The latest proposal from the Bank for International Settlements (BIS) regarding a hybrid CBDC architecture, combining the roles of central banks and commercial banks.
BIS's report indicates that many countries, including Jamaica, Nigeria, and China, are actively experimenting with central bank digital currencies (CBDCs). To support these initiatives, the BIS Innovation and Digital Economy Advisory Group has proposed a retail CBDC model with a hybrid architecture.
According to the proposal, the central bank will take on the role of issuing and managing the CBDC, while commercial banks will be responsible for providing services directly to users. This model is expected to optimize the regulatory power of central banks while maintaining flexibility and efficiency in access to financial services. In particular, BIS emphasizes prioritizing privacy protection by separating transaction information and personal data to minimize security risks and enhance user trust.
Proposed CBDC architecture model. Source: BIS
However, CBDCs still face numerous challenges. From legislators, individuals to some central banks, there are many concerns about issues such as systemic risk, privacy, and feasibility when implementing on a large scale.
In Canada, the Bank of Canada has paused its CBDC development plans after noticing limited public interest. In the U.S., attorney John Deaton, a prominent figure in the cryptocurrency community, has publicly opposed CBDCs due to concerns about the risk of infringing on personal freedoms. Some states, like Missouri, have even drafted laws prohibiting the use of CBDCs in payments and restricting research and development related to this currency.
Meanwhile, in Europe, the debates are equally intense. MEP Sarah Knafo has called for the European Union to abandon CBDCs in favor of Bitcoin, arguing that CBDCs could pave the way for totalitarianism and restrict financial freedom.
These contrasting views reflect the polarization in perceptions of CBDCs. One side emphasizes the potential to innovate the financial system, improve accessibility, and reduce transaction costs. The other warns of the risks of centralized control and infringement on personal freedoms.