White House OSTP department analyzes 18 CBDC design choices for the US

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As directed by the President of the United States, Joe Biden, the Office of Science and Technology Policy (OSTP) presented a report analyzing the design options for 18 central bank digital currency (CBDC) systems for possible implementation in the United States.

The technical analysis of the 18 CBDC design choices were made across six broad categories – participants, governance, security, transactions, data and adjustments. The OSTP anticipates technical complexities and practical limitations when trying to build a permissionless system governed by a central bank, adding:

“It is possible that the technology supporting permissionless access will improve significantly over time, which may make it more suitable to be used in a CBDC system.”

However, the analysis assumed that there is a central authority and a permissioned CBDC system.

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In helping policymakers decide on the ideal US CBDC system, the OSTP report highlighted the implications of including third parties in the two design options under the “participants” category – transport layer and interoperability. For governance, the report weighed various factors related to permissions, access leveling, identity privacy and remediation.

Other important factors OSTP wants policymakers to consider include cryptography and secure hardware (for security), signatures, transaction privacy, offline transactions and transaction programmability (for transactions), data model and ledger history (for data) and fungibility, keeping limits and adjustments on transactions and balances (for transactions).

The technical assessment for a US CBDC system highlighted the report’s inclination towards an off-the-books, hardware-protected system. After the launch of the US CBDC, the report will finally highlight the various trade-offs that policymakers have decided to make when finalizing the design choices.

Related: White House publishes ‘unified’ comprehensive framework for crypto

On September 8, the OSTP recommended monitoring and regulation while weighing the environmental and energy impact of crypto assets in the United States.

The related OSTP report highlighted that crypto assets use approximately 50 billion kilowatt-hours of energy per year in the US, which is 38% of the global total, adding:

“Note that direct comparisons are complicated, Visa, MasterCard and American Express combined […] consumed less than 1% of the electricity that Bitcoin and Ethereum used that same year, despite processing many times the number of on-chain transactions and supporting their wider corporate operations.”

The report further noted the high energy consumption of proof-of-work (PoW) staking in crypto assets.