UST delivers API prototypes for retail CBDC experimentation

Digital transformation solutions company, UST, was a key innovation vendor in Project Rosalind. This is an experiment in application programming interface (API) prototypes for central bank digital currencies (CBDC) from the Bank for International Settlements (BIS) and the Bank of England (BOE) via the BIS Innovation Hub London Centre.

Uniting leading innovators from their respective industries, Project Rosalind developed and tested prototypes for an application programming interface (API) specifically built to distribute retail CBDCs.

Daniel Field, Director of Innovation and Global Head of Blockchain, UST.

Praveen Prabhakaran, Chief Delivery Officer and UK Managing Director, and Daniel Field, Director of Innovation and Global Head of Blockchain, UST discuss the project with RBI.

RBI: What are your key takeaways from Project Rosalind. Any surprises?

Prabhakaran and Field:

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Central Bank Digital Currencies are emerging as an interesting concept with the potential to deliver far-reaching impacts. We believe, at a high level, that this requires going through three distinct phases for mainstream adoption: Awareness, Immersion, and Engagement.

Project Rosalind was designed to address the Awareness and Immersion aspects of CBDC. It is one of the few projects to focus on the use of CBDC by citizens. It’s also an important project as it provides a sandbox that allows for not only empirically exploring value but also demonstrating it to the wider stakeholder community. Beyond some of the more particular technological improvements, Rosalind demonstrated that a light public retail-CBDC ledger may give a platform for the private sector to develop while minimising privacy threats. This is critical because, ideally, you don’t want a rigid, cumbersome system; rather, you want entrepreneurs and service providers to be able to explore new and better methods to give consumer value while keeping customers secure.

We saw that we could abstract the complexity of the ledger from innovators, first abstracting the heterogeneity of different blockchains and then using bespoke APIs to further abstract all smart contract complexity. With this, we saw independent parties without blockchain expertise create new services on top, for example, by developing solutions for increased citizen online security.

RBI: How well placed is the UK here? Where do you think the UK ranks relative to its international peers? Is there potential to be one of the early movers or might we be playing catch-up?

Prabhakaran and Field:

We can group the countries into three broad categories: Pathbreakers: countries that have launched CBDC either as part of the mainstream or in pilot mode; Active champions are countries that are currently in the research and proof-of-concept mode for understanding the impact of CBDC and the associated policy requirements. Passive champions are countries that are currently in discussion mode to understand the potential but have yet to make any serious commitments to tap into it. The UK is one of the leading countries in the Active champions group, including Hong Kong and Singapore, which are publicly very active in open research around tokenised money, or CBDCs. Like them, the UK is a major international financial hub and has a vibrant fintech ecosystem. Some countries, including China, are well advanced in terms of usage, while India is in a pilot mode to understand the associated potential of CBDC. The Bank of England is designing initiatives to drive the required awareness and immersion with a view to gathering the required feedback for shaping the policy guidelines and guardrails for the digital pound, and this is highly commendable.

RBI: On the skills challenge, what skills are needed to promote CBDCs and how has the UK supported the pipeline of talent?

Prabhakaran and Field:

We are seeing individuals grow into the CBDC and tokenisation space from different backgrounds, and one of the difficulties is the scarcity of profiles with the overlap between knowledge of financial markets and processes and blockchain technology. It is hard to underestimate the importance of the pioneers from the central banks in CBDCs, as policy and regulation are a third required knowledge domain. That the UK has managed to take a forward role in this is admirable, and it’s not an issue that only affects the central banks but also the technology developers and the banks.

With time, the skills and knowledge required to work in this field will naturally subside, but in the short term, it will put pressure on the whole sector.

RBI: And what about the potential privacy risks here?

Prabhakaran and Field:

Any financial policy or technological development adopted by the government naturally deserves proper scrutiny, and CBDCs are no different, and it is therefore incumbent on any government to address concerns. From what we have seen, there is a sense of responsibility around this; there are several actions underway, including a public consultation, and the House of Lords Economic Affairs Committee has also examined the issue.

And in Rosalind, for example, privacy was present by design, ensuring that the central bank could not see the details of transactions, nor could other payment processors. Potentially, CBDC could even enable greater privacy than some alternative payment systems, so there’s a lot of attention being paid to privacy and monitoring.

RBI: Why UST? What did the firm contribute to the project? And how will the firm be involved going forward?

Prabhakaran and Field:

UST managed the innovation, exhaustively exploring the requirements and possibilities with the clients and stakeholders, oversaw weekly sprints and delivery ahead of schedule, as well as building the API layer that was fundamental to allowing the third parties to test and expand the system. One of the keys to the success of Rosalind was the way we worked as a single team. Almost from the first day there was very little sense of a client-provider relationship, and much more one of a collaboration of people giving their best towards a common goal. As such we brought an international perspective and DLT expertise and shaped part of the thinking around how this technology needs to be developed and implemented.

This was not UST’s first effort in this field, but rather a continuation of a strategy that has seen us work on tokenised money and other financial instruments for public and private usage, such as cross-border payments and enabling new environmentally conscious practices for example. We are working on a lot of similar initiatives, so stay tuned!

Praveen Prabhakaran, Chief Delivery Officer and UK Managing Director, UST