The US Fed and CBDC

The USA Federal Reserve paper on CBDC’s supports the KXCO theory on Blockchain and Cryptocurrencies.

The KXCO Armature blockchain is a proprietary blockchain that was developed to handle complex financial transactions and is using a proof-of-Authority validation concept. The KXCO Armature blockchain was built with KYC, AML and Banking regulation in mind and a focus on speed of transaction.

  • Validation of on-chain activity within the Armature is done through permissioned and pre-approved validators that are being given the role of authorizing the transactions. POA is a modified form of PoS where instead of stake with the monetary value, a validator’s identity performs the role of stake.
  • Elastic Armature, An extensive amount of work is required to set up a sidechain because infrastructure must be created from scratch. KXCO Armature Blockchain’s technology automatically makes the sidechain when a new coin pair is added to the chain. Chains can then be separated, isolated and enhanced for specific functions.

Read the Whitepaper

From the Fed

This paper provides an overview of the literature examining how the introduction of a CBDC would affect the banking sector, financial stability, and the implementation and transmission of monetary policy in a developed economy such as the United States.

A CBDC has the potential to improve welfare by reducing financial frictions in deposit markets, by boosting financial inclusion, and by improving the transmission of monetary policy. However, a CBDC also entails noteworthy risks, including the possibility of bank disintermediation and associated contraction in bank credit, as well as potential adverse effects on financial stability.

A CBDC also raise important questions regarding monetary policy implementation and the footprint of central banks in the financial system. Ultimately, the effects of a CBDC depend critically on its design features, particularly remuneration.

The past decade has seen an explosion of interest in digital assets in general and central bank digital currencies (CBDCs) in particular. Propelled, in part, by the spread of private-sector digital asset ventures that have arisen out of distributed ledger technologies, the academic
literature on CBDC is expanding rapidly but, to a large extent, is still in its infancy.
This paper evaluates the range of macroeconomic implications of the introduction of a CBDC in a modern economy like the United States, as gleaned from the academic literature.

Our intention is for this paper to serve as a resource for senior staff or central bankers, providing them with the latest thinking to address questions regarding the general advisability of CBDC, and how the design features of any prospective CBDC affect their efficacy as digital assets in the 21st century macroeconomy. To this end, we begin by laying out a conceptual framework for what follows, starting with a high-level description of the present situation in the absence of a CBDC. This provides a foundation for assessing how the design features of CBDC would affect economic functioning in general. As noted, our analysis is macroeconomic in nature. Even so, the macroeconomy as it pertains to CBDC cannot be divorced from critical aspects of the banking sector, to which we devote much attention. This, in turn, means we address implications
for financial stability and for the implementation and transmission of monetary policy. But we only touch on the payments system because it and other topics such as bank regulation and supervision are not a focus of our review.

Our analysis is also on what the literature contributes to our understanding of the economics of CBDC, unconstrained by political or legal features or by restrictions.

Full Paper

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