BoE and BIS develop digital currency APIs

Bank of Canada, Central Bank of Hungary, Visa, Mastercard and Amazon involved

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The Bank of England and Bank for International Settlements have developed application programming interface (API) prototypes for a retail central bank digital currency (CBDC) ecosystem. 

Project Rosalind was led by the UK arm of the BIS Innovation Hub. Participants and advisers included the Bank of Canada, the Central Bank of Hungary, Visa, Mastercard and Amazon. 

APIs offer a set of “standardised functionalities” to allow different systems to interoperate, the Project Rosalind report says. This is valuable for a two-tier CBDC, as it allows central bank systems to interface with those of service providers.

The 33 APIs covered account management, payments, programmability, participants, offline functionality and ecosystem service interface providers. Participants made over 500,000 API calls. The project also implemented a CBDC with four decimal places to enable micropayments.

Use cases included paying salaries, supporting trade finance, and parent and child wallets. The APIs also allowed split payments to be settled at the same time, payments when travelling in a foreign country, and government payments, such as providing “real-time support to citizens on their energy bills”. 

The model was designed with four layers: central bank ledger, ledger API layer, core API and service provider. 

The core API layer was the focus of the project, orchestrating messages and activities through the API endpoints. The API layer assumed “a privacy model that would not give the central bank ledger and API layer any visibility of or access to PII [personal identifiable information] and payments data”. 

In terms of security, individual and business users were linked to a payment interface provider (PIP) – only that PIP has permission to make API calls to pass on account owners’ instructions and balance in the central bank ledger. 

CBDC technology explored included the use of near-field communication (NFC), as well as through point-of-sale devices, QR codes, mobile phones, smart cards and biometric devices. 

Project Rosalind experimented with both account- and token-based ledgers. These had different data models that generated different account numbers and service provider IDs. Offline functionality was tested on an ethereum-based ledger, and so “would not work for the token-based ledger”. However the BIS said the project achieved “almost identical API functionalities” across the two ledgers. 

A key assumption underpinning the prototype was that CBDC is a direct claim on the issuing central bank. Service providers would not issue their own liabilities or synthetic CBDCs, or undertake custody. 

Ongoing challenges include developing an ecosystem where users’ and payments data is shared while preserving privacy. There is a “trade-off between extensibility and consistency”, the BIS said. Operational roles and responsibilities also need to be further defined. 

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