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--- cbdc:public:cbdc_omg:04_doc:20_comments:brp:q02:start [2022/05/07 14:08]
nick
+++ cbdc:public:cbdc_omg:04_doc:20_comments:brp:q02:start [2022/06/17 18:33] (current)
terrance
@@ Line 1: / Line 1: @@
 ====== Question: 02. Could some or all of the potential benefits of a CBDC be better achieved in a different way? ======
-[[cbdc:private:cbdc_omg:04_doc:20_comments:brp:start| Return to CBDC Benefits, Risks, and Policy Considerations ]]
+|< 100% >|
+| [[cbdc:public:cbdc_omg:04_doc:20_comments:brp:start| Return to CBDC Benefits, Risks, and Policy Considerations ]]  |  <WRAP>
+<html><b>
+<a href="mailto:[email protected]?Subject=OMG's CBDC WG Response:
+Question: 02. Could some or all of the potential benefits of a CBDC be better achieved in a different way?
+">Provide Feedback</a></b>
+</html>
+</WRAP>  |
 ===== Question =====
-[[cbdc:private:cbdc_omg:04_doc:20_comments:brp:q02:start| Return to Top]]
+[[cbdc:public:cbdc_omg:04_doc:20_comments:brp:q02:start| Return to Top]]
 **Could some or all of the potential benefits of a CBDC be better achieved differently?**
 ===== Answer =====
-[[cbdc:private:cbdc_omg:04_doc:20_comments:brp:q02:start| Return to Top]]
+[[cbdc:public:cbdc_omg:04_doc:20_comments:brp:q02:start| Return to Top]]
-If differently means rather than as a Cryptocurrency or a [[cbdc:private:cbdc_omg:04_doc:15_common:30_stablecoins:start| Stablecoin Models]]? The answer is **Yes** and **No**.
+If differently means rather than as a Cryptocurrency or a [[cbdc:public:cbdc_omg:04_doc:15_common:30_stablecoins:start| Stablecoin Models]]? The answer is **Yes** and **No**.
 ==== Overview ====
-[[cbdc:private:cbdc_omg:04_doc:20_comments:brp:q02:start| Return to Top]]
+[[cbdc:public:cbdc_omg:04_doc:20_comments:brp:q02:start| Return to Top]]
 Almost all Cryptocurrencies implemented so far use the concept of tokens, accounts, wallets, transactions, and distributed ledgers. In essence, these approaches use the way money is handled in bank accounts((
 % (if not all) issued Initial Coin Offering (ICO) tokens on top of the Ethereum implements the ERC-20 standard.
 [[https://www.omgwiki.org/dido/doku.php?id=dido:public:ra:xapend:xapend.b_stds:defact:ethereum:eip:erc_0020]]
-)). However, the CBDC could also be modeled on actual currency, such as the US Dollar, in essence a true Digital Dollar (i.e., [[cbdc:private:cbdc_omg:04_doc:15_common:08_currency_models:10_cash:start| Digital Cash]]) that includes intelligence. The Digital Dollar could be physical or virtual. ((
+)). However, the CBDC could also be modeled on actual currency, such as the US Dollar, in essence a true Digital Dollar (i.e., [[cbdc:public:cbdc_omg:04_doc:15_common:08_currency_models:10_cash:start| Digital Cash]]) that includes intelligence. The Digital Dollar could be physical or virtual. ((
 FinTech Futures,
 January 2020,
@@ Line 26: / Line 33: @@
 ))
-  * **Physical Digital Dollars (PDD)** would be very similar to current printed dollars, but could have a "chip" that prevents counterfeiting and forgery, journals ownership, and can be declared obsolete or unfit and removed from circulation just like paper money is handled.
+  * **Physical Digital Dollars (PDD)** would be very similar to current printed dollars, but could have a "chip" that prevents counterfeiting and forgery, journal ownership, and can be declared obsolete or unfit and removed from circulation just like paper money is handled.
   * **Virtual Digital Dollars (VDD)** would be a virtual containerized implementation of the PDD.
   : **Note:** PDD and VDD would support the same kinds of denominations as the current paper money (i.e., \$1, \$2, \$5, \$10, \$20, \$50 and \$100)
-Both PDD and VDD would be designed by the US Department of Treasury. The Federal Reserve Board (FRB) would place a yearly order with the U.S. Treasury for productions of both PDD and VDD just as they do with current currency. FRB determines the size of the order based on estimates of public demand for PDD and VDD during the coming year and how much currency they estimate will be destroyed because it is deemed unfit to circulate. PDD can be deemed unfit for circulation, just like paper currency (i.e., damaged, worn, or from an obsolete series) Obsolescence can be because of a change in the physical form of the PDD (i.e, Series) or can be because the "smarts" on the PDD or VDD are obsolete, close to journaling capacity or have logged an exception during the execution of the software. The US Treasury will be responsible for its production.
+Both PDD and VDD would be designed by the US Department of Treasury. The Federal Reserve Board (FRB) would place a yearly order with the U.S. Treasury for the production of both PDD and VDD just as they do with the current currency. FRB determines the size of the order based on estimates of public demand for PDD and VDD during the coming year and how much currency they estimate will be destroyed because it is deemed unfit to circulate. PDD can be deemed unfit for circulation, just like paper currency (i.e., damaged, worn, or from an obsolete series) Obsolescence can be because of a change in the physical form of the PDD (i.e, Series) or can be because of the "smarts" on the PDD or VDD are obsolete, close to journaling capacity or have logged an exception during the execution of the software. The US Treasury will be responsible for its production.
 Both the PDD and VDD will be signed by the Secretary of Treasury, just like paper money is.
-PDD will follow a similar pattern to the paper money in terms of distribution.
+PDD will follow a similar pattern to paper money in terms of distribution.
 VDD can be distributed electronically by the Treasury to the FRB. Similarly, the FRB can distribute VDD to the Federal Reserve Banks for subsequent distribution to Commercial Banks, etc.
@@ Line 43: / Line 50: @@
 Money that moves through a financial institution is checked for validity and fitness. And just like paper dollars, if the PDD or VDD are deemed unfit, they are removed from circulation. However, the definition of "unfit" is more extensive than with paper money.
-Another important aspect with the Digital Money model is that the money can have "colors" albeit not in the physical sense but in the sense of limiting what that money can be used for. For example, money provided by a government for a housing subsidy can only be spent on housing. Money provided for food can only be used to pay for actual food and not alcohol or cigarettes. When money is transferred from one owner to another, the color of the money is checked for validity.
+Another important aspect of the Digital Money model is that the money can have "colors" albeit not in the physical sense but in the sense of limiting what that money can be used for. For example, money provided by a government for a housing subsidy can only be spent on housing. The money provided for food can only be used to pay for actual food and not alcohol or cigarettes. When money is transferred from one owner to another, the color of the money is checked for validity.
 ==== Examples ====
-[[cbdc:private:cbdc_omg:04_doc:20_comments:brp:q02:start| Return to Top]]
+[[cbdc:public:cbdc_omg:04_doc:20_comments:brp:q02:start| Return to Top]]
-Some of the potential benefits outlined in the [[https://www.federalreserve.gov/publications/files/money-and-payments-20220120.pdf | White Paper]] and summarized by the [[https://www.omg.org/ | Object Management Group's ]] [[cbdc:private:cbdc_omg:04_doc:12_summary:start| White Paper Analysis]] can definitely addressed with an alternative model to the one assumed in the White Paper.
+Some of the potential benefits outlined in the [[https://www.federalreserve.gov/publications/files/money-and-payments-20220120.pdf | White Paper]] and summarized by the [[https://www.omg.org/ | Object Management Group's ]] CBDC WG [[cbdc:public:cbdc_omg:04_doc:12_summary:start| White Paper Analysis]] can definitely be addressed with an alternative model to the one assumed in the White Paper.
-The review in this example is not comprehensive, but is meant as a demonstration of how an alternative approach might address some of the benefits, policy Considerations, risks and design objects outlined in the White Paper.
+The review in this example is not comprehensive but is meant as a demonstration of how an alternative approach might address some of the benefits, policy Considerations, risks, and design objects outlined in the White Paper.
-Table {{ref>DigitalCurrencyExm}} provides a cursory overview of using a [[cbdc:private:cbdc_omg:04_doc:15_common:08_currency_models:10_cash:start| Digital Dollar Model]] instead of a Cryptocurrency or Stablecoin Model.
+Table {{ref>DigitalCurrencyExm}} provides a cursory overview of using a [[cbdc:public:cbdc_omg:04_doc:15_common:08_currency_models:10_cash:start| Digital Dollar Model]] instead of a Cryptocurrency or Stablecoin Model.
 <table DigitalCurrencyExm>
-<caption>Example of mapping a subset of requirements identified in the Whit Paper Analysis conducted by the OMG.</caption>
+<caption>Example of mapping a subset of requirements identified in the White Paper Analysis conducted by the OMG's CBDC WG.</caption>
 ^ Statement No.  ^ Statement  ^ Comments  ^
 ^ B0003, P0003^ Complement, rather than replace, current forms of money and methods for providing financial services | <WRAP>
-PDD and VDD are intended to work in parallel with existing systems and to follow much the same lifecycle as current paper money. The same institutions would fulfill the same roles they currently do, but have added roles and responsibility for the Digital Currency.
+PDD and VDD are intended to work in parallel with existing systems and to follow much the same lifecycle as current paper money. The same institutions would fulfill the same roles they currently do but have added roles and responsibilities for Digital Currency.
 </WRAP>|
 ^ B0004, P0004, D0012 ^ Protect consumer privacy | <WRAP>
@@ Line 64: / Line 71: @@
 </WRAP>|
 ^ B0005, P0005 ^ Protect against criminal activity | <WRAP>
-Once a criminal activity is detected, the Digital Dollars collected as part of the investigation can provide invaluable information for the prosecutors as to the origins of the money.
+Once criminal activity is detected, the Digital Dollars collected as part of the investigation can provide invaluable information for the prosecutors as to the origins of the money.
 </WRAP>|
 ^ B0009 ^ Provide faster and cheaper payments (including cross-border payments)  | <WRAP>
@@ Line 70: / Line 77: @@
 </WRAP>|
 ^ B0013 ^ Provide immediate access to transferred funds | <WRAP>
-Once the PDD or VDD are transferred to a payee, the money can be spent exactly like cash
+Once the PDD or VDD is transferred to a payee, the money can be spent exactly like cash
 </WRAP>|
 ^ B0030 ^ Support benefit payments directly to citizens | <WRAP>
@@ Line 77: / Line 84: @@
 ^ B0046 ^ <WRAP>
 Enable rapid and cost-effective delivery of:
-  - wages,
+  : 1. wages,
-  - tax refunds
+  : 2. tax refunds
-  - other federal payments
+  : 3. other federal payments
 </WRAP> | <WRAP>PDD would be analogous to current paper money, but the VDD would be immediately available.
 </WRAP>|
@@ Line 89: / Line 96: @@
 </WRAP>|
 ^ D0001 ^ Design should be for a non-interest-bearing CBDC, for example, would be less attractive as a substitute for commercial bank money  | <WRAP>
-[[cbdc:private:cbdc_omg:04_doc:15_common:08_currency_models:10_cash:start| Digital Dollars]] would be, for all intents and purposes, the same as current paper money. It would not accumulate interest until it is deposited in a financial institution.
+[[cbdc:public:cbdc_omg:04_doc:15_common:08_currency_models:10_cash:start| Digital Dollars]] would be, for all intents and purposes, the same as current paper money. It would not accumulate interest until it is deposited in a financial institution.
 </WRAP>|
+| **''B''** = [[cbdc:public:cbdc_omg:04_doc:12_summary:start#benefit_considerations| Benefit Considerations ]] |||
+| **''P''** = [[cbdc:public:cbdc_omg:04_doc:12_summary:start#policy_considerations| Policy Considerations]] |||
+| **''R''** = [[cbdc:public:cbdc_omg:04_doc:12_summary:start#risk_considerations| Risk Considerations ]] |||
+| **''D''** = [[cbdc:public:cbdc_omg:04_doc:12_summary:start#design_considerations | Design Considerations]] |||
 </table>
 ==== Discussion of Examples ====
-[[cbdc:private:cbdc_omg:04_doc:20_comments:brp:q02:start| Return to Top]]
+[[cbdc:public:cbdc_omg:04_doc:20_comments:brp:q02:start| Return to Top]]
-Table {{ref>DigitalCurrencyExm}} provides a comments column which covers much of the discussion associated with the set of individual requirements. However, the introduction of [[cbdc:private:cbdc_omg:04_doc:15_common:08_currency_models:10_cash:start| Digital Dollars]] introduces a lot of points for discussion. It is recommended that the requirements identified by the [[https://www.omg.org/ | Object Management Group's ]] [[cbdc:private:cbdc_omg:04_doc:12_summary:start| White Paper Analysis]] need to ultimately be part of a Trade Study for the various alternatives (i.e., Cryptocurrency, Stablecoine, Digital Money). The Trade Study should be based on Conceptual Models, Logical Models and Physical Modes. Where:
+Table {{ref>DigitalCurrencyExm}} provides a comments column which covers much of the discussion associated with the set of individual requirements. However, the introduction of [[cbdc:public:cbdc_omg:04_doc:15_common:08_currency_models:10_cash:start| Digital Dollars]] introduces a lot of points for discussion. It is recommended that the requirements identified by the [[https://www.omg.org/ | Object Management Group's ]] CBDC WG [[cbdc:public:cbdc_omg:04_doc:12_summary:start| White Paper Analysis]] need to ultimately be part of a Trade Study for the various alternatives (i.e., Cryptocurrency, Stablecoine, Digital Money). The Trade Study should be based on Conceptual Models, Logical Models and Physical Modes. Where:
   * **Conceptual Models** capture the concepts that need to be addressed by any CBDC
@@ Line 103: / Line 114: @@
   * **Physical Models** represent the logical constructs in a particular technology (i.e., Postgres, Oracle, HTML5, CSS, XML, JSON, etc.)
-Regardless of which model (Cryptocurrency, [[cbdc:private:cbdc_omg:04_doc:15_common:30_stablecoins:start| Stablecoin]], [[cbdc:private:cbdc_omg:04_doc:15_common:08_currency_models:10_cash:start| Digital Dollar]]) is used for the CBDC, the [[https://www.omg.org/ | Object Management Group ]] recommends that the Federal Reserve use a Model Based Systems Engineering (MBSE) and Unified Architecture Framework (UAF) approach for future CBDC efforts. The CBDC is a complex issue that, once released, could have a life expectancy of many, many years. Only through extensive Systems Analysis, Engineering, Design will CBDC have the stability it needs to instill confidence in the public (**''B0020''**).
+Regardless of which model (Cryptocurrency, [[cbdc:public:cbdc_omg:04_doc:15_common:30_stablecoins:start| Stablecoin]], [[cbdc:public:cbdc_omg:04_doc:15_common:08_currency_models:10_cash:start| Digital Dollar]]) is used for the CBDC, the [[https://www.omg.org/ | Object Management Group's ]] CBDC WG recommends that the Federal Reserve use a Model Based Systems Engineering (MBSE) and Unified Architecture Framework (UAF) approach for future CBDC efforts. The CBDC is a complex issue that, once released, could have a life expectancy of many, many years. Only through extensive Systems Analysis, Engineering, Design will CBDC have the stability it needs to instill confidence in the public (**''B0020''**).
-Some of the potential requirements in the [[https://www.federalreserve.gov/publications/files/money-and-payments-20220120.pdf | White Paper]] as summarized by the [[https://www.omg.org/ | Object Management Group's ]] [[cbdc:private:cbdc_omg:04_doc:12_summary:start| White Paper Analysis]] reflect the need to instill public confidence (See Table {{ref>confidence}}
+Some of the potential requirements in the [[https://www.federalreserve.gov/publications/files/money-and-payments-20220120.pdf | White Paper]] as summarized by the [[https://www.omg.org/ | Object Management Group's ]] CBDC WG [[cbdc:public:cbdc_omg:04_doc:12_summary:start| White Paper Analysis]] reflect the need to instill public confidence (See Table {{ref>confidence}}
@@ Line 115: / Line 126: @@
 ^ R0004 ^  3  | **Risk** to the efficacy of monetary policy |
 ^ R0005 ^  7  | New payment services could pose **Risks** to: <WRAP>
-  - financial stability
+  : 1. financial stability
-  - payment system integrity
+  : 2. payment system integrity
-  - other **Risks**
+  : 3. other **Risks**
 </WRAP>|
 ^ R0011 ^  11  | Increased **Risk** to consumer's vulnerability to: <WRAP>
-  - loss
+  : 1. loss
-  - theft
+  : 2. theft
-  - fraud
+  : 3. fraud
 </WRAP>|
 </table>
-[[https://www.omg.org/intro/MBSE.pdf | MBSE Specifications at OMG]]:
-//**Introduction**//
-//For more than forty years, the practice of systems engineering followed a linear path: requirements are documented
-first, followed by analysis, and then conceptual design, a process repeated through the development life cycle. However, regardless of the
-engineering process employed—waterfall, incremental, iterative, spiral, and even sprint-based — the lack of
-integration from one phase to another in the cycle results in longer delivery times and increases costs to correct errors
-introduced at transition points.//
-//Model-Based Systems Engineering (MBSE)((
-"Model-based systems engineering (MBSE) is the formalized application of modeling to support system requirements,
-design, analysis, verification, and validation activities beginning in the conceptual design phase and continuing throughout
-development and later life cycle phases.” INCOSE SE Vision 2020 (INCOSE-TP-2004-004-02), Sept 2007
-MBSE
-)) is an initiative in the systems engineering community that uses
-model-based descriptions and transformations so that work occurs concurrently. Requirements collection, analysis,
-and specifications are performed at the same time as conceptual design. MBSE is practiced across many industries
-around the globe. For example, it was used to develop the world’s largest telescopes, propulsion engines for fighter
-jets, and autonomous driving cars.//
-//**Value Proposition**//
-//MBSE is often contrasted with a more traditional document-based approach to systems engineering where system
-information is spread across many document-based artifacts (hand-written text documents, spreadsheets, and
-drawings). MBSE brings information together into a cohesive integrated model of the system that://
-    * //Enhances precision, consistency, and traceability;//
-    * //Includes behavioral analysis, system architecture, requirement traceability, performance analysis, simulation, test, etc.;//
-    * //Formalizes the practice of systems development through the use of models;//
-    * //Integrates information across discipline-specific engineering tools, including hardware and software design, analysis, simulation, and test; and//
-    * //Facilitates shared understanding of the system among the development team resulting in://
-      a) //quality/productivity improvements and lower risk;//
-      b) //rigor and precision;//
-      c) //ongoing communications among development team and customer; and//
-      d) //management of complexity.//
-The [[https://www.omg.org/ | Object Management Group ]] also recommends that the Federal Reserve use the Unified Architecture Framework (UAF) for future CBDC efforts. See [[https://www.omg.org/spec/UAF/ | OMG Unified Architecture Framework (UAF)]]:
-//UAF Profile (UAFP) 1.0 supports the capability to://
-  * //model architectures for a broad range of complex systems, which may include hardware, software, data, personnel, and facility elements;//
-  * //model consistent architectures for System-of-Systems (SoS) down to lower levels of design and implementation;//
-  * //support the analysis, specification, design, and verification of complex systems; and//
-  * //improve the ability to exchange architecture information among related tools that are SysML based and tools that are based on other standards.//
-//The intent of UAF is to provide a standard representation for describing enterprise architectures using a Model Based Systems Engineering (MBSE) approach.//
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