Central banks are usually very cautious and prudent (not to mention slow) in implementing anything new and innovative. But, in the case of blockchain technology they are actually taking the lead in implementing the latest technology. Using DLT (distributed ledger technology) to speed up payment-system efficiency, security and enhance financial sector inclusion seems to have caught many central banker's attention. From Singapore, Sweden and South Africa blockchain and DLT are hot topics. So what are some of the ways these central bank 'people' are jumping into blockchain? Well, here are ten and are listed below.
Bill Taylor/Fintek Capital
While research and experimentation with blockchain technology across sectors has been underway for several years, few organizations have deployed it. Although central banks are among the most cautious and prudent institutions in the world, a new white paper published by the World Economic Forum indicates that these institutions, perhaps surprisingly, are among the first to implement blockchain technology.
Central bank activities with blockchain and distributed ledger technology (DLT) are not always well known or communicated. As a result, there is a lot of speculation and misunderstanding. Yet dozens of central banks around the world - from Sweden to South Africa to Singapore - are actively investigating whether blockchain can help solve long-standing issues in banking, such as payment-system efficiency, payment security and resilience, as well as financial inclusion.
These organizations, tasked with overseeing a nation’s monetary policy and financial and economic stability, are very cautious to implement any technology or solution that can have adverse consequences. Yet many central banks are actively researching a variety of use cases to explore the technology’s potential in controlled, secure settings.
Top 10 central bank use cases
1. Retail central bank digital currency (CBDC)...
2. Wholesale CBDC...
3. Interbank securities settlement...
4. Payment system resiliency and contingency...
5. Bond issuance and lifecycle management...
6. Know your customer (KYC) and anti-money-laundering (AML)...
7. Information exchange and data-sharing...