This time they have joined forces with the central banks of both Singapore and the United Kingdom. Through a joint effort, this trio has recently released a paper. This paper was dedicated towards demonstrating the efficacy of a Central Bank Digital Currency (CBDC).
Throughout the report, the trio of banks delved into the various ways they could structure and utilize a self-issued digital currency. While many of the iterations provided no perceivable benefit over current practices, there were two that were enticing.
Two iterations of a W-CBDC had the potential to greatly reduce risk in a variety of areas. This included both settlement and payment risk, in addition to broadening services to incorporate payment service providers.
A ‘W-CBDC’ refers to a wholesale CBDC. This is a digital currency that is only accessible and usable by financial institutions. They are not for consumer use.
While this project tackles inefficiencies and security issues pertaining to cross border finance, past dives into blockchain were not quite as wide reaching. It is clear that as the National Bank of Canada continues to utilize this transformative technology, they become more comfortable in applying it to greater and broader sectors.
Monetary Authority of Singapore
The MAS is perhaps one of the most progressive banks in the world with respect to blockchain. Beyond the publishing of this paper, they have announced multiple developments in the past few months. Each of these pertaining to their activity within the sector.
Not only has the bank invested in blockchain companies, but they have recently partnered with several as well. These moves will see, not only the development of their own digital securities exchange, but a settlement platform as well.
Bank of England
The Bank of England has not been as vocal with their support of blockchain as the MAS. However, this report indicates they are warming to the technology. Brexit is an on-going source of turmoil within the nation, and many are beginning to view cryptocurrencies, and a potential CBDC, as a solution to many of their problems. With this being the case, it is no wonder that the bank chose to take part in this paper.
Beyond this trio, the idea of central bank currencies has garnered the attention of many others. In recent days, Christine Lagarde, the International Monetary Fund Chair, has commented on the topic. She stated, “That currency could satisfy public policy goals, such as financial inclusion, and security and consumer protection; and to provide what the private sector cannot: privacy in payments…Digital currency, instead, because it can be distributed much more easily than cash, could reassure even the person left lying on the couch!” These words came at the Singapore FinTech Festival, where she spoke on the merits of a CBDC and more.
With many banks, and industry pundits alike, delving into the idea of a CBDC, it is surely only a matter of time before a nation decides to take the plunge, and issue their own.