The new ITU focus group looking at digital fiat currency has established three working groups to guide its analysis of the standardization and regulation necessary for the security and interoperability of such currencies.
The working groups will define the requirements of digital fiat currency as they relate to regulation, technical and business dynamics, and security.
The establishment of the working groups was agreed by the first meeting of the focus group in Beijing, China, 13 October 2017, a meeting preceded by an ITU workshop on ‘Standards for Digital Fiat Currency for Universal Financial Access’ on 12 October.
Chaesub Lee, Director of the ITU Telecommunication Standardization Bureau, describes the Focus Group’s mission as a balancing act of digital payment innovation and regulatory protections against systemic risk.
“The Focus Group aims to describe the environment necessary to achieve the dual objective of encouraging digital transactions while ensuring that central banks retain control over the issuance of currency and associated protections of the stability and integrity of the financial system,” says Lee.
Ecosystem, reference architecture and security
The first working group will report on the practical and economic implications of digital fiat currency and associated requirements on policy and regulation. It will analyze the legal frameworks relevant to central banks’ administration of national currency to make recommendations on how these frameworks could accommodate the concept of digital fiat currency.
The second working group will describe the business and technology ecosystem to support digital fiat currency, elaborating a reference architecture outlining the responsibilities of various stakeholders. It will report on interoperability scenarios for digital fiat currency as well as frameworks for its integration into existing payment systems. This work will include the development of a taxonomy of definitions relevant to digital fiat currency to assist stakeholders in their efforts to speak in the same terms.
“The success of the focus group will be determined by its ability to help stakeholders move forward on a basis of mutual trust and understanding,” says the focus group’s chairman, David Wen, who is also co-founder and chief scientist of eCurrency. “We aim to reach a point where all stakeholders are aware of their respective responsibilities in managing the transformations spurred by digital currency innovation.”
The third working group will propose mechanisms capable of ensuring the security of digital fiat currency and related transactions. The group aims to put forward a security architecture supported by a reference model for the security and governance of the technologies underlying digital fiat currency. This work will include analysis of relevant use cases of big data analytics.
“Digital fiat currency authorized and issued by a country’s central bank has great potential to offer a secure, interoperable payment instrument suited to our increasingly digital world,” says Bilel Jamoussi, chief of the ITU-T Study Groups Department. “We see great value to be unlocked as well as significant potential for disruption. This focus group aims to help us capitalize on digital currency innovation while also accounting for related risks.”
Digital fiat currency foundations
Focus groups define new directions in ITU work. They are open to participation by all parties.
Digital currencies have the potential to increase the speed and cost-efficiency of retail payment transactions, spanning e-commerce to cross-border transactions and person-to-person payments.
The focus group will build a common understanding of the foundations of digital fiat currency and its relationship with payment ecosystems, ICT infrastructure and the latest innovations in digital currency.
The group’s work will be driven in collaboration by central banks, ICT regulators, commercial banks, financial-service providers, network operators, security professionals, FinTech innovators, and technical and financial standards bodies.
The focus group’s first meeting in Beijing endorsed the nomination of six vice-chairmen:
- Yao Qian, Institute of Digital Money, People’s Bank of China
- Yury Grin, Intervale, Russia
- Ahmed Said, National Telecommunication Regulatory Authority, Egypt
- Sami Trimech, Arab ICT Organization
- Mandar Deshpande, Department of Telecommunication, Ministry of Communications, India
- Njunga N’dungu, Former Governor, Central Bank of Kenya