Following the instructions of the President of the United States, Joe Biden, The Office of Science and Technology Policy (OSTP) presented a report analyzing the design options of 18 central bank digital currency (CBDC) systems for possible implementation in the United States.
Technical analysis of the 18 CBDC design options was done across six broad categories: participants, governance, security, transactions, data, and settings. The OSTP anticipates technical complexities and practical limitations in attempting to build a permissionless system governed by a central bank, adding:
“It is possible that the technology underpinning a permitless approach will improve significantly over time, which could make it more suitable for use in a CBDC system.”
However, the analysis assumed that there is a central authority and authorized CBDC system in place.
To help policymakers decide on the ideal CBDC system in the US, the OSTP report highlighted the implications of including third parties in the two “participant” category design options: transport layer and interoperability. On governance, the report weighed various factors related to permissioning, access prioritization, identity privacy, and remediation.
Other important factors that the OSTP wants policymakers to consider are cryptography and secure hardware, signatures, transaction privacy, offline transactions and transaction programmability, data model, and history. of the ledger (for data) and fungibility, retention limits and adjustments on transactions and balances (for transactions).
The technical evaluation of a US CBDC system highlighted the report’s penchant for an off-ledger, hardware-protected system. When an American CBDC is launched, the report will highlight the various trade-offs that policymakers decided to make in finalizing design choices.
On September 8, the OSTP recommended oversight and regulation, while weighing the environmental and energy impact of crypto assets in the United States.
The OSTP report highlighted that crypto assets use approximately 50 billion kilowatt-hours of energy per year in the United States, accounting for 38% of the global total, adding:
“Noting that direct comparisons are complicated, Visa, MasterCard and American Express combined […] they consumed less than 1% of the electricity Bitcoin and Ethereum used that same year, despite processing many times the number of on-chain transactions and supporting their broader corporate operations.”
The report also pointed out the high energy consumption of the proof-of-work (PoW) protocol in crypto assets.
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