to be able to convert back and forth in a reasonable way
between traditional cash and the new US CBDC...and between a US CBDC and non-fiat
cryptocurrencies for the foreseeable future? Beyond these issues, NAC is concerned that the
"solutions" now on the table to address the fundamental privacy and "Big Brother" concerns
associated with a US CBDC don't and won't actually address those concerns and that the
privacy rights of US citizens will be greatly diminished in the process. While the Discussion
Paper makes a nod to needing to "protect privacy", it also cuts way back on that commitment
by including the need for a US CBDC transactions to be "ID Verified" in nature. Last, but of no
less importance, it is a vital policy consideration for the Board to ensure that traditional cash
remains strong and universally accepted as "legal tender" throughout the US - a position that
has unfortunately already begun to be eroded. Allowing introduction of a US CBDC to result
in the atrophy of traditional US currency would be a dereliction of the Board's fundamental
charge, and would be a change that our nation and its people will greatly regret when the
power is out, cellphone service was disconnected, or the Lord forbid - Russia were to use it's
EMP weaponry to fry all our circuits - where a US CBDC won't do the trick to keep commerce
going...even if that US CBDC is "offline". It is imperative for these and other reasons that
creation of a US CBDC continue to be carefully scrutinized before a decision is made to
proceed, and if this moves forward - the Board makes certain to keep traditional cash
universally available, accepted for payment, and readily convertible to/from any form of US
CBDC that may be implemented.
Rather than introduce its own "product" the Board could conceivably choose to rely upon the
marketplace to continue to deliver diverse and innovative digital purchase/payment products.
In this approach, the role of the Fed would be to assure a level playing field and reasonable
regulation for all players and applicable new markets. With that said, NAC understands and
respects the need to assure that US currency maintains its role as the world's leading fiat
currency - including in a world where digital fiat currencies are being introduced by other
countries.
inclusion?
Although a CBDC is often touted by its supporters as a vehicle to improve inclusion, this is in
reality a very open question. One example of the problem is illustrated by the large
percentages of mobile phone service suspensions/disconnections that are experience by our
lower socioeconomic/minority population related to an inability to pay for service. Without a
working mobile phone &/or home internet service (a related problem) - a US CBDC isn't
available. At least with cash/check/card, those all work without the requirement for an active
mobile phone &/or internet service in place. NAC members' experience is that when the vast
number of unbanked/underbanked citizens receive funds in the form of a prepaid card or the
like, they will convert that to cash ASAP. It's much easier for citizens to get into financial
"trouble" with spending over budget with digital payments made at the push of a button,
versus the inherent self-budgeting assistance traditional cash provides to people on a fixed
income/budget. There are instances of first-time low income digital users getting in trouble
with debt the can't handle and never had an issue with when they were living on a cash basis.
With these and other real world examples, it is accurate to say that the jury is still very much
"out" on whether a US CBDC will actually help or hurt the economically disadvantaged in our
nation.
Unknown.
stability?
Unknown - but inherently risky - based on it being a departure from our tried and true current
system without a US CBDC - and based upon the inherent risks associated with any
cryptocurrency that don't exist in a traditional cash world.
The impacts are unknown and untested - and therefore quite risky. A US CBDC is unlike any
other non-fiat cryptocurrency and the implications/impacts of a US CBDC can only be
guessed.
It would seem that, if possible, some form of "pilot project" would be prudent to
test/debug/refine the CBDC in a controlled/limited real world setting prior to any larger roll out.
As NAC understands it, the more the Board tries to make a US CBDC look/act like the
traditional US Dollar, the less innovative digital features will be able to be incorporated into
the US CBDC product design. Proper resolution of this inherent tension will not be an easy
tightrope to walk in thinking about a US CBDC.
Yes, this is of vital concern. It is a matter of national security, economic stability, and personal
freedoms/privacy protection that we maintain a strong, universal, and fully functional
traditional paper/coin currency medium/system for the foreseeable future. To do otherwise
would be a dereliction of duty and a threat to our future national security and ongoing
payments inclusion.
CBDC?
Private sector innovation and competition have been what we've looked to for this in the past
- coordinated with a supportive and informed governmental policy framework and
understanding of the marketplace dynamics in order to foster continued broad growth.
While we must remain mindful of and seek to learn from what other countries are doing
regarding CBDCs, the U.S. should not let other countries or their actions dictate or unduly
influence our monetary policy/strategic goals here at home. As the world's leading
economy/currency, we should be appropriately thoughtful and careful regarding the notion of
introducing a US CBDC, and make sure that if we do it, we do it right.
Unknown.
No CBDC will offer the privacy and data protection aspects offered by traditional cash.
Moreover, the temptation will be great for law enforcement, other governmental authorities,
and perhaps those with political or other such private sector goals, to seek to obtain/misuse
this information for their own purposes when the circumstances are right/so dictate. There is
no such thing as being a little private when it comes to your personal spending/saving
decisions. Either the information is private or it is not, and the only check and balance
against this concern is to ensure that cash remains strong and universal as an alternative
payment means of transacting business versus a CBDC.
Top IT security experts agree, no IT/data system is un-hackable. Hacks on banks are bad
enough. Hacks on a US CBDC would appear to amplify these risks significantly.
It is unclear what the implications of this would be, since even cash as legal tender is no
longer being universally accepted as a payment choice for consumers in the US. A US
CBDC cannot and should not be sought to be fashioned as a substitute for traditional physical
cash, for all the reasons stated in our responses and in the Discussion Paper itself.
It depends on all the other features/policy structure and goals applicable to the CBDC.
Again, it depends on the nature of the the CBDC and what features and policy goals it
embodies.
There should be an attempt to avoid disruption of existing "rails" and modalities for handling
and transacting in traditional cash - while utilizing the present infrastructure as the starting
point for a distribution framework for the CBDC. Regulatory structures should protect
consumers while relying on robust competition and marketplace forces wherever possible so
as to promote innovation and cost effectiveness.
It is not at all clear how this would work and be workable in the real world. Certain forms of
the existing cash system are "online" and others are "in hand". How that will translate for a
CBDC is an open question we would need to learn more about.
sale? If so, how?
It is unclear whether this is an appropriate role for a CBDC and would appear to be aimed at
replacing traditional cash, cards, checks for this purpose, which would appear contradictory to
the premises set forth in the Discussion Paper.
New tech and standards will need to be created for this to actually work in the real world.
Much study and further work will need to be done over a period of years to make this type of
transition.
CBDC?
Again, a future risk looms that any US CBDC may be outstripped by changes in technology
that do not lend themselves to ready adoption/change in a US CBDC ecosystem. The level of
speculation involved in trying to answer this question is another instance of the inherent risk
associated with this exercise.
benefits of a CBDC?
As noted above, there is an inherent tension between trying to have a CBDC that is cash-like
versus having a CBDC that is a robustly full featured form of digital currency. The US Dollar
and a US Digital Dollar are two different animals and the Board's policy should acknowledge
this reality and make certain that it keeps traditional cash/US currency solid and strong while
it looks at introducing new US CBDC and during any transition that brings a US CBDC into
play.
_________________________________________________________________________
Industry
Technology Company
Country
State
California
Email
THE CASE FOR FACE PAY IN CBDC SYSTEMS��Evan W. Grant �John A. Miller �Dimitar
Dyankov �M. A. Zaman �DRAFT�May 20, 2022 �THE CASE FOR FACE PAY IN CBDC
SYSTEMS��I.�Introduction �Over the next ten years, the use of physical cash in many countries
around the world will decline—and may be altogether eliminated. The reason? Phasing out
cash in favor of digital payments brings with it a bevy of benefits, reducing tax fraud, creating
more efficient economies, and combatting illegal activities such as terrorism and money
laundering. �To that end, many countries around the world are developing a Central Bank
Digital Currency (CBDC) for retail transactions, with one of the primary stated aims being to
provide greater financial tools and access to the unbanked. Yet, in almost all cases, the
CBDC systems being designed, tested, and implemented have significant barriers to usage.
These barriers include a properly functioning smartphone, loaded with a specially designed
app, and a reliable internet connection to both scan a QR code at the point of sale and
transmit the data to complete the transaction. �Unfortunately, these barriers will prove
insurmountable for the same people the CBDC system is designed to serve—as a significant
percentage will not have smartphones or internet access, much less both. Additionally, each
year tens of millions of smartphones are lost, stolen, stop working, or are unavailable.
Indeed, one of the greatest risks for countries and their policymakers during the inevitable
shift away from cash to digital currencies is that the most vulnerable in the population will be
most dependent on—yet least likely to have— functional smart mobile devices with internet
connection to purchase food, water, and other basic necessities on a daily basis.� �To solve
this problem, governments designing, testing, or issuing a CBDC should include another
mechanism—beyond the phone—for authenticating CBDC transactions. We propose that as
a matter of policy, Central Banks around the world should implement facial verification as an
alternative to phone based verification. Face verification has been shown to be a safe,
reliable, and scalable way for payments to be made in brick-and-mortar locations.��II.
Overview of CBDCs �CBDCs are issued by the central bank of a country for public use as
legal tender and are basically digital versions of an existing national currency. But “instead of
holding it in your wallet, you store it on your phone.” A CBDC differs from the balance shown
in a checking account of a traditional bank (electronically or on paper) in that a bank balance
is a liability of the bank. CBDCs are distinct from cryptocurrencies, (e.g., Bitcoin and
Ethereum) and stablecoins (e.g. USDT and USDC), which are created by non-governmental
issuers and generally are decentralized and utilize distributed ledger technology (e.g.
blockchain). Cryptos are backed exclusively by trust in the issuer. In contrast, stablecoins
are digital assets designed to maintain a stable value in relation to a designated benchmark
(e.g. a fiat currency and gold), the most common of which is the US Dollar. To maintain the
relative value to the designated benchmark, stablecoins are backed by other asset reserves
and are generally redeemable at any time for an equal amount of the designated benchmark
currency (e.g., 5 stablecoins pegged to the US Dollar can be traded for $5 USD).
�Governments around the world are racing to develop and issue their own CBDC. Globally,
nine out of every ten countries—accounting for over ninety percent of global GDP—are
considering issuing a retail CBDC. As of May 2022, more than one-in-four central banks
have launched a CBDC or are in advanced pilots. �Doubling the number from 2021, 26
percent of central banks are “currently developing a CBDC or running a pilot,” and another 62
percent of central banks “are conducting experiments or proofs-of-concept.” And over two
thirds believe they are likely or might issue a CBDC in the short or medium term. �
A.�CBDC Examples �1.�The Bahamas �The Bahamian CBDC (the Sand Dollar) was officially
launched in October 2020. In late 2021, there were approximately 20,000 active Sand Dollar
wallets in a population of about 400,000, and functions are continuously being developed.
As of late 2021, there was only $300,000 Sand Dollars in circulation, but this represented
nearly a four-fold increase from 2021. The Sand Dollar is largely dependent on the use of a
smartphone with internet access. There is technically an option, although seldom used, to use
a card like device to make purchases. However, use of the card still requires the merchant to
use a smartphone to scan a QR code shown on the card. In addition, to use the card, a
second factor authentication is required based on a code generated and shown on the card.
In order to generate and display the code, the card needs sufficient battery power. The card
can also be lost, stollen or otherwise not work like a smartphone. In addition, there is a
significant portion of the Bahamian population that remains without a both a smartphone and
reliable internet connection. �2.�Nigeria �Nigeria launched the eNaira in October 2021. By
January 2022, 694,000 eNaira wallets had been downloaded, resulting in $450,000 worth of
transactions. The eNaira platform is dependent on smartphones with internet access to
function. In addition, “[d]espite the[Central Bank’s] stated goal of using the digital currency to
boost financial inclusion in Nigeria,” the inability of users to prove their identity is “effectively
excluding millions of unbanked citizens from using” Nigeria’s CBDC. Even if the eNaira is
ultimately expanded to everyone with a mobile phone, approximately 10% of the population
does not have one. � �3.�Eastern Caribbean �In March 2021, the Eastern Caribbean Central
Bank, the monetary authority for the members of the Organization of Eastern Caribbean
States, launched DCash, an electronic version of the Eastern Caribbean dollar. DCash is
dependent on a smartphone scanning the merchant’s QR code to complete a transaction.
About 4,000 people and 280 businesses have signed up for DCash. Through mid-February,
the ECCB minted about $850,000 USD worth of DCash. � �4.�China �China completed the
development of a retail CBDC in 2019 and began pilots through its mobile app at that time.
These pilots have expanded over the last two years to hundreds of millions of people and
millions of businesses. Based on the most recent numbers released by the Chinese
government, at the end of 2021, the number of individual digital yuan users swelled to 261
million, a more than 12-fold increase since the end of June 2021. And as of October 2021,
10 million businesses had digital yuan wallets. In the second half of 2021, there was 53.1
billion digital yuan of transactions. The digital youn is also dependent on smart-devices. �III.
Problems with Phone Dependent CBDC Systems �There are several reasons why policy
makers should not be reliant on smartphones for CBDC payment. �First, not everyone has a
smartphone. More than 16% of the global population—around 1.3 billion people —do not own
a smartphone. And 1.1 billion people (approximately 14 % of the global population) are
unable to use a smartphone even if they had one because they do not have access to
electricity to charge the phone. Even in the top 10 developed countries (e.g. USA, UK, UAE,
France, Spain, and Canada), on average, approximately 26.5% of the population does not
have a smartphone. In contrast, in the top developing countries (e.g. India, Nigeria,
Indonesia, and Pakistan) on average around 74.6% of the population does not have a
smartphone. Based on the most recent available data, the United States has the highest
percentage of smartphone users, with 82.2% (273.76 million), and China had the highest
number of users due to its population with 953.55 million (66%). This means 58.84 million
Americans (17.7%), and 456.45 million Chinese (32.3%) don’t have a smartphone. In
addition, the most vulnerable groups are also the groups with the least smartphone users. For
example, despite the United States having the highest penetration of smartphones at 82.2%,
only 46% of those over 65+, 43% of those with less than a high school education, and 33% of
those earning less than $30,000 per year, have a smartphone. �
inclusion?
Second, even when people have smartphones, many do not have internet access. In developing
economies, 60% of adults did not have both a mobile phone and internet. “In developing countries,
there is a six point gender gap with only 37 percent of women having both a mobile phone and access
to the internet.” And there is a 20 point gap between the richest 60% and the poorest 40%. Even in
advanced economies, such as the United States, around 7% don’t use the internet, mainly the elderly
and the undereducated. And for the global unbanked population, upwards of 75% “don’t have internet
access, even if they have a mobile phone.” Third, even for people who have smartphones and
internet access, the smartphone is not always available—it can be stolen, lost, damaged, malfunction,
run out of charge, or left in another location. For example, as of 2016, approximately 70 million
smartphones are lost each year in the US alone. That number has likely increased every year since. Id.
“So regardless of the exact figure, lost smartphones will account for a significant percentage of annual
mobile sales in the US, as they do in the UK and likely elsewhere.” Id. Approximately 10% of
Americans have their smartphones stolen and this percentage “is bound to keep growing.” There are
other causes of unavailability, such as the battery failing, or simply running out of charge, the phone
malfunctioning, or being submerged in water. Fourth, even when someone has an available,
functioning smart phone, with reliable internet access, the current designs of CBDC use Quick
Response (QR) codes to authenticate the transaction. But using QR codes for payment is “inherently
risky” and “comes with a whole host of issues” including that the QR codes “can be easily stolen,
replaced, or manipulated for nefarious purposes.” The problems with QR codes for payment are so big
that the United States FBI recently warned Americans that “cybercriminals are taking advantage of this
technology by directing QR code scans to malicious sites to steal victim data, embedding malware to
gain access to the victim's device, and redirecting payment for cybercriminal use.” China has
shown using QR codes for payment creates “an environment ripe for rampant fraud,” because
scammers can “very easily” create QR codes and implant viruses, and “consumers cannot verify the
authenticity of QR codes by eye.” “One common way to scam unsuspecting victims is to replace a
legitimate code with a bad one,” which installs a Trojan or virus on the phone. For example, in 2017
in China, “over 23 per cent of Trojans and viruses [were] transmitted via QR codes.” Another common
scam is to “surreptitiously photograph[]” someone’s phone screen “showing [their] personal QR code”
and use the photo to spend money from the account. “The security of QR codes has long been an
issue,” such that at one point China had banned QR code based payments from mobile devices.
Although China ultimately allowed such transactions, it imposed a daily transaction cap per customer
that is generally $150 USD. Near-field communications (NFC) technology is not the answer
for CBDCs because it still requires a smartphone that not everyone has. And there are security
concerns with this technology including eavesdropping, data corruption or modification, interception
attacks, and physical thefts. And there “are growing concerns about the security and safety of private
stored information when carrying out NFC-based mobile transactions.” NFC may be more secure that
a magnetic strip credit card, but even the NFC organization acknowledges “[n]o amount of encryption
can protect a consumer from a stolen phone,” and “[i]f a smartphone is stolen, the thief could
theoretically wave the phone over a card reader at a store to make a purchase.” Finally, the use of NFC
technology is subject to whim of the phone manufacture, including their ability to extract additional
fees or only allowing their own payment app to access the chip. IV. Problems with Card
Dependent CBDC Systems Policy makers should not design card reliant CBDC systems either.
Magnetic strip cards, chip cards, or “cold storage devices” as a secondary authentication method suffer
many of the problems shown with smartphones and QR codes, such as prone to being lost, stolen,
destroyed, malfunction, or otherwise unavailable when they are needed. They are also prone to fraud.
Credit and debit card fraud “is an unfortunate fact of life,” which is on the rise following the Covid
pandemic, which impacts a huge number of victims each year. For example, about ½ of US adults
have had a fraudulent charge made to their account and more than 1/3 of card holders have been the
victim of fraud more than once. In addition, cards have additional drawbacks because they are
expensive and require extensive time and resources to manufacture, ship, manage, and replace.
�V. The Case for Face Verification as an Alternative to Smartphone Verification �To address
the shortcomings of phone- and card-based authentication platforms, policymakers designing
and implementing CBDC systems should consider face verification technologies as a
component of their solution. Contactless payments are now widely preferred due to the
coronavirus pandemic, and as a result “facial recognition payments are taking off” and “likely
to be a popular addition” to other forms of contactless payment. With face authentication,
“there is no need to carry a smartphone, bank card, or any form of identification, or even have
to enter a pin number.” �In 2020, there were 671 million users globally of software-based
facial recognition technology used to secure payments. A 2021 Juniper Research study
predicts there will be more than 1.4 billion users globally by 2025. Face pay is most widely
used in China, where in 2019 approximately “1,000 convenience stores installed a facial
payment method and more than 100 million Chinese have registered to use the technology.”
In 2021, more than 495 million Chinese—about 1/3 of the population—made payments
authenticated by their face. And it is predicted that in 2022 there will be more than 760
million in China using face pay. While everyone acknowledges privacy concerns that must be
mitigated, experts explain that face authentication for payments and other services “is
inevitable for safety and security.’” As China has shown, even when consumers have
“serious doubts” regarding security of their information, “the convenience of this payment
method has made people willing to use it.” And despite the privacy concerns, there is an
ever-increasing number of public and private entitles that are relying on facial verification
because it is the most accurate, reliable and secure method to authenticate identity. �In the
United States, PopID has implemented its face pay platform, PopPay, across business
surrounding college campuses. PopPay has robust security features including a
three-dimensional liveness check. The platform allows consumers to "check in" to an ordering
or shopping process using face verification and "check out" using face verification.
Consumers can link any payment they choose to their PopPay account, and businesses can
offer PopPay in any medium, including self-ordering kiosks, at the point of sale on the
counter, in drive through systems, in table service order taking and payment products, and in
web sites and mobile apps. PopPay provides various operational benefits to restaurant and
retail operators, and consumers generally have shown to prefer PopPay over card- and
phone-based payment systems. The platform has been demonstrated to be accurate and
more secure than other forms of payment authentication. In late 2021, PopID launched in
Japan through a joint venture with a SoftBank subsidiary and recently announced the launch
of the platform in the Middle East through a partnership with Visa and Dubai Holding. �VI.
Case Study: PopPay and the Bahamian Sand Dollar��In May 2022, PopID partnered with
SunCash, the largest digital payments, mobile money, and e-commerce service provider in
The Bahamas, to allow consumers to use the PopPay face verification platform to purchase
goods and services with the Bahamian Sand Dollar. This is the first time in history that facial
verification was used to transact in a fully launched CBDC. SunCash is one of seven
authorized financial intuitions licensed by the Central Bank of The Bahamas to offer a digital
Sand Dollar wallet. Through the partnership, SunCash’s users can enroll in PopPay so they
have the ability to spend their digital Bahamian dollars at a network of SunCash merchants.
Various brands are or will be accepting digital Sand Dollars authenticated through PopPay,
including local and global brands.��The deployment of PopPay was applauded and
commended by the Central Bank of The Bahamas. The Governor of the Central Bank of the
Bahamas, John A. Rolle, recognized that PopPay’s face pay platform provides “security
features [that] are important to increasing personal comfort around the use of digital
payments and advancing the Central Bank's goal of increasing financial inclusion among all
segments of our society." �VII.�CONCLUSION��CBDC systems that are reliant on smartphones
run the very risk they are supposed to help alleviate—that the unbanked and underprivileged
may not have the resources to participate in the new wave of digital transactions. The right
phone, the right app, the right internet, and the right resources to fund, charge, and
participate may be unavailable. In contrast, facial recognition payment technologies, like
PopID’s PopPay, promise to help address that problem. For any Central Bank considering a
digital currency project, facial recognition verification should be an integral part of the final
product—assisting all with the convenience, safety, and secu
stability?
See responses 1-4 which contain our white paper: THE CASE FOR FACE PAY IN CBDC
SYSTEMS��
SYSTEMS
SYSTEMS
SYSTEMS
CBDC?
SYSTEMS
SYSTEMS
SYSTEMS
SYSTEMS
SYSTEMS
SYSTEMS
SYSTEMS
SYSTEMS
SYSTEMS
SYSTEMS
sale? If so, how?
SYSTEMS
SYSTEMS
CBDC?
SYSTEMS
benefits of a CBDC?
SYSTEMS
_________________________________________________________________________
E G I ™ Euphrates Gallery Inc
Industry
Other: Cross·Cultural Cross·Discipline Applied Curatorial rD Cultural Education Content +

Aud Diversity
Country
State
Missouri
Email
CBDC + nCOVID·19 EraCommerce Drives Governance is not a rhetorical
expression.Since 1440 'Oppressive Commerce' has served as an 'Atlantic Basin Business
Module' until 2020 George Floyd’s death brought into focus faceted sets of socio-cultural,
socioeconomic, gender, racial, political maleficence which included a pervasive systemic
institutionalize legacy ofchattel slavery George Floyd’s death, 25 May 2020, stratified a
declaration ofa new Coronavirus 19 Pandemic, 11 March 2020. Circa 12 Mayan estimate of ’15
million deaths’ worldwide were reported to had died directly or indirectly from the virus 24
Feb 2022 the world observed the invasion of Ukraine in horrific disbelief. Circa 17 May 2022
processed observation data from 2017 of Sagittarius A* the black hole at the centerof the Milky
Way. ‘300 astronomers, and hundreds of engineersand support staff from 60 institutions across 20
countries andregions, processed [observation data].’On a shared human sojourn we are
confronted with uncommonwave after wave of challenges and opportunity. Central Bank
Digital Currency is an atypical opportunity of significant ESG Value[Environmental, Social,
Governance (Value)] if fashioned,developed and refined as a local global nPARADIGMS
rD™Creative Problem Solving Design tool.Quantum Computing would be a natural fit for
the development of Central Bank Digital Currency as a cross cultural. cross discipline
Curatorial rD™ näscent PARADIGMS™Emanuél Cooper JrE G I EAC™20 05
2022©
inclusion?
stability?
CBDC?
sale? If so, how?
CBDC?
benefits of a CBDC?
_________________________________________________________________________
Fredrick odhiambo
Industry
Trade Organization
Country
Kenya
State
Email
please help me only $50000 you can though Western Union money
want business
inclusion?
$50000
please help me
stability?
$50000
you can though Western Union money
electrical engineering
CBDC?
please help me
electrical engineering
please answer me want business
$50000
you can send email
okno
no
sale? If so, how?
yes
yes
CBDC?
yes
benefits of a CBDC?
yes
_________________________________________________________________________
Albert Marko
Industry
Individual
Country
State
Florida
Email
Being that most of your leadership are political appointees, where will they go for work when
the banks they usually get hired from are cut down significantly with a Fed account for
individuals?
You already have "digital dollars" via debit cards, credit cards, etc etc.
inclusion?
CBDC would obliterate the bottom line for Financial institutions. You won't have jobs to rely
on after Fed time is up.
It wil help implement monetary policy but based on political agendas. Thats why you ejected
the hawkish members for more liberal ones. Nice trick.
stability?
Negative financial stability as it is going to lead to MMT.
CBDC?
sale? If so, how?
CBDC?
benefits of a CBDC?
_________________________________________________________________________

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Name or Organization

United States of America

Yes, it could adversely affect the financial sector.

Through use of stablecoins - USDC, GUSD, etc.

Don't issue one.

14. Should a CBDC be legal tender?

United States of America

Privacy must be maintained and prioritized

14. Should a CBDC be legal tender?

United States of America

14. Should a CBDC be legal tender?

United States of America

14. Should a CBDC be legal tender?

United States of America

14. Should a CBDC be legal tender?

United States of America

In my humble opinion, centralization leads to fragility.��Assume an EMP or a quantum

Yes. Cash is useful. Cash doesn't require electricity or a telephone.

Do not pursue it.

14. Should a CBDC be legal tender?

Commercial banks, perhaps.

Yes. Make them convertible to precious metals and vice versa.

Be very careful here. You're flirting with opening Pandora's box.��

Chitose Nakamoto (pen name)

United States of America

14. Should a CBDC be legal tender?

No, a CBDC should be a functional form of transactional currency, not an investment.

United States of America

Don't implement CBDC. I won't use it. How's that?

14. Should a CBDC be legal tender?

Bank, Small or Midsize

United States of America

Who knows? Ask China.

Swift seems to have worked well for decades.

How? You tell me and everyone else in the USA.

Look how successful the hackers have been stealing crypto’s.

14. Should a CBDC be legal tender?

If it replaces the dollar, it would have to legal tinder.

If everyone has to use it, they should get interest on it.

Where else would they put excess CBDC?

You tell me.

You tell me.

Forget this scheme for government control.

United States of America

Decentralize it and make it viewable and verifiable by all.

If everyone is thier own bank, I do not see this as an issue.

Again everyone thier own bank, non issue.

Yes. Decentralized Access

14. Should a CBDC be legal tender?

This seems a redundant question.

Should be limited to whatever amount prevents hostile takeover.

No intermediaries. Full decentralized access

Loopring L2 is already solving this. Take notes

14. Should a CBDC be legal tender?

Yes, what else could it be?

The rules should apply equally to all forms of money.

I understand there are offline capabilities, just as we have gift cards.