Programmable money may be just around the corner. Project Rosalind, kicked off by the Bank for International Settlements (BIS) and Bank of England (BOE) last year, yielded promising results for the retail CBDC concept.
The experiment explored functionality and design for CBDC APIs with 33 endpoints in six functional categories proving the efficacy of over 30 use cases for individuals and businesses, including:
- online, offline, and in-store payments by means of QR codes, mobile phones, smart cards, biometric devices, and smart assistants,
- peer-to-peer transfers,
- small-value business transactions,
- receiving commissions,
- paying salaries,
- supporting trade finance, and more.
Several use cases explored CBDC’s programmability. In such scenarios, API enables individuals and businesses to earmark money for a specific use and trigger payment when the agreed-on conditions have been met. The Project Rosalind also tested the use of decentralized identifiers (DIDs) and verifiable credentials (VC) with the goal of minimizing data storage and transmission through bank APIs and fast-tracking the onboarding process.
According to the project’s summary report, a set of simple and standardized API functionalities can support a diverse range of use cases and innovation in CBDC-based products and services to meet future digital economy demands. CBDC APIs can also be tailored to support offline payments. However, such functionality is significantly harder to develop.
Other technological and legal challenges and areas of further exploration highlighted in the report include:
- user and payment data sharing without privacy risks,
- balancing simplicity and consistency flexibility to develop bespoke features necessary for innovation,
- defining the roles and responsibilities of the CBDC ecosystem stakeholders.
In recent months, CBDC has emerged as an irresistible solution for countries looking to control their citizens’ financial activity. Those include not only the likes of China and Nigeria but also many Western countries, such as EU member states and the UK.
On June 1, 2023, the HM Treasury extended the original deadline for the consultation on the digital pound, a local CBDC that “would be a new form of digital money for use by households and businesses for their everyday payments needs” – under the watchful eye of the government.