Still have questions?
Contact Us
New York (US)
590 Madison Avenue, 21st Floor,
New York, NY 10022
London (UK)
71-75 Shelton Street, London,
Dublin (EU)
6th Floor,
2 Grand Canal Square, Dublin 2
Copyright © 2022 Fluency Group Ltd. All Rights Reserved.
Back to blog
Industry Insights
Press Release
April 27, 2023

LEDGER INSIGHTS: Fluency’s CBDC solution could bridge account and token-based schemes

As central bank digital currency (CBDC) projects progress worldwide, patterns have started to emerge. One is the tendency for wholesale CBDCs to be token based, whereas the foundational layer of retail CBDCs is often account based. There’s a need for a bridge between the two to avoid operating two entirely separate CBDC systems. CBDC startup Fluency has developed a bridge solution that starts with an account-based system, provides interoperability with token-based and conventional payment systems, and supports offline CBDC payments.

Account versus token-based CBDCs

Average users do not care about differentiating between an account or token-based CBDCs, as they focus on the CBDC’s utility rather than the backend.

However, two features related to token-based platforms make them undesirable for retail CBDCs. The first limitation is associated with offline functionalities. If a token-based CBDC uses a distributed ledger to prevent double spending, offline functionality is a significant challenge. However, token-based CBDCs don’t have to use DLT. Many jurisdictions, including the EU require offline functionality, which tilts the scales towards an account-based retail CBDC offering.

The second barrier concerns scalability, as any DLT would need to be highly scalable to log every single retail CBDC transaciton. This is currently not the case, so an account-based CBDC is preferable for the retail option (at least at the base level).

Conversely, the approach for a wholesale CBDC is different because most banks already have accounts at the central bank. Instead, wholesale CBDCs will likely involve blockchains  and tokens to allow for the adoption of distributed ledger technologies (DLTs) in financial market infrastructures. This would enable more manageable on-chain payments to power things such as tokenized securities settlements, which is what countries like France and Switzerland have been testing, and the ECB is about to unveil a formal pilot.

But central banks don’t have to provide a wholesale CBDC for DLT securities settlement. Onchain settlement could be done using tokenized commercial bank money, privately issued synthetic CBDCs (such as Fnality) or trigger payments from real-time gross settlement systems (RTGS).

Fluency’s CBDC solution

Circling back to the challenge, if a central bank chooses to provide both a wholesale and a retail CBDC, they want to avoid creating a parallel system where the various types of money could be difficult to reconcile.

In response, Fluency has developed a solution that offers central bankers “a straightforward means of connecting their internal networks with all other payment systems across the globe via a single issuance layer,” said the company in an announcement.

According to CEO Inga Mullins, this account-based CBDC will offer “a seamless CBDC transaction flow between wholesale and retail on a highly scalable model” that will allow central banks to bridge the two options and solve the account versus token-based debate.

We asked Fluency for more details about the solution but didn’t receive a response in time for publication.

Original Content: Ledger Insight

Share it in your social media


Industry InsightsPress Release March 02, 2023 Industry InsightsPress Release March 02, 2023 UK Innovate Finance: CEO, Inga Mullins, recognised in Women in FinTech Powerlist 2022, Senior Leaders UK Innovate Finance: CEO, Inga Mullins, recognised in Innovate Finance Women in FinTech Powerlist 2022, Senior Leaders Category, London, March 2023 Industry Insights May 23, 2022 Industry Insights May 23, 2022 Lagarde says crypto is ‘worth nothing’ and should be regulated BLOOMBERG: Lagarde says crypto is ‘worth nothing’ and should be regulated. Lagarde said she’s skeptical of crypto’s value, contrasting it with the ECB’s digital euro—a project that may come to fruition in the next four years. Industry Insights March 09, 2022 Industry Insights March 09, 2022 THE WHITE HOUSE: President’s Executive Order on Ensuring Responsible Development of Digital Assets THE WHITE HOUSE, March 9, 2022, US-President's Executive Order on Ensuring Responsible Development of Digital Assets. Within 120 days of the date of this order, the Secretary of the Treasury, in consultation with the Secretary of State, the Secretary of Commerce, shall establish a framework for interagency international engagement with foreign counterparts and in international fora to, as appropriate, adapt, update, and enhance adoption of global principles and standards for how digital assets are used and transacted, and to promote development of digital asset and CBDC technologies consistent with our values and legal requirements. 

Start planning now

Start by understanding how things will change and what can be improved across your business. Regardless of your role and how entrenched you are in the existing system, CBDC will hit with game-changing impact—get started today!
Get in touch