Last month, we presented our solution to the Global CBDC challenge with our partner, SEBA Bank, a FINMA licensed Swiss Bank providing a seamless, secure, and easy-to-use bridge between digital and traditional assets.

Launched by the Monetary Authority of Singapore and in partnership with the International Monetary Fund, World Bank, Asian Development Bank, United Nations Capital Development Fund, United Nations High Commission for Refugees, United Nations Development Programme, and the Organisation for Economic Co-operation and Development (OECD), the Global CBDC Challenge calls for FinTech companies, financial institutions and solution providers around the world to submit innovative retail CBDC solutions to enhance payment efficiencies and promote financial inclusion. StraitsX & SEBA bank were selected amongst 15 finalists from over 300 applications representing over 50 countries. 

Our Hybrid CBDC issuance solution aims to promote financial inclusion and decrease counterparty risk while maintaining a high level of compliance. The solution also aims to achieve both private data protection and system integrity by leveraging cutting edge layer-2 security mechanisms. The solution incorporates privacy-preserving capabilities while retaining high performance, with fast response time, low latency, and scalability to support large deployment. This enables the central bank to strike the right balance between personal and transaction data protection while maintaining the necessary monitoring capabilities required. 

Our hybrid CBDC model introduces an intermediary layer of financial institutions to distribute CBDCs while a direct claim on the central bank is established, allowing greater portability for both consumers and financial institutions and a stronger CBDC ecosystem. Authorized financial institutions issuing and distributing CBDC would perform customer due diligence,  Anti-Money Laundering/Combating the Financing of Terrorism (AML/CFT) duties such as recording and reporting suspicious transactions, while the central bank will be responsible for conducting AML regulations and supervising fulfilment. In addition, the solution proposed that financial institutions should also be responsible for transaction monitoring, fraud detection and prevention efforts. 

The proposed model offers interoperability on various infrastructures and networks, including account-based and token-based systems as well as both permission and permissionless networks allowing the central bank to leverage existing payment rails, thus reducing disintermediation.  In comparison, a direct CBDC model where the central bank directly settles payment transactions could substantially impact financial systems, causing major disintermediation, and potentially a reduction in the availability of credit, which would hurt the economy. In the proposed hybrid CBDC model, the central banks can leverage existing financial institutions’ technology and innovation capabilities, reducing the cost of building additional infrastructure and systems. 

We would like to take this opportunity to express our gratitude to our partner, SEBA bank for their support in this challenge and the Monetary Authority of Singapore for the opportunity to present our solution.