My team at BitMint won first prize in an international financial innovation competition more than 10 years ago, and our product was declared "the only candidate eligible to become the universal digital representation of global currencies. Back in October 2011, we were ahead of schedule.

Amnon Samid, CBDC Specialist and Digital RMB Fellow

Two years later, in an interview with a Chinese TV channel, I predicted that the yuan would be digitized, enabling citizens to store digital currency in their phones – similar to the way we carry paper money in our wallets – for both online and offline transactions. Unbeknownst to me, Zhou Xiaochuan, then governor of the People's Bank of China, made the strategic decision to explore this direction. Since 2014, the PBOC has executed a very professional and responsible exploration process, without abandoning any technology or financial model that might have been developed elsewhere. Since 2018, we are proud to have been invited to contribute to this brainstorming process and to lead the Real Retail CBDC experiment in China.

Expectations are high as the Beijing Winter Olympics approach, when a limited edition digital renminbi will be showcased to the world, with the promise of 24/7 support in multiple languages for foreign visitors. As of December 31, 2021, there are more than 8 million e- RMB pilot scenarios, with a cumulative total of 261 million personal wallets opened and 87.6 billion RMB ($13.6 billion) in transactions.

The elephant in the room: the quantum computer

The Chinese don't need the World Economic Forum to tell it that "quantum computing will eventually affect all financial services because it compromises the primary data cryptocurrency methods and cryptocurrency language used to protect the access, confidentiality and integrity of stored and transmitted data. CBDC is no exception."

Unfortunately, most of the 15 retail CBDC pilots announced so far in smaller economies are using architectures that do not properly address this threat and are designed to be incorrect. Not only that: they use architectures with limited functionality that could compromise users' privacy. These CBDCs fall far short of the AML and other measures needed to prevent illicit activity.

In this respect, BitMint speaks the same language as the Chinese. Unlike some central banks that claim to be "technology-agnostic," the Chinese agree that CBDC's quantum-resistant cryptocurrency analytics architecture is not "excessive," especially since it offers all the versatility and power of a cryptocurrency-based digital currency, but without the unacceptable risk of a currency crash. but without the unacceptable risk of a currency collapse.

Payment Continuity

The financial community is eagerly watching the potential use of digital renminbi in the international environment, especially after learning of the obstacles facing CBDC systems in other countries. Thailand's announcement in late December that it will delay its retail CBDC rollout may be a good opportunity for the Bank of Thailand to reconsider adopting an architecture that is not resistant to quantum cryptocurrency analysis. Central banks must consider potential flaws from day one, rather than relying on additional layers of complexity. Quantum computers will crack those classical cryptocurrency algorithms.

As of this writing, the Eastern Caribbean Central Bank currency DCash, used by seven Caribbean countries, has been falling since January 14 or more than two weeks ago. The leaders of the Central Bank of Nigeria must be nervous because their CBDC e-Naira is built on a similar platform.

In this case, the DCash service outage is clearly caused by a technical problem. But what if a major economy's CBDC is attacked by a more intelligent bad actor than the system designer? Or by quantum computing power to disrupt any cryptocurrency cryptography that most known cryptocurrency-based CBDCs rely on? Payment continuity is essential for national digital currencies.

Enabling continuous offline payments

Meituan, one of China's largest e-commerce platforms, recently announced that it has opened a digital RMB payment channel for all offline consumption scenarios. Spring Airlines announced that it will accept offline payments on its flights. Cryptocurrency technology providers and other vendors showcased at CBDC in Singapore have challenged the so-called secure element/card for offline payments. Even Nigeria is reportedly looking to deploy offline use for e-Naira, which would allow users without a strong Internet connection or smartphone to use CBDC.

Do these solutions offer true offline payments? If you define offline payments as the ability to make continuous payments without connecting to any external system, without connecting to the Internet, and without using a cell phone, then the answer is no. Most smart cards that are declared secure appear to be vulnerable to advanced tampering and counterfeit wallets, and in most cases do not provide settlement finality in offline mode, so the number of transactions and the volume of transactions is limited. What is needed is a hard wallet that can mitigate all the above problems, provide payment continuity for all at all times and in offline mode for settlement finality. Such a hard wallet is quantum secure with scalable tamper resistance; preventing counterfeiting and double spending while creating trusted offline payment solutions in the event of an Internet threat. This is the key third leg of payments trust: we trust the money (cash); we trust the payer (credit cards, peers); and we trust the wallet, with or without the Internet.

What is still missing in the e-renminbi?

Gaining widespread consumer and merchant acceptance over cash and mobile payment applications such as WeChat Pay and Alipay will require great advantages in convenience, speed, efficiency, security, user experience and functionality. And this CBDC will meet the evolving needs of all consumers, including the underbanked, the unbanked, the non-tech-savvy, and those without smartphones.

An appropriate design enables detachable coins for payments in any desired denomination, including micropayments and Nano payments, as well as continuous payments for each service with payment finality. The design must also ensure that transactions will be conducted autonomously by the user's mobile or IoT device, without relying on any ledger or other intermediary, for both liquid and stationary currencies.

Traditional red envelopes and cryptocurrency gift cards lack this unique "split and spread" call-to-phone mechanism. Combined with the intended use of bundled features, digital RMB will provide maximum flexibility for stylish rewards and enticement to customers and prospects with maximum security, transferability, online and offline, and will inspire greater interest from consumers and merchants.

Bounded currency, as detailed in my book of the same name by BitMint co-founder Gideon Samid, can be used to pay living expenses directly to the banked and unbanked over the phone to boost local and national economies and provide an economic safety net for every citizen. It also addresses the challenges of social distance, prevents hoarding, eliminates shortages of essential goods and eases liquidity crunches during lock-in.

Creating novel payment options needs to serve the microservices economy. e-CNY, and any CBDC infrastructure, should provide: real-time payments with or without Internet, for transactions large or small. Pay-as-you-go replaces the current unfair subscription scheme where lighter users pay more and heavier users pay less.

What will the future look like?

Cryptocurrency 1.0-based currencies and assets will likely become obsolete sooner or later unless they put citizens in charge of their privacy and are designed to be resilient against smarter bad actors and quantum computing attacks. Cryptocurrency 2.0 will restore the bilateral payment experience. It has the same form as cash payments: strictly bilateral. Privacy will prevail, in favor of law-abiding citizens. The high-tech sophistication of this cyber-cash will prevent criminals from abusing this valuable privacy. The first cryptocurrency 2.0 protocol, BitMint's LeVeL, is sufficient to support Web3 and other proposals and to prepare for the great battle between quantum and cryptocurrencies that is coming today. It is a battle to preserve the achievements of digital currencies: frictionless transactions, easy storage and the binding of currencies to their intended purpose, while protecting privacy and reestablishing the social bond between two strangers involved in the exchange of currency.

Ultimately, major economies will shy away from the risk of adopting cryptocurrency technology to produce national digital currencies and will instead build strong, flexible, and sustainable digital currencies based on quantum randomness.

Both central banks and private or public trust digital token issuers will deploy cryptocurrency 2.0 platforms to issue centrally minted, decentralized distributed, stable, unbreakable, anonymous coins designed to distinguish between ordinary law-abiding monetary privacy and the criminal and abusive exploitation of it. Does this sound like utopia? Well, the technology to make this happen exists. Central banks will have to make Brave, responsible decisions to make this idea a reality. Let's make a conscious choice and use digital currencies to achieve social justice and equitable global prosperity.