sync TeX edition

1 files changed, 64 insertions, 37 deletions

diff --git a/sa/sa.tex b/sa/sa.tex
index c014900..307d2eb 100644
--- a/sa/sa.tex
+++ b/sa/sa.tex
@@ -43,7 +43,8 @@
 \section{Introduction}
 
 Taler Systems SA is developing an online payment system called Taler, that
-broadly fits the requirements of SARB's CBDC project.  Taler's unique focus is
+broadly fits the requirements of SARB's CBDC project.  The major parts
+of the system have already been built.  Taler's unique focus is
 on regulatory compliance, efficiency and data minimization.  Cryptography is
 employed for security.  While Taler includes privacy features, it can still
 guarantee that cash flows to merchants/retailers are transparent for anti-%
@@ -69,6 +70,7 @@ The USPs of Taler are:
 \item Ease of use (one-click, instant, no authentication during payment, again like cash)
 \item The patent-free, open standard protocol and the free reference implementation provide
   long-term sustainability and technological independence from foreign providers
+\item Can be used for smart contracts
 \end{itemize}
 
 The Taler architecture includes a register-based system of bank accounts
@@ -94,7 +96,9 @@ Thus, the following components form the core of the system:
     recovery.
 
   \item The \emph{Exchange} issues digital coins to wallets, after
-    receiving money in a escrow account. The authorized electronic
+    receiving fiat money in an escrow account, or based on a
+    central bank creating the digital coins as a central bank liability.
+    The authorized electronic
     wallet is identified using an ephemeral \emph{reserve public key}
     encoded in the wire payment instructions.  As blind signatures are
     used, the exchange knows that it issued coins of a certain
@@ -158,7 +162,8 @@ forth in the SARB tender in Section~3.
   denomination.  Usually the auditor would be tied to the
   regulation of the respective central bank.  Thus, if SARB
   only qualifies itself to issue CBDC for rand, then only SARB
-  can issue Taler CBDC for rand.
+  can issue Taler CBDC for rand. The digital coins issued by
+  SARB would constitute themselves a fiat currency, i.e. rand.
 \item
 {\bf A possible alternative scenario is for the SARB to back the CBDC and to set
 regulatory standards and interoperability requirements, but with commercial banks
@@ -170,8 +175,10 @@ acting as issuing authorities under the regulatory oversight of the SARB.}
 {\bf The supply of CBDC must be limited as determined by applicable monetary policy.}
   CBDC is either supplied by a central bank creating them, or by commercial
   banks moving existing funds into an escrow account when creating electronic
-  coins.  Thus, the introduction of Taler does not impact monetary policy,
-  except that it might be easier for foreigners to obtain and hold electronic
+  coins.  In the first case SARB fully controls the issuance of CBDC which will
+  increase M0/M1 unless offset by reducing cash.  In the latter case, the
+  introduction of Taler does not impact monetary policy,
+  except that it is probably easier for foreigners to obtain and hold electronic
   coins (compared to obtaining cash or rand-denominated bank accounts).
 \item
 {\bf It must be possible to issue and distribute CBDC to commercial banks only, or to
@@ -198,7 +205,7 @@ cash to some extent over time.}
   Taler coins in circulation would thus be backed by an
   escrow account at a commercial bank, or when created by the SARB
   be booked as a liability on the SARB balance sheet in anticipation
-  of future deposits of the electronic coins.
+  of future deposits of the electronic coins --- in the same way as cash.
 \item
 {\bf CBDC must be issued at one-to-one parity with the rand.}
   Taler is designed to map 1:1 to any existing fiat currency.
@@ -217,7 +224,8 @@ cash to some extent over time.}
 {\bf CBDC must offer value or an incentive to promote its use, including a lower cost to
   the industry compared with the cost of cash.}
   As stated earlier, Taler comes with a range of USPs, including lower costs,
-  improved security, sustainability, convenience, competition, and privacy.
+  improved security, sustainability, convenience, competition, privacy and
+  it can be used for smart contracts.
 \item
 {\bf CBDC must be ubiquitous and accepted as a means of payment by all sizes of
 business and by the government.}
@@ -237,11 +245,16 @@ of commercial banks to provide credit.}
   provide competition for profitable payment services offered by commercial banks,
   possibly reducing the risk spread in the business activities of commercial banks.
   Taler CBDC would be created as part of M1 by the SARB, thus it does not
-  impact SARB's ability to make policy decisions with regard to supply. 
+  impact SARB's ability to make policy decisions with regard to supply.
 \item
 {\bf CBDC must provide the opportunity for stakeholders to innovate in terms of payment
-products, but must not be seen to disintermediate commercial banks.
-CBDC must be usable alongside the rand in the member states of the Common
+  products, but must not be seen to disintermediate commercial banks.}
+  The Taler system is open to handle this in different ways. The CBDC could be
+  issued directly by SARB or via the commercial banks. The greater the role of
+  the commercial banks the higher the costs they charge for their services (see
+  requirement viii).
+\item
+{\bf CBDC must be usable alongside the rand in the member states of the Common
 Monetary Area (CMA).}
   Taler comes with a Free and Open Source reference implementation and is not
   encumbered by patents.  Taler's openness should thus enable new services
@@ -249,6 +262,10 @@ Monetary Area (CMA).}
   By design, Taler does not disintermediate as every Taler payment must go
   into a (commercial) bank account.  In other words, Taler coins can only
   be spent once, the system does not allow for transitivity.
+
+  In the case of a central bank operating the system, the involvement of a
+  commercial bank can be avoided in cases where wallet-holders have undergone
+  KYC checks outside of the scope of creating a traditional bank account.
 \item
 {\bf Consumers must be able to own and transact in CBDC without the need for a bank
   account.}
@@ -310,16 +327,15 @@ policy positions in future.}
 \item
 {\bf It must enable immediate person-to-person transfer of value without clearing and
   settlement in today’s terms.}
-  Taler enables offline person-to-person transfers without the involvement of third parties
-  only by sharing access to a selected amount of funds among with the receiver(s).
-  The participants in such an offline person-to-person transfer must trust each other to
-  behave honestly. Basically, such transfers are not transactions in that the sender
-  can spend the money elsewhere at any time.
-
-  Online person-to-person transfers are possible, but involve at least the exchange
-  as a service provider to protect against double spending.  In this case, the receiver
-  also must have an account that satisfies KYC requirements at the exchange to prevent
-  money laundering.
+  Online person-to-person transfers are possible, but involve at least the
+  exchange as a service provider to protect against double spending. In this
+  case, the receiver also must have an account that satisfies KYC requirements
+  at the exchange to prevent money laundering. Taler enables also offline
+  person-to-person transfers without the involvement of third parties only by
+  sharing access to a selected amount of funds among with the receiver(s). The
+  participants in such an offline person-to-person transfer must trust each
+  other to behave honestly. Basically, such transfers are not transactions in
+  that the sender can spend the money elsewhere at any time.
 \item
 {\bf It must be possible to set limits for CBDC transaction values and to implement
   graduated regulation depending on transaction value.}
@@ -370,7 +386,7 @@ data once online.}
 {\bf Interoperability principles must enable CBDC to be used at all levels throughout the
 payment system.}
   With proper system integration, wire transfers, debit and credit cards or even
-  NFC-enabled ATMs could all be used to fund the CBDC wallet.  Our specifications
+  NFC-enabled ATMs and e-mails could all be used to fund the CBDC wallet.  Our specifications
   are public, thus broad integration is a question of regulation and/or
   incentives.
 \item
@@ -468,7 +484,8 @@ to be built.
 blockchain or an existing ‘traditional’ technology. It is envisaged that a solution could
 be based on any one or a combination of technologies.}
 Taler is not based on DLT or a blockchain.  Instead, blind signature
-technology is used.
+technology is used.  The ledger could be implemented in a blockchain,
+if required.
 \item
 {\bf CBDC must be simple and user friendly.}
 The Taler wallet enables one-click payments.  We have successfully
@@ -478,7 +495,8 @@ tested the system with children below the age of 10.
 Taler requires only a few signature operations and only a few kilobytes
 of data transfer per transaction.  The Taler wallet pre-computes signatures
 while waiting for the user to confirm the transaction. As a result, actual
-transactions are usually confirmed in one network round-trip time.
+transactions are usually confirmed in one network round-trip time (generally
+in milliseconds) and with minimal energy consumption.
 \item
 {\bf Consumers must be able to transact in CBDC using smart phones and unstructured
   supplementary service data.}
@@ -507,6 +525,7 @@ holdings, without requiring input from the consumer.
 %emphasis on sustainability and the ability to undertake the
 %feasibility project
 
+Taler Systems SA was established in 2016.
 Taler Systems SA is headquartered in Luxembourg, but also has developers in
 Germany and Switzerland. Taler Systems SA was founded as a startup by with
 support from INRIA, the French national institute for research in computer
@@ -528,6 +547,7 @@ secrets to protect, as all of our code and documentation is freely available.
 Thus, we can easily find and train local partners in our technology and focus
 on providing second-level support.
 
+Taler Systems has a large network of industry experts and specialists.
 Our experts are in principle all available to work on the SARB project, as
 we are currently investigating options for a first deployment of the Taler
 product.
@@ -624,7 +644,7 @@ SARB to consider adding privacy considerations to their requirements.
 Similarly, we hope that SARB understands the value of a Free Software solution
 in that it preserves SA's independence from particular vendors.  Furthermore,
 open standards and public source code enhance public verifiability and thus
-the public's trust in the solution.  We believe that only a Free Software
+the public's trust and acceptance in the solution.  We believe that only a Free Software
 solution can be in the best long-term interest of South Africa as it ensures
 technological independence and sustainability, as was recently demonstrated
 by the US government forcing Google to terminate all licenses to Huawei
@@ -641,9 +661,9 @@ A realistic CBDC solution based on the Taler system requires integration with
 an existing register-based banking system.  Here, the Taler architecture calls
 for the implementation of a simple adapter that needs to be able to query the
 banking system for wire transfers into the escrow account and needs to be able
-to trigger wire transfers from the escrow account into merchant accounts.
-Once these two simple operations are implemented, Taler can in principle
-transact in the respective currency.
+to trigger wire transfers from the escrow account/central bank liability into
+merchant accounts.  Once these two simple operations are implemented, Taler
+can in principle transact in the respective currency.
 
 We would typically expect this integration with the existing SA banking system
 to be the first step.  In parallel, the specific regulatory requirements on
@@ -757,9 +777,12 @@ CBDC is a natural progression from cash.  Compared to cash, Taler offers
 superior protections against counterfeit, usability for online transactions,
 lower cost, and income transparency / tracability.
 
-Furthermore, SARB would be truly in sovereign control of the national money
-supply (at least as far as the CBDC is concerned) and not depend on foreign
-entities providing secure printing services.
+Furthermore, SARB would be the first central bank offering solutions for smart
+contracts and has a clear response with respect to the issues caused by
+speculative crypto currencies. In addition, with Taler SARB has a payment
+system that is largely independent from the existing payment infrastructure
+like cash.
+
 
 \paragraph{How could the respective design options impact monetary policy, financial
 stability, fiscal policy, financial market structures and any other policy objectives
@@ -823,10 +846,11 @@ further minimize the potential damage.
 \paragraph{What are the lessons learned from practically issuing a CBDC in a test
  environment?}
 
-We expect to learn about the complexity of integrating Taler with
-the wire transfer system of SA, and SARB to learn how easy (or
-difficult) it is to migrate existing services to support the Taler
-protocol.
+The tests of the Taler system have demonstrated that the system is very
+stable, fast and can handle large transactions.  We expect to learn about the
+complexity of integrating Taler with the wire transfer system of SA, and SARB
+to learn how easy (or difficult) it is to migrate existing services to support
+the Taler protocol.
 
 SARB will also learn details about the regulatory capabilities Taler offers,
 and where the limitations on regulation are.
@@ -842,8 +866,11 @@ comment on this question.
 scheme be structured and who would determine the scheme ‘rulebooks’)?}
 
 We can see two possible regulatory regimes, with either the SARB being
-soly responsible for the issuance of Taler coins denominated in rand, or
-with commercial banks issuing electronic rand.  In the latter case, the
+solely responsible for the issuance of Taler coins denominated in rand, or
+with commercial banks issuing electronic rand.
+In the first case, the Taler coins, i.e. electronic rand coins must
+be recognized as legal tender like cash.
+In the latter case, the
 commercial banks would be subjected to permanent security audits to
 verify that their escrow balance matches the amount of issued electronic
 coins.  Commercial banks may also have to take out insurance to cover
@@ -1006,7 +1033,7 @@ a government monopoly equivalent to a government mint for coins.
 
 
 
-\section{Addressing CBDC Requirements} 
+\section{Addressing CBDC Requirements}
 
 We now sketch how the Taler components map to a Centrally Banked Digital
 Currency system run by the ECB or national central banks (NCBs), according to