Cryptocurrency for Central Banks Coming This Year
April 12, 2018
R3 research division head Antony Lewis during his speech at the Deconomy conference in South Korea told cryptocurrency for Central Banks, CBDC (Central Bank Digital Currency), will come soon.
Note that the CBDC project came into public notice in July last year. At that time the coin was said to become a new remittance means between institutions and customers.
It is still unknown how CBDC will be used or what types of deals it will be applied to: wholesale or retail ones.
Lewis told why central banks representatives find the idea quite challenging:
“We have had conversations with central banks who have mandates to fix certain payment problems, and one solution they look to is a blockchain type of platform”.
Most of the commission’s experts also tend to opt for this variant saying that retail CNDC may aggravate financial status of the customers.
“If it issues cryptocurrency to millions and billions of citizens, it will have to hold all these individual accounts, which inherently increases the market and credit risks,” said Stanley Yong, CBDC director at IBM.
Lewis explained that the CB’s digital currency will stand out against Bitcoin or Ethereum so at first only specific financial institutions will be using these coins. He also marked some advantages the DLT technology brings about necessary for the currency security.
“Don’t make your secondary (decentralized) system look like your primary (centralized) system,” Lewis said. Otherwise, if a primary system goes down in an attack, the attackers would only need to play the same trick”.
Ian Grigg, financial cryptographist, spoke on possible outcomes of launching CBDC taking the Bank of England as an example. As he put it, it supports deposit of commercial banks so direct issuing of cryptocurrency in Great Britain may undermine the existing deposit base which may affect the country’s loan market.
The Bank of International Settlements’ representative has claimed however that using CNDC may lead to instable financing of the commercial banks’ deposit.