BIS Project Tourbillon: CBDC balancing privacy, security, and scalability

According to recent surveys conducted by the Bank of England and the European Central Bank, privacy is a fundamental requirement for Central Bank Digital Currencies (CBDCs) and is also the top concern for users. The Project Tourbillon, launched by the BIS Innovation Hub Centre in Switzerland, is a research project for retail CBDCs that aims to balance privacy, security, and scalability. Project Tourbillon

Privacy Protection in Different Payment Methods

According to a report by the BIS, the global use of cash is declining as digital payments become more prevalent. Over the past decade, non-cash payments have been growing at an annual rate of 16%, and current payment methods offer varying degrees of privacy protection:

• Cash provides complete anonymity for both payer and payee but cannot be used for online transactions
• Credit cards and debit cards are confidential for users, as long as only banks and card issuers can access personal information, requiring users to trust in their security measures
• Cryptocurrencies generally offer pseudo-anonymity, as transaction amounts and addresses are visible on a public blockchain, potentially exposing identities

Payer Anonymity with Recipient Information Known to Banks

Project Tourbillon tested the concept of payer anonymity, offering cash-like anonymity for payers while not extending the same to recipients. For example, consumers using Central Bank Digital Currency (CBDC) for payments to merchants would not disclose personal information to anyone, including the merchant, banks, and central banks. However, the merchant's identity would be part of the payment and disclosed to their bank, limited to that institution.

This concept helps reduce tax evasion or illicit payments. Central banks can view transaction amounts without detailed information on consumers or merchants.

Tourbillon Balancing Privacy, Security, and Scalability Challenges

In addition to privacy, CBDCs must meet security and scalability requirements, forming the "iron triangle" of payments that is crucial and requires a delicate balance. Achieving this goal demands precise calibration and accuracy, much like the internal workings of a tourbillon.

Note: The Tourbillon, invented by the renowned Swiss watchmaker Abraham-Louis Breguet in 1795, is a device in mechanical watch movements. Tourbillon watches are known for their extreme precision and were the epitome of timekeeping before the advent of quartz and electronic watches.

• Privacy - By enabling payer anonymity
• Security - Through implementing quantum-safe cryptography
• Scalability - By testing prototypes for the ability to handle increasing transaction volumes

Further Research Needed on Quantum-Safe Cryptography

Considering the potential threat of quantum computers being able to break widely used encryption schemes, jeopardizing the security of financial transactions and data, Project Tourbillon studied the feasibility of quantum-safe blind signatures to prevent attacks on transactions.

While the project demonstrated the feasibility of quantum-safe blind signatures, it also found challenges in implementation. Compared to existing cryptography, quantum-safe payments take five times longer, with a 200-fold decrease in transactions per second. This discovery indicates the need for further research by the BIS on quantum-safe cryptography.