 Welcome everyone. This is the fourth in our series of five weekly webinars to celebrate the fifth anniversary of Hyperledger. Hyperledger was announced on December 17, 2015 as a new initiative form to pull together the really exciting work being done in the blockchain and cryptocurrency space and try to understand how to make that usable and appropriate for enterprises and for broader business purposes. And we've accomplished a lot in those five years and really pulled together an amazing set of software but also really it's more about the community because you can have great open source code but if you don't have a community around it adding to it building upon it pushing it forward faster it's kind of it's not doesn't mean much right and so in celebration of that community and in celebration of the different use cases out there we've put together this series of panels to help people understand where and how the these technologies are being used both hyperledger technologies and those that are even beyond just the core that we have here because this is a broad movement and this is something that over the five years has grown to be to be rather substantial and particularly now affecting the very traditional and old world world of the banking systems. We've seen years and years now of investment into this space of everybody from upstarts, fintech and like to the central banks of the world really taking a look at this and so we really wanted to pull together a set of voices from our community and some who are on the periphery of our community to take a look at where those things or where those technologies are heading and how they will affect the world of finance and to first again I want to repeat and encourage folks if you're new if you just landed do use the chat functionality to tell us in one line kind of the city state or country you're from just so we get a feel a better feel for who you are. I will also mention on the hyperledger website the five-year anniversary spot there is a place to claim a free t-shirt you do have to pay for shipping we couldn't sign up to ship all around the world but if you can cover that you get a free t-shirt to help us celebrate the fifth anniversary. So with that I'd like to introduce the moderator for the panel Laura Shin. Laura is a crypto and blockchain journalist she's covered this space for a lot of different major publications she's also the host of the Unchained podcast that is a tremendous amount of readership and has been going for quite some time now and with that I'd like to turn the mic over to Laura. Laura take it away. Hi everyone welcome to our panel so we have three great speakers for you one is Bob Bench who's the assistant vice president at the Federal Reserve Bank of Boston we also have Rob Palatnik managing director of global head of technology research and innovation at the DTCC and who is also chairman of the hyperledger board and then Mathew St. Olive codify payments product manager and CBDC advisor at consensus welcome to our panelists why don't we start by having you each go around and stating what it is that you and your organization do and how it is that you're either working on central bank digital currencies or other blockchain related initiatives how about we start with Bob. I think the Robert Bench is known as Bob I'm still Robert. Bob oh okay let's not start with Bob because I don't know if he can hear us or his camera's frozen or something Rob why don't you start. I'm sure thank you very much Laura and thanks thanks to the panelists and first as chairman of the hyperledger board of governors I would like to congratulate hyperledger on five years I think the accomplishments just in helping push software push the ideas push the concepts and push the discussion and bring together the community in sessions like this has been phenomenal and part of you know the great value that hyperledger is bringing to to the world as we embark on this journey. So I'm I run research and innovation for DTCC DTCC is depository trusting clearing corporation we're a one of the premier financial industry post-trade infrastructures in the world in the United States where the primary mechanism for clearing and settlement of equities cash trades most of the non-futures and non-option markets all settled through DTCC so we're not a payment organization we're primarily a clearing and settlement and regulatory reporting and data organization but we move assets around and having a new and consistent set of payment rails would certainly benefit our client our industry. Great. Now over to Bob. Yeah thanks for picking up the slack Rob and thank you for having me Laura and Brian so my name is Bob Bench an AVP at the Federal Reserve Bank of Boston so what our team does is we DCI I'm gonna kill my video Laura so it goes a little better okay is this better? Well hopefully let's try it keep going yeah the audio is the most important so yep so in association with the DCI at MIT we are working on a general purpose central bank digital currency research project the main idea here as opposed to Rob's organization which handles the securities markets we are trying to understand what are the tradeoffs and trying to build a fiat alternative fiat alternative digital currency and we're starting at the core layer we think that there are unique design requirements to central banks fiat currencies and we think that that needs to be built and we're going to try to build it for research purposes what we think about is almost a Linux for central bank currencies and so we are in year one of the project we plan on releasing open source software in summer 2021 along with a white paper and we look forward to people from the community testing our product playing with our product much like Hyperledger and Linux did over their history and we're excited to release this and get your feedback that's interesting yeah I'll have some questions about that but before that why don't we turn to Matthew hi so Matthew Santolive I'm leading consensus work on CBDC globally so briefly Consensus is a software company a pioneer in blockchain our founder and CEO Joseph Lubin co-created Ethereum six years ago and then created Consensus to build a community around Ethereum and we are really in between public blockchain innovation and enterprise and strongly believe in in this the convergence of the two and CBDC is a great example of this we are really close to Hyperledger and really grateful to be part of this community we have contributed to Hyperledger with Hyperledger Bezu which is an Ethereum client open source Ethereum client which was submitted almost two years ago and we strongly believe that Hyperledger brings a lot of value by having this by being this greenhouse with 15 projects which allows for collaboration creation of standards and all of this is really critical for enterprise adoption and then more specifically on CBDC so we are really committed to support central banks on CBDC we are working with six different central banks on CBDC pilots wholesale retail and cross border pilots and yeah right now we believe that central banks do not yet plan to go live with CBDC they need they are cautious by nature and so they need experimentation they need to understand as you said Bob what are the trade off what are the capabilities and how to implement it very concretely and so it's really exciting time for us to to see this technology being used by such high provider in institutions so as I'm sure everyone's well aware when it comes to blockchain technology people always make a joke that the solution everything is just to put a blockchain or put it on a blockchain but obviously that's that's just a joke because that's not the case so when it comes to central bank digital currencies what are the main problems that could be solved or alleviated with central sorry the problems with central bank money that could be alleviated or resolved with blockchain technology and in this is just an open question anyone can answer it but I think that if I can start briefly I think there are three main problems in terms of which are wholesale retail and cross border so wholesale they are already existing RTG systems and interbank settlement which work pretty well but there are delays and costs associated to this and more importantly there is lack of programmability and programmability do not solve the problem but provide additional value for cross-border payments obviously we are still relying on our correspondent banking infrastructure that is completely outdated very slow very costly and here many people believe that cbdc can can significantly facilitate cross-border payments and then for retail cbdc I'm not sure we solve the problem because in developed countries we have great means of payments but it can be more relevant for developing countries and even for developed countries it will actually not solve problems but create new opportunities and Rob do you want to add something from the wholesale side yes so from the from the wholesale perspective and I guess Matteo touched on on two aspects to the digital currency that if realized in a central bank digital currency would be of tremendous value one is that they would be digital and they would be a consistent methodology for recording those payments and tracking and tracking where the money is moving and second that they're programmable so those two things in combination is what really brings that value within the wholesale ecosystem of the financial industry there are many different process flows that are really unique to every asset class so equities has a particular process flow various fixed income transactions have process flows money markets have their process flow and all of these have their own settlement workflow their own margin models so it seems fairly obvious that if we adopt a more efficient payment rail that consolidated all of the the cash movements for our clients in the industry that it would be much easier for our clients to manage their liquidity needs so it just the math of it just seems much simpler and Bob does you want to add anything sure I mean I think you know we're certainly not wedded to a blockchain architecture but you know certainly there are advantages there resiliency across distributed networks there's benefits there and again our research is primarily around trade-offs right so the challenge with distributed networks is they're really complex and complexity adds attack surfaces and those things can cause challenge to one of our most important goals which is security but in certainly the traceability of certain blockchains is very intriguing from an AML CFT standpoint right the ability of firms like chain analysis and elliptic to track funds globally fairly instantly as long as you have some KYC somewhere along that along that trail is is really unique and interesting and new for the AML CFT world so again I think there's a lot of positive aspects and we're looking at those and what trade-offs exist with those distributed systems yeah I imagine that there's a segment of the leadership that already has their hackles raised about what you just said but actually before we get to that because obviously that raises privacy issues I do want to just ask you about something that you mentioned in the beginning about how you're working on the solution and you're going to release the code for it in the summer so I'm just curious you know if you work are working on solutions for central bank digital currencies then do you see that as something that would be an open source technology and a government would build that kind of solution using open source code of course and governments currently use a plethora of open source code much of the government architecture is built off linux and you know we at least at least our research team and cons with MIT we don't believe in security by obscurity we think that if code is going to be secure you need a lot of people looking at it and a lot of people working on it and it's very hard for that to be done when it's a very small classified team again we you know the federal reserve and treasury have not made any announcements regarding central bank digital currency plans to go live in any sense the word but we think the best use of our research time is to build something open source where we can build off the minds of the women and men who take part in the open source community and why are you building something as opposed to maybe using one of the existing technologies one is to be sure our our division will be evaluating public and private platforms to test our platform our own in-house build but one you know I think it's it's really interesting to build something from the ground up you learn a lot about your platform if you're build it yourself you learn a lot about the difficulties you learn a lot about the tradeoffs that we may not have learned if we exclusively use a provider I think that's critically important um two is you know I think joining with MIT we are really building on some of the better brains in this space uh Neha Nurula who runs the DCI has put together a fantastic team from the top cryptographers and developers in the world in this area and we want to see what they can do with the very unique design requirements for central bank digital currency as far as I understand there is not a single platform that is exclusively even built for the design requirements for central bank digital currency there's been a lot of enterprise chains for value so to speak but we think central banks have unique design requirements and we're going to try to build for that purpose and Matthew you've worked with a number of different governments or consensus is working or has worked with um South Africa, Singapore, Thailand, Hong Kong, Australia and I just wondered how do concerns differ across countries and what factors tend to affect their concerns is it like the size of the country or are there cultural factors or is it about kind of the existing penetration of fintech technology or you know how are different governments thinking about this yes just before answering the question I just want to react on what Bob said about open source which I think is quite important is that one of the great benefits of DLT is open source is that it's a transfer of values of value capability is embedded and so it's much different from any other technologies like database or whatever here you have the protocol itself allows transfer of value which and then on top of this open source software people will build additional proprietary applications and make a business out of it and this we see this as the opportunity also to foster digital innovation and the bank of England has foretested a boost of GDP of three percent with the general purpose dbdc which I think is quite exciting then when it comes to in our distribution with central banks there are several things so first of all this technology is new to them so first the first thing they need is to basically get their hands dirty and start to understand exactly what what are the capabilities what are the tradeoffs and how they can implement it when we look at the at the technology layers they have some concerns about how we can manage privacy how we can manage transactions throughput so how many transactions per second you can manage so and and how will it be interoperable with other systems whether it is legacy systems or new DLT platforms that might be built with the same protocol or with different protocols so they have this this need of understanding the technology but what as we see the markets becoming more and more mature central banks are also more focused on what's the use cases what's the application and here collaboration between the public so the central banks and the private sector is absolutely key it doesn't need to understand not only how the individuals will use the cbdc but how the enterprise is how the the the private sector will will be able to use it how it will solve their their their pen points and how it will allow them new opportunities and so there's obviously a lot of collaboration very useful with the financial institution for the world's a layer but also for the I mean any merchants every merchants need a means of payment and so understanding how they can manage a subscription their invoices in a smarter way in a better way is very important for the central bank to understand properly design it and Rob why don't you maybe give more insight to what Matiu just said and tell us how the DTCC currently works with central banks and maybe mention some of the pain points that he discussed as well as new opportunities that you see could come with a cbdc sure and you know I guess the way you know we look at the entire ecosystem in the financial industry and in the financial markets across across the globe basically is is that they're they're helping people manage their their retirement accounts their pension funds you know the the the financial industry serves a purpose that that benefits to that benefits everyone so being able to move assets and move value in exchange for those assets with a complete confidence in the integrity of the markets and in the integrity of your that your asset is accounted for or your money is accounted for is critical and DTCC's primary focus has long been on that resiliency on the safety and soundness of markets and that when you make a trade of an of a security you buy a stock you sell a stock you sell a money market instrument that when you do that transaction you get your money or you you get your stock and it is unquestioned that that accounting exists is reliable has integrity is verifiable so the markets that exist today have instrumented that and built that through decades of incremental advancement incremental advancement in the technology in market practices in regulation in oversight the federal reserve bank in the united states and central banks around the world have been critical components of making sure that those markets have that safety and soundness that they can scale when scale and performance is necessary that in in the face of market volatility and disruptions that they're resilient and and that everyone always can be confident that those markets work so when we start looking at so all of that is kind of table stakes that's the foundation you know when something goes wrong at two in the morning today everyone knows exactly what happened that's the point in time where we're processing variable annuities or you know there's something in the process that already is going on there that we've been working on for decades it's been instrumented it comes up on your alert screen you know exactly how to respond as we start moving into replacing components of the infrastructure and especially the payment rails you're going to have to have that same degree of confidence that when something goes wrong you know exactly how to fix it you know exactly where to find that problem and that the system itself is resilient in the face of security attacks of unexpected you know natural disasters of any kind of disruption and that the markets can keep on operating so our focus in the wholesale markets has long been making sure that train works and that all of it works without problem without fail and that we can test failure scenarios that we can try things out payments is a critical part of how DTCC processes the equity markets have a cycle trading occurs on exchanges today's cycle is at the end of the day all day long those trades are submitted into a organization central securities clearing corporations and depositories then at the end of the day traditionally we have various netting cycles some activity settles on a two-day basis and everyone knows that in two days all of your settlements net down and you have to settle you either have to send a security or receive a security and then you have to either send a payment or receive a payment and that all nets so 200 million trades net down to 1 million payments so in this world with central bank digital currency making sure that that payment is as reliable and as durable and has integrity it's non refutable it can't be duplicated it can't be denied that you actually made that payment and that it has the same integrity as payments do today and better because it's traceable to the degree privacy and regulations want it to be traceable and that you could have confidence that once it's executed it's immutable all of those add would add tremendous value to the existing system so we're going to get a little bit more into kind of the technical details around how to structure a CBDC on the back end but I actually want to draw in one of the questions that came in through Q&A from Jacques and hopefully I'm not going to butcher the same too much beacon do it looks like who wrote should CBDCs be blockchain based why or why not I don't know if maybe Bob or Matthew you want to address this but maybe we should just get that question out of the way before we talk about more technical details again I think one thing that we try to reiterate is in our research we find that while I think there is a great value to interoperability amongst CBDCs to solve some of the cross border issues every country needs to decide for themselves the design requirements right like any good product manager you're focusing on your customer and the customers of Sweden may be very different than the customers in the for the Eastern Caribbean central bank and so you need to solve the problems that your customer is bringing to you and so there might be economies that their blockchain may help out and there might be ones where a centralized database is a lot more appropriate and I think that's something that needs to be discussed is every central bank needs to solve the problems of their customers like every every software company to solve the problems of their customers so it's you know again like we've discussed earlier there's upsides but you need to understand your customer first yeah and to emphasize on this so we also believe that some CBDC will be built with DLT and particularly ETERRA, Morklorn, and Apple, and others won't but and and we also strongly believe that there is no one-size-fits-all solution it's just impossible each country each jurisdiction have specific requirements whether it's in terms of a number number of people in the country or the attachment to privacy and so each approach is will be quite different but we believe that at the core the core layer which which is brought with DLT which prevents all double spending which is really the core of the technology to prevent double spending without a central party to maintain a central ledger is absolutely key so this is one of the key benefits the second one is programmability so when we imagine programmability it's already possible somehow with centralized systems where one centralized party will say okay if you do this action I will do this output what is again quite exciting is that with DLT you can create those market contracts which can execute themselves to depending on the inputs that provide an output and all of this without any central party and with a significant trust because anyone can look at it verify that it does what it say it does and that's really bringing a lot of value and then what's even more exciting is the next step is when we start to have an ecosystem such an open ecosystem which is very different from our world garden system we have today when we have this open ecosystem we have composability which means that products built by one company can leverage the product built by the others and it goes really much further than the open API or open banking API system where people can connect through APIs because here it's native in the protocol and that's what we have seen recently or over the last year with the emergence of decentralized finance where a lot of protocols build on top of stable coins and then there are aggregators and we create these ecosystems that can just benefit from each other's innovation and really allows us to to create a new application and new services for the end users so I actually want to ask this is a structure question and this kind of goes to what is perhaps at least to my mind an inherent tension in the technology as Matthew was saying for a distributed letter system to work well it needs to be distributed and obviously central bank digital currencies has the words central in it and normally that does come from you know what we think of as a centralized institution so for a central bank digital currency what is the back end structure in terms of like who's running nodes is it all like a permission chain how do you spread that out to make it secure and yet also I'm sure you know the more spread out as we all know the kind of greater limitations on scaling at least as far as I understand so how are you guys thinking about how to structure given those constraints so that's something we think about a lot certainly I don't necessarily a lot of times we think about whether or not there's a malicious actor intent right and that's I think a lot of what bitcoin and ether based upon was the assumption of a malicious actor in the removal of a trusted party but it's certainly there's a lot of gains to be had from resiliency standpoint having a distributed system and that's kind of where we look at the upside for distribution in our initial research but again and again we are exclusively focusing on the retail use case if you're going to have throughput that's comparable to existing retail payment methods you're going to have impact there and so understanding how you can maximize resiliency but also throughput and settlement finality for the retail use case is one of the most critical trade-offs and so again we think less about centralization and more about malicious actor intent when we look about you know centralized distributed systems but can you also answer what I was asking about in terms of like who would be running nodes and how do you resolve that issue because is it just a permission chain or would there be any way to kind of open it up to other people or is that you know one of the potential attack vectors for like some kind of um yeah unfriendly actor on the network so that's something we're still looking into I don't think we've gone that far in our research we you know we're still working on our core level code base so that's something that we're currently mapping out but I don't have a good answer for you on that yet and Matthew is this something that you guys have thought about uh yeah so from our perspective so today central banks are really focused on permissions the chain where the central bank and regulated financial institution like banks and payment service providers we sorry we all run nodes and this consensus will emerge through those regulated financial institution and the fact that the central bank is as you say central but the fact is there's the only entity allowed to issue the CBDC and that's fine and that's again one of the benefit of the technology is that you can program into the protocol itself each roles and responsibilities of different stakeholders um so yeah really the focus on this and then this those uh regulated financial institution for general purpose will be responsible to distribute it to the end users but still in this open ecosystem where there is trust and uh where the transfers are so simple between one PSP and the other and this is this would be seamless but we also believe that and I'll finish with this sorry uh is that we also we still believe that um central banks will um in a couple of years be actually quite open to public blood chains we always do this from a reason with uh internet people initially when they see a new technology they do not understand it they see the problems and indeed there are some limitations at the beginning and and and they do not trust this technology but as it is being implemented as it is being used initially as a niche and then by more and more companies and we already see large bench large financial institution using public blood chain with we do believe that some CBDCs will be either directly issued on on public blood chains or at least that there will be some bridges between the the permission network built by the central banks and the public blood chain in which other companies are building their own applications I'd like to add I'd like to add a little just just I guess from a hyper ledger perspective and and you know I've been around the industry over 40 years and and the the pace of technology and the way technology moves uh is not in a straight line uh and and everyone kind of wants the answer immediately when an idea came out but it's like finding a piece of metal and imagining an iPhone I mean it does the gap between those two is a whole lot of element exercises so I think you know the it's it's a tribute to uh the consensus Matteo and his company and and Joe Lubin who's a a colleague of mine on the on the board of hyper ledger uh that that the ethereum community started out as very public focused and and public chain uh but with Bezu and their contributions to the community uh they've made this tremendous investment in in private enterprise models as well uh it's a tribute to to Bob Bench and Neha uh and the work they're doing on uh evaluating new security models because security and threat vectors are are ever present never increasing uh and the the role of hyper ledger with its greenhouse and its many projects is to bring together lots of different dimensions it's not the game isn't over it's like you know when the book on computers was written 50 years ago and saying all right that's going to be the model and it will have vacuum tubes and you flip these switches where the book first book on relational databases was written and and then that was that was the end of it it's a progression and we're all learning from each other uh the fact that we have these conversations uh and DTCC apparently is the only one on on this panel that is not writing its own blockchain uh software uh but we're investing through our we have a couple of of prototype projects uh project ion uh that's doing clearing and settlement on DLT as a fully functional prototype uh and we have this project Whitney which is a a private market securities issuance and we've been able to write those on multiple blockchains both public and private to understand them to see just the way Bob was explaining to see what their scale dimensions are what it means to put out different nodes what it means from resiliency perspective and we're all sharing and we're all learning from each other so it's a progression and something else that I was curious about before we dive into what I think is probably going to be a somewhat meaty topic which is the privacy issues that came up earlier I was just wondering you know for normal public blockchains transactions are typically paid for with a fee would that also be part of a central bank digital currency blockchain so I guess I'll jump into that question because that's an important one um there are very specific legal legal rule legal laws I should say around how a central bank can charge for its services right so that is a constraint on a central bank bill that leads to the guards United States there may be other central banks that may model it differently but I think questions about fee and I guess the later question of privacy are really important wouldn't think about things like spam on network and DDoS attacks that's something that isn't really talked about in CBDC conversations a lot is the simple question of spam but stopping spam is really important and fees is one way to do it and having really robust identity structures is one way to do it those are two of the easier ways to fix that problem and so understanding legal and policy constraints with regards to spam and DDoS attacks on one of these platforms is something we think a lot about but as far as the US is concerned there are constraints around fees for any central bank payment process okay well let's segue now to the privacy or Matthew did you want to add something yeah I just wanted to one thing is you're comparing the transition fee on public blood chain and CBDC if it is built on private blood chains even if we still have what we call gas to pay for the transition it might not need to have a price on it and so the reason why it has a cost on public blood chain is that you have to pay for the validators who participate to the consensus and so it is slightly different and might not be required for CBDC and I also wanted to emphasize on what Rob said and finish with this that all DLT platforms all blood chains are not created equally and so picking the right platforms that fits your specific use case will be very important and even if at on some cities we are really focused on Ethereum we we also strongly believe that there are great alternatives out there and that they will emerge and be widely adopted it just depends on what use case you are you are for Tristan okay yeah so now let's talk about what Bob mentioned near the beginning which I think is going to be of interest to a lot of people he talked about how CBDCs have the potential to have built in KYC which is know your customer and AML anti-money laundering processes built into them and I think that obviously you know people have a lot of privacy concerns about CBDCs particularly maybe because one of the first or the first to really be rolled out is the DCEP in China which you know there's I think a surveillance culture over there when it comes to their technology so how is how are different central bank additional currency players thinking about concerns over privacy what are some of the options for managing privacy when it comes to CBDCs so I guess I'll hop in there I think with regards to our research you know I think the question of privacy in the United States remains one that needs a lot more discussion and is a critical policy question but certainly a question that informs technology what you know when we started our project our main focus was how can we make something useful for retail purposes primarily meaning extremely secure with throughput and finality equivalent to leading retail payment systems but one of our learnings has been that you need to start thinking about privacy early in the stack one thing that we've been educated by the MIT folks is that the later you add privacy to a system the less private it becomes and so that's something that we are thinking a lot about and certainly we are not a policy team or exclusively a technology team but understanding where a policy needs to enter into the platform is something is absolutely critical and I think more advanced discussions need to happen to get a better understanding of sentiments around privacy with regards to payments because I think it's still largely undefined at least over here well one thing that I was wondering about is you know Zcash and Monero have their viewing keys or you know ways to take a shielded transaction and have you know and I guess proves you know certain aspects of that data to specific people is that an option that's being considered we're not like going directly into say Zcash and Monero we have cryptographers that have worked on both platforms deeply that understand those methods very very very well but that's not like we're not modeling any of our systems to date off of Zcash and Monero any platform that like that you know without question the state will have to perform its financial intelligence functions I think any institution whether it's us whether it's DTCC any large banking entity those rules are not going away barring a change in legislation so we need to understand all of our customers needs so that being the users of the dollar and the members in the Treasury Department that have jobs to do to stop financial crime so that's a balance that has to be done the key thing for our platform is understanding where do we put that privacy because I think regardless of how the privacy works we need to make sure that if data is collected only the data should be seen by the people responsible for seeing the data and no one else and I think that's the hardest thing is once you collect data it's on you to secure it and so that's the most important thing for us is making sure whatever we're required to collect is absolutely secure and so maybe to I think I agree privacy there's lot to be discussed still and I think technology is not the bottleneck what's more important is the decision of the central bank of how they want to design it but when we look at the wholesale layer so between the central bank and the financial institution I think it is commonly agreed that the central bank the the banks do not want other banks in the network to see their transactions the value the quantity of activity so this has to be made private to the other banks but for the central bank the central bank wants to have access to this information whether natively or thanks to a court court law or whatever they want to be able to have access to this information so I think that's that's one point and then for retail applications there will there are different approaches as you say as as far as I know in China it will be quite open so even if the identity of the users are not directly visible on the CBDC platform and the CBDC ledger there you will see all the transaction you will see history of transaction and so you could deduce some of the identities so this is one option and then there are honestly a lot of technical options to abstract or to create additional layers of privacy just to mention it there are the most adopted ones there are ideas around implementation leveraging zero net proof or privacy groups so there are basically different approaches which yeah we will depend on the use case and just raise additional and the objectives and so now let's talk about adoption because there you know just with the current system this will be quite a shift if something comes to pass with CBDCs so in general how are a lot of CBDCs sorry how are a lot of central banks thinking about how to get CBDCs adopted in terms of you know whether or not they'll use commercial banks the way that they're used now or whether they'll have their own retail accounts or you know just what are they thinking or is it just too early to even ask this question yeah sure I'll start that that's a starting with the banking intermediation that's a critical question right there's really really important policy implications to change the current intermediary model some some countries such as China have are going with a two-tier model there are certainly advocates for continuing the two-tier model here in the United States that's something that has like we said trade offs there's costs and benefits to that certainly a direct model to a central bank requires a material operational uptick by the central banks activities doing retail compliance retail servicing is hard it's a lot of work it's very different than wholesale and I think that's something central banks would be fairly new to most central banks I think there's a world some central banks are looking at payment service providers and technology the technology community has gotten very good at directly handling retail customers that's something that we need to learn from as a central bank of how they do it and and what makes them so good at it but again I think that's something that is what we call phase two question we don't think the core code base really changes much if you go through a two-tier model or a direct model or a payment service provider model but I think what's critical is institutions like the federal reserve understand the impacts of any change to the model right so what does that mean for small and community banks if their deposit base erodes to some extent because of CBDCs that's something really important for say community banks and the communities they serve so again that's something we're looking at closely because we need to understand those trade-offs but just out of curiosity so I understand that discussions may not have gone too far in this but if central banks were to deal more directly with retail customers is that kind of enable them to do things that they can't currently do with the model using commercial banks at the moment like you know are there sort of like pros to switching things up I think there there certainly could be right I think there's so the FDIC does a really great research every year on the unbanked and the underbanked that is something that is a really thorny question and has been really hard to fix what we do know from the FDIC study is that certain people are unbanked because they choose not to enter into relationships with banks and open questions would they enter a direct relationship with a central bank maybe maybe not we don't know that answer but that is something that is seen at least by some researchers a positive is are there are there are certain unbanked persons who would rather work directly with the government that might be true and so that's those are the kind of things we look at certainly there have been advocates since if they had direct accounts so again another issue where government benefits could be more quickly received but a lot of research has to happen and a lot of trade-off research has to happen because there's a lot of stakeholders I mean you know you look at how many Rob I'm sure with DTCC the amount of stakeholders you have in your environment is enormous and getting all those people to the table to agree on a new model is extremely hard and so you really have to understand all the issues to when you bring all those people to the table because it's it's a dramatic change I mean I think one of one of the the general first laws that that we all adhere to is do no harm so I think there's a lot of different ways of looking at the the alternatives that technology can bring but there are there are definitely some capabilities like the comments we've all made about resiliency and security that have been quite durable over over many decades and we don't want to lose a lot of those those values I am part or an advisor to the digital dollar project and that does is advocating for a two-tier system a wholesale system that involves interactions between the central banks and and the the banking tier and a second tier that's that's retail oriented I think there are a lot of different models and and I'm I'm sure a lot of the work that Bob is doing with MIT and some of the other academic institutions that we're all we're all speaking with and then that are part of Hyperledger as well are going to contribute in a in a great way over the next few years to advancing thought leadership on this well Rob I actually wanted to ask you a question about what you said about how you know you're not trying to do too much damage with whatever changes you make or do no harm but you know this technology obviously could bring a lot of benefits if it were to to do more than simply just keep the existing processes in place so in that regard like how do you kind of work with the different stakeholders to talk about what different benefits you could get if you were to embrace more disruption I completely agree with you let me so let me just make make that clear and I think most of us that are in certainly in this in this conversation but in this ecosystem and that are trying to push the technology I agree with that idea as well I just I think we've got this tool and we're a little bit afraid of the power of this tool it's like a lightsaber in the hand of a three-year-old and and there there's a bit of you know to some of the questions that are on the Q&A and the earlier question before do we need DLT distributed ledger to answer central bank digital currency or even increasing or improving the efficiency of equity settlement or or any asset settlement the fact that the entire world is is basically spending a tremendous amount of energy on reconciliation of information constantly that everyone on this call has a different view of what a ledger is of of how much money or how many assets they have on the ledger and then we have to go through variety of different protocols to reconcile what we all should know as a central truth is something this technology can answer does it need to answer it in a broad public either a proof of work proof of stake model is is it able to trust certain entities like federal banks like governments like certain institutions that were created specifically for trust how do you trust them in the you know event of security and malware onslaughts and and various actors looking to subvert that these are all questions that need to be answered but the basic premise that this technology can enable much more efficient interactions much more efficient tracking of of sources of truth absolutely true so I think there's a willingness of on everyone's part to take a fresh look at those you know long-held beliefs that our traditional silos on mainframes were that needed to be reconciled with other mainframes was the way everything had to work we're ready to throw that out and say let's move to something new but we need to do it with you know with all the concerns about safety soundness and protecting everyone's retirement account everyone's investments everyone's pensions you know so there's that balance of how do you disrupt but you know address the concerns of of you know people with real assets that want to make sure that they can you know pay the rent and I actually want to call it another question by Jacques Piquantou which is should CBDCs coexist with stablecoins or replace them I don't even know if this is something that this you know that you are considering but maybe I would be curious to just hear what your thoughts are on that I think that's more towards Bob and and the Fed I mean I think the the the aspect of stablecoins right now is a way of creating equivalence with with the the crypto ecosystem and what that evolves into once there's additional once there's viable fiat currencies issued by governments and viable other types of currencies issued by organizations like Facebook and and consortium that that support that how that balances out with the the values underneath cryptocurrencies will be an interesting thing we're all interested in seeing Bob I can jump in so I think there's two two different things with CBDC and stablecoins one and it's about the aspect of money it's either it's it is a store of value and the means of payments and I believe that it's unlikely that stablecoins will become widely adopted as a store of value for instance even Libra as a Facebook project people will pay with this but you will not keep your earnings and your salary and in your in your whatsapp wallet it just doesn't make sense and so what the the way we derive this is that we believe that some stablecoins or CBDC will be more appropriate to specific use cases and so for instance we see on the public blockchain MakerDero which is a stablecoin which works very well but and the the way it is built and organized is fully decentralized it's done by a community and it will probably not make sense for DTCC to use it DTCC will very likely prefer a CBDC issued by the Fed but it put made sense for a number of projects that happen in the web3.0 and and similarly we believe that some stablecoins will be preferred for niche use cases and will basically coexist with CBDC. Yeah so with regards to stablecoins we think about this a lot I spent my prior career helping build one of the larger stablecoins out there USGC yeah that circle yep and I think most stablecoins right now aside from DAI are commercial bank deposits on a new rail it's it's commercial bank money and I think that's fundamentally different than central bank money and I think that you know for the countries that bring out CBDCs I think that they'll they'll continue to coexist with stablecoins I think the stablecoin use case will continue and I think that they will coexist I think there is a use case for direct central bank money in a digital form for retail persons whether or not the United States chooses to do so it's gives a major policy decision above my pay grade but I think certainly countries will certain countries are going to go forth with retail CBDCs and enable retail persons to have central bank money but I think stablecoins will continue to exist with through the commercial banking system moving commercial bank money on new payment rails and I'm going to achieve significant innovation through that way I'm certainly there's brilliant women and men working on the problems that can be solved with commercial bank money on these rails and certainly our team looks to learn from them but I think there are fundamental different fundamentally different use cases for commercial bank money on these rails and central bank money on these rails all right so we're going to have to wrap up but before we go why don't you all each say kind of what you expect going forward in terms of the next steps on this journey or you know what questions you're looking to resolve as these different efforts continue I'll start so we're we're actually building a fully functional prototype we call Project ION working with the financial industry clients to simulate clearing and settlement on a distributed ledger in a accelerated settlement type model where you can optionally say I want to settle this trade immediately I want to settle this trade in a hourly net I want to settle this trade in two days so some something that combines the the current ecosystem and a digital asset ecosystem we're expecting to implement a cash token as part of implement part of that prototype build but we've been talking to the digital dollar project about making this an eligible pilot for central bank digital currency in the wholesale markets so we expect to be active working with our industry certainly working with the Fed our payment rail on different models and if we can help advance the thought process on you know how this could work in the wholesale markets we're we're we're willing great on my side I think we are kind of at a turning point where in the last couple of years central banks have been testing the technology to understand whether or not it's technically possible to create a cdc and I think when you look at all the reports all conclude that it is possible there are some things where the technology has to be pushed further but basically it's possible but now what's really exciting is central bank will start to work with a private sector to identify clear use cases clear needs of how this cdc can be really used and adopted and and that will make sense great interesting great Bob I think over the next couple of years you're going to have a lot deeper understanding of the use cases here I think the technology certainly makes this possible it's transaction throughput release is an issue but understanding why people want this and convincing them and putting the wholesale the world that Rob and Matthew have been dealing with recently I think that's really compelling because you don't have to throw any issue of privacy and identity and I think there could be compelling compelling developments in that front if you get the right stakeholders in the room but I think you know policy makers are going to start catching up with technologists in this area and I think that's going to be really really helpful folks like the digital dollar project consensus hyper ledger educating policy makers and getting them up to speed is really going to enable this technology to be better and understand how we can use it to help all the all the economies who want to approach this in a thoughtful way I think it's going to be very interesting great well this has been a fascinating discussion thank you all so much for participating and thank you to hyper ledger for hosting and yeah we'll we'll have to resume this conversation at some point in the future looking forward to it thank you Laura thank you very much thanks Ryan thank you everybody bye bye