The blockchain ball seems to be rolling well and truly smoothly as it has come to be known through a World Economic Forum report that over 40 central banks across the world are considering the implementation of blockchain technology and/or issuing their own digital currencies.
The report, which looks into how central banks are exploring blockchain technology, refers to a January 2019 report by the Bank of International Settlements (BIS) and notes how these 40 or so banks are examining the applications of blockchain technology for the improvement of payment times, general efficiency, and security.
Various banks and the degree to which they have executed blockchain initiatives are mentioned, including the Bank of France, which has fully deployed blockchain technology. Others are not so far ahead at the moment, though from the report it appears that several banks have conducted heavy research and are executing pilot programs to refine the technology such that it suits their needs most appropriately.
The Bank of England, the Bank of Canada, and the Monetary Authority of Singapore (MAS) have taken taken a more extensive look at the space, compared to their central bank counterparts in other nations, by the looks of it. Yet central banks of nations from Lithuania to the Caribbean are also making headway. The report notes that the Central Bank of Lithuania plans to issue a Digital Collector Coin to test the technology in a controlled real-time environment, while the Eastern Central Caribbean Bank wishes to test a digital Eastern Caribbean currency to foster economic growth.
Also of importance is the ten use cases that the banks see most application in, which include retail and wholesale central bank currencies, KYC and AML management, information exchange and data sharing, customer credit identifiers and interbank securities settlements, among many other applications.
Of course there are challenges, and banks face several questions when considering the implementing the emerging technology. Transaction anonymity, availability to customers, and account and transaction volume limits are some of the mentioned pain points. It concludes by saying that there is a lot of growth mixed with a lot of planning around these issues,
Over the next four years, we should expect to see many central banks decide whether they will use blockchain and distributed ledger technologies to improve their processes and economic welfare. Given the systemic importance of central bank processes, and the relative immaturity of blockchain technology, the banks must carefully consider all known and unknown risks to implementation.
In general, the report has a positive outlook on the advantages of using Distributed Ledger Technologies (DLTs), though it does note that there are risk given the technology is still in the early stages of development.