# A Digital Currency Architecture for Privacy and Owner-Custodianship

**Authors:** Geoffrey Goodell, Hazem Danny Al-Nakib, Paolo Tasca  
**arXiv:** [2101.05259](https://arxiv.org/abs/2101.05259)  
**Date:** 2021-01-13  
**Summary page:** https://www.summarizepaper.com/en/paper/2101.05259v6/

## Key points

- The rise of electronic retail payment mechanisms has led to a decline in the use of cash in many developed countries
- Societies are losing a critical public retail payment option while retail consumers are losing important rights associated with using cash
- Geoffrey Goodell, Hazem Danny Al-Nakib and Paolo Tasca propose an approach to digital currency that would allow people without banking relationships to transact electronically and privately
- Their proposal introduces a government-backed, privately-operated digital currency infrastructure that ensures every transaction is registered by a bank or money services business
- It relies on non-custodial wallets backed by privacy-enhancing technology such as blind signatures or zero-knowledge proofs to ensure transaction counterparties are not revealed
- The authors argue that their system can restore and preserve the salient features of cash including privacy, owner-custodianship, fungibility and accessibility while preserving fractional reserve banking and the existing two-tiered banking system
- Their approach can facilitate more efficient and transparent clearing, settlement and management of systemic risk
- The proposed system also enables regulation of digital currency transactions involving non-custodial wallets that unconditionally protect the privacy of end users.
- People without access to traditional banking systems can transact electronically while maintaining their privacy rights with this architecture for digital currency in place.

## Summary

The rise of electronic retail payment mechanisms, such as e-commerce and card payments at the point of sale, has led to a decline in the use of cash in many developed countries. This shift has resulted in societies losing a critical public retail payment option while retail consumers are losing important rights associated with using cash. To address this concern, Geoffrey Goodell, Hazem Danny Al-Nakib and Paolo Tasca propose an approach to digital currency that would allow people without banking relationships to transact electronically and privately. Their proposal introduces a government-backed, privately-operated digital currency infrastructure that ensures every transaction is registered by a bank or money services business. It relies on non-custodial wallets backed by privacy-enhancing technology such as blind signatures or zero-knowledge proofs to ensure transaction counterparties are not revealed. The authors argue that their system can restore and preserve the salient features of cash including privacy, owner-custodianship, fungibility and accessibility while preserving fractional reserve banking and the existing two-tiered banking system. Moreover, their approach can facilitate more efficient and transparent clearing, settlement and management of systemic risk. The proposed system also enables regulation of digital currency transactions involving non-custodial wallets that unconditionally protect the privacy of end users. With this architecture for digital currency in place, people without access to traditional banking systems can transact electronically while maintaining their privacy rights.