The interest shown in decentralized ledger technology (DLT) has been big as of lately, which also showed in the blockchain news. Cryptocurrencies continue to be mistrusted by the financial system which has been made apparent as comments by a lot of people and regulators show that Bitcoin is still not the favourite topic on their tables. Central banks are exploring blockchain and as we can see, they are doing this for personal reasons.
CBDCs are another interesting topic in the crypto news, especially since they became a trend in the crypto sphere now. According to the BIS Quarterly Review, at least 17 governments around the world are exploring the potential uses of CBDCs. For instance, the president of the European Central Bank (ECB) Christine Lagarde publicly announced the active involvement in the development of a CBDC in a bid to address the demand for faster and cheaper cross border payments.
Central banks are exploring blockchain. A report also shows that cross-border payments are not a priority in any of the projects. A CBDC would also not address the lack of access to transitional accounts. These two major shortcomings of emerging markets and developing economies are often caused by or assisted by central banks.
As the BIC Report reads:
“The overhead needed to operate a consensus mechanism is the main reason why DLTs have lower transaction throughput than conventional architectures. Specifically, these limits imply that current DLT could not be used for the direct CBDC except in very small jurisdictions, given the probable volume of data throughput.”
Despite exploring the various types of architectures for the creation of a CBDC, central banks are exploring many other things as well. The decentralization and immutability are the primary topics in the blockchain news. As the report mentions, “The central bank is, by definition, the only party issuing and redeeming CBDC.”
According to one lead blockchain strategist named Arwen Smidt who works at MintBit:
“CBDC’s could very well become potentially a tool for governments to assert control on crypto. It’s definitely part of the reason why these central banks are looking at it. So, that can go two ways: either the government would do it purely to assert control or to make cryptos fall in line with the future monetary policy and also grant legitimacy to these new forms of private money.”
All in all, CBDC are an interesting topic and central banks are exploring various ways to implement them and/or see the real benefit of blockchain when put to practice.
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