Core Focus: The three main operational architectures for CBDC issuance and distribution, the rationale for the two-tier model, and the trade-offs between centralisation and private sector involvement.

In-Depth Notes:
The operational architecture of a CBDC determines who issues the digital currency, who manages the customer-facing infrastructure, and how the central bank interacts with end-users. This is one of the most consequential design decisions, as it fundamentally shapes the relationship between the central bank, commercial banks, and the public . The three primary architectures are the one-tier (direct) model, the two-tier (indirect) model, and hybrid models that blend elements of both .

The One-Tier (Direct) Model:
In a one-tier or direct model, the central bank issues CBDC directly to the public and manages all customer-facing functions, including onboarding, wallets, transaction processing, and customer service. This model gives the central bank complete control over the CBDC ecosystem but requires the central bank to take on operational responsibilities for which it may not be equipped, including managing retail customer accounts, handling disputes, and ensuring 24/7 technical support. As one analysis notes, a direct CBDC model where the central bank directly settles payment transactions could substantially impact financial systems, causing major disintermediation and potentially a reduction in the availability of credit .

The Two-Tier (Indirect) Model:
In a two-tier model, the central bank issues CBDC to authorised intermediaries (commercial banks, payment service providers), which then distribute it to end-users and manage customer-facing functions. This is the dominant model globally, adopted by most major CBDC projects including China’s e-CNY, the ECB’s digital euro, and Nigeria’s eNaira . The two-tier model preserves the existing relationship between banks and their customers, leverages existing infrastructure, and reduces the risk of bank disintermediation by keeping commercial banks central to the payment system . In this model, the central bank retains ultimate control over the CBDC issuance and monetary policy, while the private sector provides innovation and customer service.

Hybrid Models:
Some jurisdictions have adopted hybrid models that blend elements of both approaches. For example, a hybrid CBDC model introduces an intermediary layer of financial institutions to distribute CBDCs while a direct claim on the central bank is established, allowing greater portability for both consumers and financial institutions . In this model, financial institutions would perform customer due diligence and AML/CFT duties such as recording and reporting suspicious transactions, while the central bank is responsible for conducting AML regulations and supervising fulfilment . The Singapore StraitsX hybrid solution proposes that financial institutions should also be responsible for transaction monitoring and fraud detection efforts . China’s e-CNY project has adopted a hybrid architecture combining value-based, quasi-account-based, and account-based access mechanisms .

The Dominance of the Two-Tier Model:
The literature review indicates that the hybrid/intermediated CBDC is the preferred option in all 10 jurisdictions that have launched a CBDC and 8 of 15 in the pilot stage . This preference reflects the consensus that preserving the role of commercial banks is essential for financial stability, and that central banks should not compete directly with the private sector. The two-tier model also reduces the cost of building additional infrastructure and systems by leveraging existing financial institutions’ technology and innovation capabilities .