Source: cryptoslate
Compiled by: Blockchain Knight
The Bank for International Settlements (BIS) has published a comprehensive framework for designing retail central bank digital currencies (CBDCs), emphasizing a hybrid model that combines central bank control with private sector collaboration.
The report, produced by the Consultative Group on Innovation and the Digital Economy (CGIDE), provides a roadmap for central banks in the Americas and around the world to explore this evolving financial instrument.
The hybrid model proposed in the report enables the central bank to retain management of CBDC issuance and infrastructure while delegating user-facing responsibilities to private intermediaries.
These intermediaries will handle functions such as KYC verification, wallet management, and transaction facilitation.
This model ensures efficiency and scalability while addressing issues related to user privacy and compliance.
The architecture includes four core processes: user registration, CBDC issuance (cash in), CBDC withdrawal (cash out) and intra-ledger transfers.
Notably, the system supports a tiered KYC mechanism, providing a basic wallet for low-value transactions with minimal identity requirements and an advanced wallet for high-value transactions that meet stricter regulatory standards.
Offline payment functionality is a key feature of the proposal, which aims to expand access to underserved and unbanked populations.
“Hybrid models bridge the gap between centralization and decentralization, providing resilience, accessibility, and stronger privacy protections,” the report said.
The BIS report highlights the advanced features that CBDCs can bring to the financial ecosystem, including programmability through smart contracts, asset tokenization, and seamless integration with DeFi.
These features could improve liquidity, automate transactions and create new financial arrangements, positioning CBDCs as foundational tools for the modern economy, the report said.
For example, tokenized CBDCs could streamline financial settlements through atomic transactions, eliminating the need for multi-step reconciliation processes. They could also facilitate cross-border payments, reducing costs and processing times while promoting greater competition and efficiency.
The report highlights that a programmable CBDC platform could transform supply chain finance and support innovations such as emergency payments.
The report draws on global experience, mentioning Jamaica’s JAM-DEX, China’s digital yuan, and Peru’s offline pilot project targeting rural areas.
It also addresses technical challenges, including interoperability with existing payment systems, ensuring privacy without compromising regulatory compliance, and protecting against cyber threats.
The BIS stressed that the proposal is a flexible framework designed to facilitate dialogue and feedback among stakeholders.
