Central Banks Looking To Replace Cash with Cryptocurrency

By Kapil Gauhar

CBDC (Central Bank Digital Currency) would see central banks distribute cryptocurrency that could be redeemed for their respective domestic fiat currencies.

In the case of an American CBDC, it would be the USD, or in Russia, it would be a “Cryptoruble.”

These cryptocurrencies would be maintained on blockchain networks of any number and propose a fistful of different advantages.

In order to get a better idea of the current state of research in this particular field, the WEF (World Economic Forum) prepared a March 2019 report asking, how are central banks exploring blockchain today?

Singapore, England, Canada and France are Leaders

In spite of the central banks historically being risk-averse, so many different countries too have contributed various reports, white papers and investigations into how blockchain technology would improve their operations.

In a cursory report from the BIS (Bank of International Settlements), researchers – Christian Barontini and Henry Holden – wrote that,

“A survey of central banks shows that the majority is collaboratively looking at the implications of a central bank digital currency.”

For example, the Bank of England has been developing research since 2014 starting with two seminal papers.

In their work, a group of British researchers concluded –

“The incentive models at that time were the greatest impediment to widespread adoption. In a companion piece, the Bank of England described the ways in which digital currencies differ from traditional monetary schemes and wrote broadly about the technology’s advantages. Both documents indicate an early and unwavering interest in the possibilities behind cryptocurrencies and distributed ledger technology.”

In November last year, the central banks from Canada, England and Singapore teamed up for writing one of the first large scale reports on how digital currencies could improve cross-border interbank payments and settlements.

They determined that,

“Cross-border payments and settlements have not kept pace with advances in domestic payments and continue to be based on the correspondent banking model, which has not evolved materially over the decades.”

With such little change in the finance sector, different CBDC pilots have emerged which discover the above-mentioned subject among others. Generally, these pilots have been launched on Hyperledger Fabric of Linux Foundation, Corda of R3, Quorum of J.P. Morgan, or a novel iteration of the Ethereum network.