Central Bank Digital Currency Towards A Composable Standards-Based Implementation

We introduce a unique standards-based approach to the implementation of a Central Bank Digital Currency (CBDC) in this paper.The paper starts with a brief background of the work done by the authors on a suite of products targeting a digital marketplace to demonstrate competence and familiarity with the solution space.The paper explores the purposes of central banks and links these purposes to the rationale for CBDC and subsequent requirements. The sources are public statements, speeches, papers from central banks, expert commentaries, publications from advocacy groups, and conversations with central bankers and other experts. No specific central bank is in focus.The proposed solutions reference standards, the Token Taxonomy Framework (TTF) for tokens, and the International Swaps and Derivatives Association (ISDA) Common Domain Model (CDM) for contracts being the main ones.The proposal’s basic pattern is a contract network linked to a token network, bridging the gap between business contracts and the corresponding exchange of value. This pattern, along with some other standards-based components in different configurations, can help realize different CBDC scenarios.Parts of these components have already been created under open source in Hyperledger Labs through the Hyperledger Financial Markets Special Interest Group (FMSIG). Some other components are implemented as extensions of a commercial product. From these building blocks, different CBDC use cases are constructed. This dual network can be implemented in platforms other than DLTs. When specific DLTs are used, they are for illustration or discussing specific implementations.The solution is meant to be transferable to alternate platforms with similar properties. These concepts were refined by building working software and demonstrating the functions to several central bankers and software service providers. Lastly, the paper summarizes unanswered questions and extensions necessary for production deployments