CBDR as a core component of CBDC (Central Bank Digital Receipts)
CBDR as a core component of CBDC (Central Bank Digital Receipts)
Reflection on central bank digital receipts: "Central bank digital receipts"
© 2023 iSDU.cz, receipt.digital, 2023-03-26
Introduction of the Association iSDU.cz
n March 2023, an association called "Association for Digital Receipts" was founded by 13 entities with the aim of creating an environment for the gradual digitisation of payment traces. The topic of digital receipts is a topical one, as evidenced by the recent formation of an association with wide-ranging ambitions. The establishment of the SDU was supported by the Ministry of Industry and Trade of the Czech Republic, the Ministry of the Interior of the Czech Republic, the Ministry of Regional Development of the Czech Republic and the Chamber of Commerce of the Czech Republic. Within our expert team, we have identified several areas that we want to address. One of them is CBDC, or rather a new area of interest, which we have named CBDR. We would be delighted if you could get in touch and possibly join the upcoming CBDR working group.
Introduction
In our study of the official CBDC proposals, in other words the descriptions and technical specifications, we have not yet come across any mention of how central bank digital money, i.e. CBDC, will deal with "proofs" arising during transactions. For the time being, let us refer to these documents generically as 'receipts', of which several different variants are created at the time of the transaction. CBDC's creators have rightly focused on defining a generic payment system to digitally simulate cash, with the assumption that receipts will be dealt with in the standard way, i.e. as before - on paper or digitally, as the merchant's POS system allows. This approach of the CBDC designers gives us room to ponder whether a CBDC transaction could also be covered by a digital receipt system.
Thus, we believe that CBDC cannot do without "CBDR - Central Bank Digital Receipts", without digital receipts. Ignoring such a situation would be inconsistent in relation to the intensive digitization efforts. The expansion of CBDC, certainly depends on the additional added services that CBDC will bring, at the same time, concerns about the technological and, legislative fragmentation of local practices and capabilities of merchants, customers and the state must be shared.
And that is the reason for this article: CBDR, or Central Bank Digital Receipts.
Definition of CBDR
Let us propose, as generally as possible, a definition of CBDR:
CBDRs, which stands for "Central Bank Digital Receipts", are standardised digital receipts generated during transactions involving a central bank-issued digital currency, referred to as Central Bank Digital Currency (CBDC). These receipts include all the information about the trade transaction: date, time, amount, payee and payer identifiers, item details including VAT, unique CBDR identifier, specific details and merchant identification. CBDRs are created when the CBDC payment channel interacts with the merchant's POS system (PSO) to accept payment. CBDRs are compliant with the tax code and, GDPR. a nd high demands are placed on their security, long-term storage and retrieval only by authorised persons.
Why are CBDRs different from other digital receipts?
We can ask ourselves how CBDR is different from other digital receipts (DR). For now, we are only assuming what the final form of the CBDC will be, so we distinguish the CBDR from the set of DCs as a special case of a DC. There is still debate about the possibilities of CBDC, which we propose in another paper to upgrade to CBDC+.
How are receipts generated?
CDBC transactions should be viewed as just one of a set of payment methods that parties can use in a commercial transaction, such as cashless/cash-in.
Parties to the transaction:
The merchant: accepts a demonstrably online payment, passes on the consideration, generates two sets of receipts: the first set is passed on to the customer, the second is archived.
Customer: demonstrably online informs the merchant of the payment, accepts the consideration, not/receives the first set of receipts.
Payment facilitator (cash payment, terminal, etc.): such a set of SWsw and HWhw that facilitates the transfer of payment means (or information about such fact) from the customer to the merchant in such a way that it is secure, confidential, immediate for both parties. It is up to the agreement of the parties as to how it takes place. The device may be the palm of the merchant's hand, into which the customer inserts cash so that the merchant can perform verification, or it may be a payment biometric corneal scanner that, based on an online query to the customer's digital wallet, blocks the transaction amount.
State: the state participates in such a transaction as the supplier of the legal framework, the means of payment, and subsequently the recipient of the tax (VAT, profit tax).
Two types of documents
Two types of documents must be created during a business transaction:
Funds transfer record - Payment record
Tax document - receipt, warranty certificate.
It must be taken into account that each type of document is subject to a different distribution and archiving regime.
Technical means
Merchant cash register system
Customer payment wallet
Payment terminal
Payment instrument
Types of Records
Analog - the owner is the holder of the tangible susbstratum
Digital - the owner is the addressee, we need to know his ID
HybridCombination - combination of points 1. and 2. Hybrid
A receipt is created as a permanent record of a set of data during the interaction of the parties involved using their technical means and meeting the requirements. It serves as a tax, accounting and contractual document of the realized exchange.
Since many different combinations of input conditions arise in reality, it is very complicated to create a homogeneous system. It is therefore necessary to take into account all possible situations and to anticipate previously unrecognised circumstances.
No payment system can be introduced by a sudden jump, but rather through natural evolution. It cannot be expected that all participants in transactions will use CBDC. CBDC can be viewed as one of many payment methods that will continue to evolve in a continuous and innovative way in the future. However, CBDC can also be seen as a new type of currency and thus we could use existing infrastructures of suitable and established payment systems, (see CBDC+ for more).
DLT as a way forward for CBDR
Distributed Ledger Technology (DLT) could be a great way to implement CBDR. DLT is a distributed technology that allows transactions to be recorded across a network of nodes that are connected and work together to maintain a common and synchronized network state. DLT can be implemented as a blockchain, where transactions are grouped into blocks, and these are further chained. This technology part will be further investigated.
With DLT, it would be possible to track the movement of digital receipts in real time and maintain a steady state of the network. DLT also enables a high level of security and resilience against fraud and embezzlement. Each receipt could be digitally protected and authenticated across a network of nodes, eliminating the risks of counterfeiting and duplication of digital receipts.
DLT technology could also alleviate the concerns of some CBDC opponents who fault digital cash for its potential to purchase some illegal and problematic goods with it, or goods purchased in a discreet mode without a digital trace of the transaction in the form of a digital receipt. DLT allows these traces to be anonymised or, alternatively, to bear a payer identifier.
Implementing CBDR on DLT would also allow easy integration with other financial and payment systems such as payment gateways, banking applications and e-commerce platforms.
Draft CBDR Technical Specification
CBDR (Central Bank Digital Receipts) is the standard for digital receipts within CBDC (Central Bank Digital Currency). The systematics behind CBDR allows for the storage, transmission and authentication of digital receipts in a secure and transparent environment.
CBDR defines the format and structure of digital receipts, including information about the transaction, trading partner, time and place of the transaction and other relevant data. Receipts can be authenticated using DLT.
The CBDR also defines how receipts are stored and managed in the user's digital wallet. The user has full control over their receipts and can easily share them with a trading partner, accounting and tax authority or other authority.
CBDR enables cost reduction and simplifies the process of recording transactions for merchants and accountants, increases transparency and prevents counterfeit receipts.
It is also important to consider the environmental impact of using paper receipts, vouchers and documents in general. The implementation of CBDR can help reduce the amount of paper receipts and documents printed, thereby reducing printing costs while having a positive impact on the environment. This is another reason why it is important to develop a standardised procedure for issuing digital receipts through CBDR. In this context, the implementation of green elements in the whole process could also be considered, such as the use of renewable energy sources for the operation of data centres, etc.
No payment system can be introduced in leaps and bounds, but through natural evolution. It cannot be assumed that stakeholders will use it without adequate CBDC benefits.
CBDC can be seen as a stablecoin transfer enriched with smartcontracts - see more on the consideration of "CBDC+".
Conclusion
This is the task of the Digital Receipt Association and the emerging working group of digital currency and electronic transaction record experts who will work together to create a CBDR standard. The working group will also work to garner support and promotion for the CBDR standard.
Contact
This study was prepared by a team of authors for iSDU.cz:
Pepe Rafaj, Jan Lamser, Bara Vaculíková, Jan Kremláček, Ondřej Polák, Jan Pálka
Date of preparation 2023-03-26
Date of publication: 2023-04-18
SDU: Sdruzeni pro digitalni uctenky z.s., www.iSDU.cz
DRA: Digital Receipt Association, www.receipt.digital
SDU/DRA Blog: sdu-dra.blogspot.com
© 2023 iSDU.cz, receipt.digital
Czech version of CBDR article: https://sdu-dra.blogspot.com/2023/04/cbdr-jako-zakladni-soucast-cbdc-uvaha-o.html