cbdc:public:cbdc_omg:04_doc:20_comments:brp:q10:start
Differences
This shows you the differences between two versions of the page.
| Both sides previous revision Previous revision Next revision | Previous revision | ||
|
cbdc:public:cbdc_omg:04_doc:20_comments:brp:q10:start [2022/05/13 16:26] terrance [Example Discussion] |
cbdc:public:cbdc_omg:04_doc:20_comments:brp:q10:start [2022/06/17 18:58] (current) terrance |
||
|---|---|---|---|
| Line 1: | Line 1: | ||
| ====== Question: 10. How should decisions by other large economy nations to issue CBDCs influence the decision whether the United States should do so? ====== | ====== Question: 10. How should decisions by other large economy nations to issue CBDCs influence the decision whether the United States should do so? ====== | ||
| - | [[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: 10. How should decisions by other large economy nations to issue CBDCs influence the decision whether the United States should do so? | ||
| + | ">Provide Feedback</a></b> | ||
| + | </html> | ||
| + | </WRAP> | | ||
| ===== Question ===== | ===== Question ===== | ||
| - | [[cbdc:private:cbdc_omg:04_doc:20_comments:brp:q10:start| Return to Top]] | + | [[cbdc:public:cbdc_omg:04_doc:20_comments:brp:q10:start| Return to Top]] |
| **How should decisions by other large economy nations to issue CBDCs influence the decision on whether the United States should do so?** | **How should decisions by other large economy nations to issue CBDCs influence the decision on whether the United States should do so?** | ||
| ===== Answer ===== | ===== Answer ===== | ||
| - | [[cbdc:private:cbdc_omg:04_doc:20_comments:brp:q10:start| Return to Top]] | + | [[cbdc:public:cbdc_omg:04_doc:20_comments:brp:q10:start| Return to Top]] |
| - | No "desirements" are expressed about needing or wanting to be the first among the other large economy nations to issue a CBDC. In many ways, building a CBDC is like landing a man on the moon. It is an extremely complicated undertaking, with lots of parts and lots of requirements. See section [[cbdc:private:cbdc_omg:04_doc:12_summary:start]] for the "desirements" called out in the **White Paper**. | + | No "desirements" are expressed about needing or wanting to be the first among the other large economy nations to issue a CBDC. In many ways, building a CBDC is like landing a man on the moon. It is an extremely complicated undertaking, with lots of parts and lots of requirements. See section [[cbdc:public:cbdc_omg:04_doc:12_summary:start]] for the "desirements" called out in the **White Paper**. |
| Beyond the **White Paper** there is a lot of discussion about CBDC, large systems engineering projects, and what works and does not work for large systems. Probably the most important "implied" requirement is that the CBDC is a [[https://www.omgwiki.org/dido/doku.php?id=dido:public:ra:xapend:xapend.a_glossary:m:missioncritical | Mission-Critical System]] with a long [[https://www.omgwiki.org/dido/doku.php?id=dido:public:ra:1.2_views:3_taxonomic:4_data_tax:05_lifecycle:start | Lifespan]]. | Beyond the **White Paper** there is a lot of discussion about CBDC, large systems engineering projects, and what works and does not work for large systems. Probably the most important "implied" requirement is that the CBDC is a [[https://www.omgwiki.org/dido/doku.php?id=dido:public:ra:xapend:xapend.a_glossary:m:missioncritical | Mission-Critical System]] with a long [[https://www.omgwiki.org/dido/doku.php?id=dido:public:ra:1.2_views:3_taxonomic:4_data_tax:05_lifecycle:start | Lifespan]]. | ||
| Line 25: | Line 31: | ||
| These are some of the reasons why a U.S. CBDC is much larger, complex, and trickier to create than any other national CBDC, let alone any simplistic cryptocurrency or large products offered to the public by large corporations. The following example is meant to highlight the difference between large commercial complex products and a CBDC. | These are some of the reasons why a U.S. CBDC is much larger, complex, and trickier to create than any other national CBDC, let alone any simplistic cryptocurrency or large products offered to the public by large corporations. The following example is meant to highlight the difference between large commercial complex products and a CBDC. | ||
| - | Example: If a commercial, very large, complex system (such as Facebook) has a failure or has a temporary outage, there are probably very few lives at stake (if any) or even placed in jeopardy as a result of the loss of commercial service. This is because the commercial system is **NOT** mission-critical. However, when a CBDC is deployed and there is a failure or a temporary outage -- people's lives, livelihoods, or life savings could be wiped out -- making the CBDC a Mission Critical system. Over and above the criticality of a CBDC to a nation and its people, the use of this currency as a Reserve Currency throughout the world, makes it obvious that the breath and scope of the U.S. CBDC is more critical than other CBDCs. | + | Example: If a commercial, very large, complex system (such as Facebook) has a failure or has a temporary outage, there are probably very few lives at stake (if any) or even placed in jeopardy as a result of the loss of commercial service. This is because the commercial system is **NOT** mission-critical. However, when a CBDC is deployed and there is a failure or a temporary outage -- people's lives, livelihoods, or life savings could be wiped out -- making the CBDC a Mission Critical system. Over and above the criticality of a CBDC to a nation and its people, the use of this currency as a Reserve Currency throughout the world makes it obvious that the breadth and scope of the U.S. CBDC are more critical than other CBDCs. |
| Line 45: | Line 51: | ||
| * //For traders, currencies are the units of account of various nation-states, whose exchange rates fluctuate between one another.// | * //For traders, currencies are the units of account of various nation-states, whose exchange rates fluctuate between one another.// | ||
| - | An important part of the explanation of how money works come down to **faith in the issuer** and **social agreement**. This is underpinned by the Executive Summary provided in the [[https://www.federalreserve.gov/publications/files/money-and-payments-20220120.pdf | Money, and Payments: The U.S. Dollar in the Age of Digital Transformation]] **White Paper**: | + | An important part of the explanation of how money works comes down to **faith in the issuer** and **social agreement**. This is underpinned by the Executive Summary provided in the [[https://www.federalreserve.gov/publications/files/money-and-payments-20220120.pdf | Money, and Payments: The U.S. Dollar in the Age of Digital Transformation]] **White Paper**: |
| : //For a nation’s economy to **function effectively**, its citizens must have **confidence in its money and payment services**. The Federal Reserve, as the nation’s central bank, works to maintain the public’s **confidence by fostering monetary stability**, **financial stability**, and a **safe and efficient payment system**.// | : //For a nation’s economy to **function effectively**, its citizens must have **confidence in its money and payment services**. The Federal Reserve, as the nation’s central bank, works to maintain the public’s **confidence by fostering monetary stability**, **financial stability**, and a **safe and efficient payment system**.// | ||
| Line 57: | Line 63: | ||
| * Be a safe and efficient payment system | * Be a safe and efficient payment system | ||
| - | For these reasons, the U.S. CBDC must be more than a Cryptocurrency or even **Stablecoin**. It can not be organically grown and evolve using a bottom-up approach. Having a Dollar be a National Currency with a major role in the National and International economies requires a systematic, pedantic, system engineering approach. This does not mean that it has to follow the traditional [[https://www.omgwiki.org/dido/doku.php?id=dido:public:ra:xapend:xapend.a_glossary:w:waterfall | Water Fall Model]] but can also use an [[https://www.omgwiki.org/dido/doku.php?id=dido:public:ra:xapend:xapend.a_glossary:a:agile | Agile Model]] when and where appropriate. For example, if a Blockchain model is adopted for use within the CBDC, which uses a series of Smart Contracts to accomplish portions of its overall requirements, these can be developed using an **Agile Model** working within the framework of requirements set at the onset of the CBDC. | + | For these reasons, the U.S. CBDC must be more than a Cryptocurrency or even **Stablecoin**. It can not be organically grown and evolved using a bottom-up approach. Having a Dollar be a National Currency with a major role in the National and International economies requires a systematic, pedantic, system engineering approach. This does not mean that it has to follow the traditional [[https://www.omgwiki.org/dido/doku.php?id=dido:public:ra:xapend:xapend.a_glossary:w:waterfall | Water Fall Model]] but can also use an [[https://www.omgwiki.org/dido/doku.php?id=dido:public:ra:xapend:xapend.a_glossary:a:agile | Agile Model]] when and where appropriate. For example, if a Blockchain model is adopted for use within the CBDC, which uses a series of Smart Contracts to accomplish portions of its overall requirements, these can be developed using an **Agile Model** working within the framework of requirements set at the onset of the CBDC. |
| Mark Zuckerburg is quoted as saying, __//"We used to have this famous mantra … and the idea here is that as developers, moving quickly is so important that we were even willing to tolerate a few bugs in order to do it. What we realized over time is that it wasn’t helping us to move faster because we had to slow down to fix these bugs and it wasn’t improving our speed."//__ (( | Mark Zuckerburg is quoted as saying, __//"We used to have this famous mantra … and the idea here is that as developers, moving quickly is so important that we were even willing to tolerate a few bugs in order to do it. What we realized over time is that it wasn’t helping us to move faster because we had to slow down to fix these bugs and it wasn’t improving our speed."//__ (( | ||
| Line 67: | Line 73: | ||
| )) As stated earlier, there is a big difference between working on a large, commercially available product that is not Mission Critical and a product that is Mission Critical. In Mission Critical Systems, any bug can have devastating consequences. Who wants to be in an operating room when a major piece of equipment has a bug? How about an airplane flying over your head? It is expected there will be bugs in any software, but in Mission Critical systems many can be found and corrected earlier on in the product lifecycle and especially during product testing. It is not acceptable to "let the End Users" do the testing on these kinds of systems. | )) As stated earlier, there is a big difference between working on a large, commercially available product that is not Mission Critical and a product that is Mission Critical. In Mission Critical Systems, any bug can have devastating consequences. Who wants to be in an operating room when a major piece of equipment has a bug? How about an airplane flying over your head? It is expected there will be bugs in any software, but in Mission Critical systems many can be found and corrected earlier on in the product lifecycle and especially during product testing. It is not acceptable to "let the End Users" do the testing on these kinds of systems. | ||
| - | <wrap hi>**So, back to the fundamental question. Should the U.S. CBDC be worried about being first to market among the other large economies? Not if it means the Federal Reserve has to take shortcuts to race to market and ultimately accumulates Technical Debt, that like all debt, must be paid back in the future.**</wrap> | + | <wrap hi>**So, back to the fundamental question. Should the U.S. CBDC be worried about being first to market among the other large economies? Not if it means the Federal Reserve has to take shortcuts to race to market and ultimately accumulate Technical Debt, which like all debt, must be paid back in the future.**</wrap> |
| : //The term “technical debt” was coined by Ward Cunningham, when he described the phenomenon of meeting a release deadline by making adaptations and concessions to a product. He also outlined how the effects felt afterward were analogous to those associated with the incurring of financial debt. Cunningham acknowledged that, most often, technical debt required payback, while the inability to manage assets could lead to a complete stand-still as the interest and effects of the adaptations (or lack thereof) become unbearable.//(( | : //The term “technical debt” was coined by Ward Cunningham, when he described the phenomenon of meeting a release deadline by making adaptations and concessions to a product. He also outlined how the effects felt afterward were analogous to those associated with the incurring of financial debt. Cunningham acknowledged that, most often, technical debt required payback, while the inability to manage assets could lead to a complete stand-still as the interest and effects of the adaptations (or lack thereof) become unbearable.//(( | ||
| Line 85: | Line 91: | ||
| <figure typesOfTechnicalDebt> | <figure typesOfTechnicalDebt> | ||
| - | {{ :cbdc:private:cbdc_omg:04_doc:20_comments:brp:q10:screen_shot_2022-04-15_at_6.43.14_pm.png?500 |}} | + | {{ cbdc:04_doc:20_comments:brp:q10:screen_shot_2022-04-15_at_6.43.14_pm.png?500 |}} |
| <caption>A classification of Technical Debt show in quadrants. (( | <caption>A classification of Technical Debt show in quadrants. (( | ||
| Chris Cairns , Sarah Allen , | Chris Cairns , Sarah Allen , | ||
| Line 142: | Line 148: | ||
| <figure bigCryptoHacks> | <figure bigCryptoHacks> | ||
| - | {{ :cbdc:private:cbdc_omg:04_doc:20_comments:brp:q10:screen_shot_2022-04-15_at_1.47.26_pm.png?800 |}} | + | {{ cbdc:04_doc:20_comments:brp:q10:screen_shot_2022-04-15_at_1.47.26_pm.png?800 |}} |
| <caption>Top nine biggest cryptocurrency thefts by estimated losses as of March 2022(( | <caption>Top nine biggest cryptocurrency thefts by estimated losses as of March 2022(( | ||
| Tech Monitor, | Tech Monitor, | ||
| Line 217: | Line 223: | ||
| ===== Examples ===== | ===== Examples ===== | ||
| - | [[cbdc:private:cbdc_omg:04_doc:20_comments:brp:q10:start| Return to Top]] | + | [[cbdc:public:cbdc_omg:04_doc:20_comments:brp:q10:start| Return to Top]] |
| - | The following "desirements" are from the [[https://www.omgwiki.org/CBDC/doku.php?id=cbdc:private:cbdc_omg:15_summary:start&do=edit | White Paper]] as identified by the [[https://www.omg.org/ | Object Management Group's ]] report called [[https://www.omgwiki.org/CBDC/doku.php?id=cbdc:private:cbdc_omg:15_summary:start | White Paper Analysis]]: | + | The following "desirements" are from the [[https://www.federalreserve.gov/publications/files/money-and-payments-20220120.pdf | White Paper]] as identified by the [[https://www.omg.org/ | Object Management Group's ]] CBDC WG report called [[cbdc:public:cbdc_omg:04_doc:12_summary:start | White Paper Analysis]]: |
| <table> | <table> | ||
| - | <caption>Example of mapping a subset of requirements identified during the White Paper Analysis conducted by the OMG</caption> | + | <caption>Example of mapping a subset of requirements identified during the White Paper Analysis conducted by the OMG's CBDC WG.</caption> |
| |<100% 20% >| | |<100% 20% >| | ||
| ^ Benefits | B0020, B0027, B0036, B0050 | | ^ Benefits | B0020, B0027, B0036, B0050 | | ||
| Line 232: | Line 238: | ||
| ===== Example Discussion ===== | ===== Example Discussion ===== | ||
| - | [[cbdc:private:cbdc_omg:04_doc:20_comments:brp:q10:start| Return to Top]] | + | [[cbdc:public:cbdc_omg:04_doc:20_comments:brp:q10:start| Return to Top]] |
| <table> | <table> | ||
| Line 259: | Line 265: | ||
| </WRAP>| | </WRAP>| | ||
| ^ P0006 ^ Garner broad support from key stakeholders |<WRAP> | ^ P0006 ^ Garner broad support from key stakeholders |<WRAP> | ||
| - | In order to garner support from within the U.S. and from the rest of the world, the CBDC needs to uphold the laws against [[cbdc:private:cbdc_omg:04_doc:15_common:48_natsec:10_human_traf | Human Trafficking ]], | + | In order to garner support from within the U.S. and from the rest of the world, the CBDC needs to uphold the laws against [[cbdc:public:cbdc_omg:04_doc:15_common:48_natsec:10_human_traf| Human Trafficking ]], |
| - | [[cbdc:private:cbdc_omg:04_doc:15_common:48_natsec:20_drug_traf | Drug Trafficking ]], | + | [[cbdc:public:cbdc_omg:04_doc:15_common:48_natsec:20_drug_traf| Drug Trafficking ]], |
| - | [[cbdc:private:cbdc_omg:04_doc:15_common:48_natsec:30_corrupt | Corruption ]], and | + | [[cbdc:public:cbdc_omg:04_doc:15_common:48_natsec:30_corrupt| Corruption ]], and |
| - | [[cbdc:private:cbdc_omg:04_doc:15_common:48_natsec:40_launder | Money Laundering ]] just as the U.S. has done with the U.S. Dollar and the numerous laws we now enforce to prevent or interrupt these illegal activities. | + | [[cbdc:public:cbdc_omg:04_doc:15_common:48_natsec:40_launder| Money Laundering ]] just as the U.S. has done with the U.S. Dollar and numerous laws we now enforce to prevent or interrupt these illegal activities. |
| </WRAP>| | </WRAP>| | ||
| ^ P0009 ^ CBDC would be a liability of the Federal Reserve, not of a commercial bank |<WRAP> | ^ P0009 ^ CBDC would be a liability of the Federal Reserve, not of a commercial bank |<WRAP> | ||
| - | When the Federal Reserve assumes the liability for the CBDC, any negative news regarding hacks, breaches, or criminal activity associated with the CBDC will be a direct reflection on The Federal Reserve. | + | When the Federal Reserve assumes liability for the CBDC, any negative news regarding hacks, breaches, or criminal activity associated with the CBDC will be a direct reflection on The Federal Reserve. |
| </WRAP>| | </WRAP>| | ||
| ^ P0010 ^ CBDC would be a liability not of a commercial bank((Commercial banks include banks licensed either by federal or state banking agencies, credit unions, and thrifts from the **White Paper**.))|<WRAP> | ^ P0010 ^ CBDC would be a liability not of a commercial bank((Commercial banks include banks licensed either by federal or state banking agencies, credit unions, and thrifts from the **White Paper**.))|<WRAP> | ||
| Line 271: | Line 277: | ||
| </WRAP>| | </WRAP>| | ||
| ^ P0014 ^ The PWG report highlights gaps in the authority of regulators to reduce these risks |<WRAP> | ^ P0014 ^ The PWG report highlights gaps in the authority of regulators to reduce these risks |<WRAP> | ||
| - | This is why all the [[cbdc:private:cbdc_omg:04_doc:15_common:05_stakeholder:start | Stakeholders]] need to be involved in the U.S. CBDC development, not just to guild the CBDC system, but also to guide the administrators and the legislators to make the appropriate updates and amendments to the laws. | + | This is why all the [[cbdc:public:cbdc_omg:04_doc:15_common:05_stakeholder:start| Stakeholders]] need to be involved in the U.S. CBDC development, not just guide the CBDC system, but also to guide the administrators and the legislators to make the appropriate updates and amendments to the laws. |
| </WRAP>| | </WRAP>| | ||
| ^ P0015 ^ The PWG report recommends that Congress act promptly to enact legislation that would ensure payment Stablecoins |<WRAP> | ^ P0015 ^ The PWG report recommends that Congress act promptly to enact legislation that would ensure payment Stablecoins |<WRAP> | ||
| Line 322: | Line 328: | ||
| </WRAP>| | </WRAP>| | ||
| ^ R0014 ^ **Risk** of not achieving an appropriate balance between safeguarding the privacy rights of consumers and affording the transparency necessary to deter criminal activity |<WRAP> | ^ R0014 ^ **Risk** of not achieving an appropriate balance between safeguarding the privacy rights of consumers and affording the transparency necessary to deter criminal activity |<WRAP> | ||
| - | Not only does the CBDC have to worry about hacks that can steal value from the CBDC, but it also needs to worry about hacks that steal private information. Once there is a hack of the private information, confidence in the CBDC will be undermined. | + | Not only does the CBDC have to worry about hacks that can steal value from the CBDC, but it also needs to worry about hacks that steal private information. Once there is a hack of private information, confidence in the CBDC will be undermined. |
| </WRAP>| | </WRAP>| | ||
| ^ R0023 ^ **Risk** of financial panic causing outflows from Commercial Banks to CBDC without prudential supervision, government deposit insurance, and access to central bank liquidity |<WRAP> | ^ R0023 ^ **Risk** of financial panic causing outflows from Commercial Banks to CBDC without prudential supervision, government deposit insurance, and access to central bank liquidity |<WRAP> | ||
| Line 328: | Line 334: | ||
| </WRAP>| | </WRAP>| | ||
| ^ D0011 ^ Design should generate data about users’ financial transactions in the same ways that commercial bank and nonbank money generates data today | <WRAP> | ^ D0011 ^ Design should generate data about users’ financial transactions in the same ways that commercial bank and nonbank money generates data today | <WRAP> | ||
| - | If the CBDC is rushed to be the first major economy in the world with a CBC, the design must assure the privacy of the end-users. See section [[cbdc:private:cbdc_omg:04_doc:15_common:45_privacy:start]]. | + | If the CBDC is rushed to be the first major economy in the world with a CBC, the design must assure the privacy of the end-users. See section [[cbdc:public:cbdc_omg:04_doc:15_common:45_privacy:start]]. |
| Also, see **''P0009''** where the CBDC would be a liability of the Federal Reserve, not of a commercial bank. | Also, see **''P0009''** where the CBDC would be a liability of the Federal Reserve, not of a commercial bank. | ||
| Line 338: | Line 344: | ||
| A dedicated infrastructure takes time. As an indicator of how slow infrastructure can be, IPv6 has been underway since 1998 to address a shortfall of IPv4 addresses, yet the upgrade is still in progress as of 2022. (( | A dedicated infrastructure takes time. As an indicator of how slow infrastructure can be, IPv6 has been underway since 1998 to address a shortfall of IPv4 addresses, yet the upgrade is still in progress as of 2022. (( | ||
| Josh Fruhlinger, | Josh Fruhlinger, | ||
| - | __What is IPv6, and why is adoption taking so long?__, | + | __What is IPv6, and why is its adoption taking so long?__, |
| Network World, | Network World, | ||
| 21 March 2022, | 21 March 2022, | ||
| Line 354: | Line 360: | ||
| )) | )) | ||
| - | : //The credit card market in the US is complex (pdf). You have retailers, big banks and then card associations like Visa and Mastercard. So you have to get three sectors of the market to work together to implement any new technology. US retailers and credit card companies have been at war for years over who pays what transaction fees. Now they're trying to sort out who will pay for the estimated $8bn costs (pdf) for chip and pin technology. // | + | : //The credit card market in the US is complex (pdf). You have retailers, big banks, and then card associations like Visa and Mastercard. So you have to get three sectors of the market to work together to implement any new technology. US retailers and credit card companies have been at war for years over who pays what transaction fees. Now they're trying to sort out who will pay for the estimated $8bn costs (pdf) for chip and pin technology. // |
| The adoption of infrastructure for CBDC needs to be thought out and planned, including who is paying for it. | The adoption of infrastructure for CBDC needs to be thought out and planned, including who is paying for it. | ||
| </WRAP>| | </WRAP>| | ||
| - | | **''B''** = [[cbdc:private:cbdc_omg:04_doc:12_summary:start#benefits| Benefit Considerations ]] ||| | + | | **''B''** = [[cbdc:public:cbdc_omg:04_doc:12_summary:start#benefits| Benefit Considerations ]] ||| |
| - | | **''P''** = [[cbdc:private:cbdc_omg:04_doc:12_summary:start#policy_considerations| Policy Considerations]] ||| | + | | **''P''** = [[cbdc:public:cbdc_omg:04_doc:12_summary:start#policy_considerations| Policy Considerations]] ||| |
| - | | **''R''** = [[cbdc:private:cbdc_omg:04_doc:12_summary:start#risks| Risk Considerations ]] ||| | + | | **''R''** = [[cbdc:public:cbdc_omg:04_doc:12_summary:start#risks| Risk Considerations ]] ||| |
| - | | **''D''** = [[cbdc:private:cbdc_omg:04_doc:12_summary:start#design| Design Considerations]] ||| | + | | **''D''** = [[cbdc:public:cbdc_omg:04_doc:12_summary:start#design| Design Considerations]] ||| |
| </table> | </table> | ||
| - | |||
| - | <color blue><todo @nick>Consider adding defs of technical debt in Table 1 into Glossary</todo></color> | ||
| /**=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=- | /**=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=- | ||
cbdc/public/cbdc_omg/04_doc/20_comments/brp/q10/start.1652473568.txt.gz · Last modified: 2022/05/13 16:26 by terrance
