CBDC Electronic Wallet Segmentation for Transaction Limits
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Solution Overview
Problem
Central bank digital currencies (CBDCs) face limitations in usability due to regulatory restrictions, such as transaction limits, which hinder their use in large transactions, and existing payment processing systems are slow and batch-based, exposing merchants to cryptocurrency price volatility.
Innovation Solution
An electronic wallet system that accommodates CBDCs, allowing users to manage multiple funding sources, including CBDC wallets, cryptocurrencies, and other payment instruments, enabling real-time transactions and overcoming transaction limits through a wholesale CBDC wallet for authorized financial institutions, and utilizing blockchain technology for secure and efficient settlement.
Engineering Contradictions & Design Principles
Engineering Contradiction Analysis
1Reliability
If CBDCs are issued with regulatory restrictions and transaction limits, then government authorization and control are achieved, but usability for large transactions is hindered
Solution Approach 1:
The system segments CBDC functionality into two distinct wallet types: retail CBDC wallets with regulatory limits for individual users, and wholesale CBDC wallets without limits for authorized financial institutions. This segmentation allows the system to simultaneously satisfy regulatory requirements for consumer protection while enabling large-scale transactions through institutional channels.
Solution Approach 2:
Authorized financial institutions act as intermediaries between the central bank and end-users for large transactions. These institutions hold wholesale CBDC wallets that can facilitate transactions exceeding retail limits, thereby enabling large-value transfers while maintaining government control and oversight through the intermediary layer.
2Device complexity
If batch-based payment processing is used, then system simplicity is maintained, but settlement speed is slow and merchants are exposed to cryptocurrency volatility
Solution Approach 1:
The payment system dynamically adapts its processing mode based on transaction requirements. While batch processing remains available for standard transactions, the system enables real-time settlement for CBDC transactions through the wholesale wallet infrastructure, allowing merchants to choose the appropriate processing speed based on their needs without compromising system simplicity.
Solution Approach 2:
The system performs preliminary setup by establishing wholesale CBDC wallets with authorized financial institutions before large transactions occur. This pre-configuration of settlement channels enables immediate real-time processing when needed, eliminating the delay of ad-hoc system configuration while maintaining overall system simplicity through standardized pre-established pathways.
3Reliability
If retail CBDC wallets have transaction limits, then regulatory compliance is achieved, but ability to conduct large transactions is restricted
Solution Approach 1:
The system segments transaction capacity by wallet type: retail wallets enforce regulatory limits for consumer protection, while wholesale wallets held by authorized financial institutions have no such limits. This segmentation allows the overall system to maintain regulatory compliance for individual users while achieving high transaction capacity through institutional wholesale channels.
Solution Approach 2:
The CBDC system provides universal functionality across different wallet types. Both retail and wholesale wallets can conduct transactions, but they serve different purposes with different capacity limits. The wholesale wallet functionality extends the system's overall capacity to handle large transactions while the retail wallet functionality ensures regulatory compliance for individual users.
Data Source
AI summary
Disclosed are various embodiments for conducting central bank digital currency (CBDC) transactions. A user CBDC wallet can be stored in a wallet application corresponding to a wholesale wallet, which can allow users to conduct transactions that might otherwise be impractical using the user wallet. Multiple funding sources can be accommodated by the wallet application.