fiscal 2018 annual report, https : / / s22. q4cdn. com / 869488222 / files / doc _ financials / annual / 2018 / 2018 - annual - report. pdf. attributes more similar to securities. cryptocurrencies vary across multiple attributes, including whether the arrangement is open to everyone or only approved entities and whether they are intended for general - purpose use or for wholesale use. one important design choice is whether a digital currency is account - based or tokenbased. from an accounting perspective, there is an account structure for the asset owner and for the asset itself. individual accounts could take the form of traditional account structures of commercial banks or be pseudo - anonymous. the accounting of the asset itself could take the form of debiting and crediting account balances or tracking of specific “ tokens. ” another key design consideration is the method for authenticating the asset owner — to open an account and to make transactions. traditionally, identity authentication is done by the account provider, but new tools, such as biometrics, may be required for decentralized systems. a third important design variant is convertibility. private - sector digital currencies vary in important ways with regard to whether they are linked in a legally binding way to a sovereign currency. a decade ago, bitcoin was heralded as a new kind of digital money that would serve as a store of value, means of exchange, and unit of account delinked from any sovereign currencies without the need for centralized governance. bitcoin has not achieved widespread acceptance as a means of payment or unit of account because of its extreme volatility, as well as limited throughput capacity, unpredictable transaction costs, limited or no governance, and limited transparency. stablecoins were designed specifically to overcome the volatility of first - generation cryptocurrencies by tying the digital currency to an asset or basket of assets, such as commercial bank deposits or government - issued bonds. unlike first - generation cryptocurrencies, they may be issued by a central entity and rely on third - party institutions for some aspects. but even - 10 - within this broad class of digital currencies, stablecoins vary widely in their underlying reference assets and the associated “ exchange rate, ” the ability to redeem the stablecoin claims for the underlying assets, and the extent to which a central issuer is liable for making good on redemption rights.

essential that we remain on the frontier of research and policy development regarding cbdc. like other central banks, we are conducting research and experimentation related to distributed ledger technologies and their potential use case for digital currencies, including the potential for a cbdc. we are collaborating with other central banks as we advance our understanding of central bank digital currencies. in assessing cbdc in the u. s. context, there are policy and design issues to explore, as well as legal considerations. it is important to consider whether a new form of digital central bank liability might improve the payment system, taking into account the innovations offered by cordruta boar, henry holden, and amber wadsworth, impending arrival — a sequel to the survey on central bank digital currency ( basel : bank for international settlements, january 2020 ), https : / / www. bis. org / publ / bppdf / bispap107. htm. see yuan yang and hudson lockett, “ what is china ’ s digital currency plan? ” financial times, november 25, 2019, https : / / www. ft. com / content / e3f9c3c2 - 0aaf - 11ea - bb52 - 34c8d9dc6d84 ; and scott horsley, “ china to test digital currency. could it end up challenging the dollar globally? ” national public radio, january 13, 2020, https : / / www. npr. org / 2020 / 01 / 13 / 795988512 / china - to - test - digital - currency - could - it - end - up - challenging - the - dollarglobally. - 12 - the private sector. we would need to consider whether adding a new form of central bank liability would reduce operational vulnerabilities from a safety and resilience perspective. another consideration is whether a cbdc would reduce complexity in payments, improve endto - end processing, or simplify recordkeeping. with regard to cross - border payments, it is important to consider what would be required in terms of cross - border cooperation for cbdcs to address current frictions and reduce costs. it is also vital to consider the implications for the broader financial system of the issuance of a cbdc. in light of considerations of privacy and guarding against illicit activity, issuance of a digital currency would raise important questions about what kinds of intermediaries might provide cbdc transaction accounts for consumers.