While a lot of Central banks are trying to get in terms with cryptocurrencies, the World Economic Forum which houses itself in Davos, Switzerland has released a white paper discussing how Central Banks across the globe are exploring blockchain and distributed ledger technologies.
Central Banks experimenting with ten possible use cases for blockchain
Since the launch of Stablecoins, there has been a lot of discussion happening around cryptocurrencies and central banks. A lot of experts believe sooner or later central banks would launch their own stablecoins and cryptocurrencies would become mainstream. But according to the recent report by World Economic Forums, Central banks are
“researching and experimenting with at least 10 specific use cases for blockchain and DLT, exploring where they can potentially unlock new possibilities and improve inefficient processes”
The report begins by referring to a January 2019 report which was by the Bank for International Settlements (BIS) in Basel, Switzerland, which stated that least 40 central banks around the world are currently, or soon will be, researching and experimenting with central bank digital currency (CBDC).
While stablecoins or CBDC happens to be the most common use case in experimental phase, this world economic forum report looks beyond this and identifies other 9 key areas and use cases where banks are bringing in the distributed ledger technology. These include
- Retail central bank digital currency (CBDC)
- Wholesale central bank digital currency (CBDC)
- Interbank securities settlement
- Payment system resiliency and contingency
- Bond issuance and lifecycle management
- Know-your-customer and anti-money-laundering
- Information exchange and data sharing
- Trade finance
- Cash money supply chain
- Customer SEPA(single euro payments area) Creditor Identifier (SCI) provisioning
While the report explains these use cases in a bit detail, it recognizes the efforts put forward by some central banks. These are
- Bank of Lithuania plans to issue “Digital Collector Coin”
- Bank of Thailand experiments with CBDC for interbank payments and liquidity management efficiency
- The Central Bank of Brazil implementation of DLT for an interbank payments contingency and resiliency system
- The Hong Kong Monetary Authority research and experiments on multiple use cases including trade finance, digital identity management, and KYC/AML processes
- The Swedish central bank (Sveriges Riksbank) investigations in a blockchain-based “e-krona” to serve as an alternative form of central bank-issued money
While the report mentions other several efforts that central banks are putting to implement blockchain, the author believes over the next four years, there would be many central banks deciding whether they will use blockchain and distributed ledger technologies to improve their processes and economic welfare
Will DLT, Blockchain, and Cryptocurrencies change the way Central Banks work today? Do let us know your views on the same.