A group of researchers at the Massachusetts Institute of Technology (MIT) Digital Currency Initiative (DCI) have produced a detailed report on the inclusion of retail central bank digital currency (CBDC) design.
The study was conducted by MIT and Maiden Laboratories for a period of 15 months in four low- and middle-income countries. The countries are Nigeria, India, Indonesia and Mexico.
The researchers considered three aspects of CBDC based on real life examples of people in the study countries. These included the existing financial infrastructure, CBDC design choices, and user experience.
In addition, the study explicitly emphasized the differences between intermediated and non-intermediated forms of payment (cash). These differences emerged when comparing five agreements (what a user can do with the technology) in intermediate and non-intermediate systems.
Other areas of comparison were the actual worldwide application of the two systems and the challenges they posed for users at risk.
Concerns Facing CBDC Use
Since all six CBDC pilots and projects running today use intermediate design models, the group hit several CBDC pain points.
One issue raised by the report is the reproduction of harm from existing forms of payment using digital currency.
The authors emphasized that there is a potential risk that intermediated CBDCs will replicate design of existing intermediated payment methods. Therefore, being of identical composition, the CBDC will inherit the problems of current monetary systems.
This project also echoed the conclusions of DCI’s first report of Hamilton project.
This initial research concluded that governance and trust are key challenges regarding the use of distributed ledger technology (DLT). The authors added that some performance-related issues would also contribute to concerns faced by using DLT rather than its ability to achieve particular features.
Even so, the authors noted that the main challenge facing the use of CBDCs is the lack of trust generated by the growing lack of trust in the government.
