A white paper from the World Economic Forum (WEM) has analysed the key issues and areas of research, experimentation and implementation for central banks with respect to distributed ledger technology (DLT).
According to a January 2019 report by the Bank for International Settlements (BIS) in Basel, Switzerland, at least 40 central banks around the world are currently researching and experimenting with central bank digital currency (CBDC).
According to Ashley Lannquis, Project Lead, Blockchain and Distributed Ledger Technology at WEM and the author of the report, research and innovation with blockchain technology has been under way for the past several years, but few organizations have actually deployed the technology.
“Although central banks are among the most cautious and prudent institutions in the world, they are, perhaps surprisingly, among the first to implement blockchain,” she said.
The report lists potential downsides of CBDCs, saying that banks should consider the challenges of blockchain technology. But central banks around the world, from South Africa to Singapore, are actively investigating whether blockchain can help solve long-standing issues in banking, such as payment-system efficiency, payment security and resilience, as well as financial inclusion.
Bitcoin Cynic Says CBDCs Will Not Be Based On Blockchain
Infamous cryptocurrency muckraker, Nouriel Roubini has said that if and when CBDCs are adopted, they won’t be based on blockchain. His latest combativeness came during a panel discussion with Ethereum co-founder, Vitalik Buterin at the Deconomy conference in Seoul, South Korea. The debate was billed: Fundamental Value of Cryptocurrency and its Sustainability.
The debate centred around Roubini’s statement that privacy and anti-censorship in crypto is a “joke” because governments have the authority to overrule cryptocurrency-related systems.
“Governments will not allow crypto to become Swiss bank accounts, and that know your customer, transaction monitoring, and tax audits will be carried out just as they are in legacy system,” he said.
“As soon as there is news about [CBDC issuance] the people in crypto get excited and say, see it’s becoming mainstream,” he added, “but if you look carefully about what they want to do, if and when they’re going to do it, it’s not going to be blockchain, it’s not going to be crypto, it’s going to be on a single ledger, secured”.
This is not far from what he said last year, when he claimed that CBDCs would crowd out “worthless cryptocurrencies” and should be welcomed. Writing in The Guardian, he said that if a CBDC were to be issued, it would “immediately displace cryptocurrencies, which are not scalable, cheap, secure or actually decentralized”.
He wrote that the main problem with CBDCs is that they would disrupt the fractional reserve system, saying if all private bank deposits were to be moved into CBDCs, then “traditional banks would need to become loanable funds intermediaries, borrowing long-term funds to finance long-term loans such as mortgages”.
Despite his high credentials, it appears he still doesn’t seem to grasp the appeal of cryptocurrencies, particularly Bitcoin, and the allure of a decentralized blockchain. Central banks will run on controlled permissioned networks, in other words, a centralized database. This is not a decentralized blockchain and will in no way displace cryptocurrencies.
As the price of Bitcoin surged, he tweeted on April 3 “Bitcoin Is Surging Again. Just Ignore It”. For a man with a twitter following of 459,000, the tweet received a mere 354 likes. Perhaps, as an “expert” he should take his own advice?