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WHY THIS MATTERS IN BRIEF

While blockchain is the technology of the decade, alongside a few others, central banks don’t appear to be fans of it.

 

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As China starts rolling out the world’s first digital central bank currency, the digital Yuan or e-CNY, central banks in 46 countries are considering joining them and testing their own so called Central Bank Digital Currency (CBDC) using a form of Distributed Ledger Technology (DLT), according to a new survey. But what many people might find strange in today’s world of blockchain hype is that almost all of them want to avoid using blockchain.

 

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In their survey London based journal Central Banking, a specialized publication supported, among others, by the Bank of International Settlements (BIS) and the European Central Bank (ECB) – who’s planning on creating a digital Euro – found that 65% of respondents had actively researched digital currencies.

But the survey, conducted in February, found only one central bank said that they would use blockchain as the basis for a CBDC. Described as a “small African central bank,” the survey noted that bank said it would only consider using blockchain “if found to be the best available platform.” That and the other 45 banks were not identified.

Central Banking’s survey doesn’t delve much further into why central banks don’t want to use blockchain. One North African central bank said it had concerns about blockchain’s security and scalability issues. Whether this was an attitude held by other survey respondents isn’t clear.

 

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While most central banks dismissed blockchain, 71% of respondents said they would consider building a CBDC on DLT – a broader category of network architectures, blockchain being one of them – if they reached the issuance stage.

The survey added the caveat that the majority of central banks researching CBDCs had no plans to actually move forward with issuing one.

DLT includes private and permissioned networks, shared with a handful of known and trusted nodes. In the survey, banks indicated there was a trade-off with decentralization: distributed frameworks created operational resilience against a single point of failure; but there were also privacy issues, with more parties likely having ready access to confidential transaction data.

The survey also cites the Bank of England’s CBDC discussion paper from last March, which shows that while there are clear benefits to using distributed networks, they also represent a major shakeup of the existing monetary system, for which some financial institutions may be ill-prepared.

 

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This report doesn’t offer many surprises about central bank intentions for CBDCs, but it indicates change may be afoot. Decentralization used to be considered a binary concept: It either was or it wasn’t. But that’s not a choice many new entities entering the space want to face so for them it’s all about finding the right balance – the happy medium – between a decentralized and more resilient operating system, while at the same time maintaining user privacy. And increasingly that doesn’t look like it’s blockchain.

About author

Matthew Griffin

Matthew Griffin, described as “The Adviser behind the Advisers” and a “Young Kurzweil,” is the founder and CEO of the World Futures Forum and the 311 Institute, a global Futures and Deep Futures consultancy working between the dates of 2020 to 2070, and is an award winning futurist, and author of “Codex of the Future” series. Regularly featured in the global media, including AP, BBC, Bloomberg, CNBC, Discovery, RT, Viacom, and WIRED, Matthew’s ability to identify, track, and explain the impacts of hundreds of revolutionary emerging technologies on global culture, industry and society, is unparalleled. Recognised for the past six years as one of the world’s foremost futurists, innovation and strategy experts Matthew is an international speaker who helps governments, investors, multi-nationals and regulators around the world envision, build and lead an inclusive, sustainable future. A rare talent Matthew’s recent work includes mentoring Lunar XPrize teams, re-envisioning global education and training with the G20, and helping the world’s largest organisations envision and ideate the future of their products and services, industries, and countries. Matthew's clients include three Prime Ministers and several governments, including the G7, Accenture, Aon, Bain & Co, BCG, Credit Suisse, Dell EMC, Dentons, Deloitte, E&Y, GEMS, Huawei, JPMorgan Chase, KPMG, Lego, McKinsey, PWC, Qualcomm, SAP, Samsung, Sopra Steria, T-Mobile, and many more.

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