International Association
for Cryptologic Research

What would it take to operationalize UTXO-based settlement for central bank digital currency?I explore the advantages, trade-offs and challenges of a hypothetical adoption of the UTXO data model for representing currency values in a token-based central bank digital currency. The UTXO model potentially offers greater scalability, privacy, security and interoperability for CBDC than the traditional account model. However, some aspects, in particular with respect to liquidity and denomination management, would require careful design as to fit the prevailing regulatory and institutional requirements. I present possible solutions and conclude that there are no in-principle impediments to the adoption of UTXO-based tokens in a central bank digital currency context.