- The bank representatives said CBDCs are not better than digital alternatives, and they are likely not going to adopt any new technologies.
- Distributed Ledger Technology is not needed to make a central bank digital currency.
- Central banks not necessarily against distributed ledger technology, but there is no total support for the adoption of the technology.
At a recent conference organized by Ukraine’s central bank, several central banks, including the Canadian central bank, were against the need for CBDCs. In their opinion, blockchain technology is not better than other digital alternatives, and they wouldn’t want to change anything to that effect now.
The central banks’ representatives were also against the argument of using blockchain technology as a means of issuing a central digital currency.
This is coming only a few days after Riksbank, Sweden’s central bank, rolled out a 1-year test of its own e-krona digital currency. Similarly, in 2018, Ukraine’s central bank launched its own test for a blockchain-based digital currency. The test ran for few months, before the central bank called off it off, claiming “no fundamental advantages in using specifically the DLT [distributed ledger technology] to build a centralized e-hryvnia issuance system.”
CBDC not better than other digital alternatives
The representative of the Canadian central bank also said a CBDC does not offer a better option than its alternatives. This is coming, ironically, after the Bank of Canada explored the value of the CBDC. After the bank’s exploration, it stated that if CBDC is offered to the public, the economy could benefit immensely because it could lead to more competition in the banking sector.
From a report published by the Canadian central bank in May last year, “[CBDC] can improve the efficiency of bank intermediation and increase lending and aggregate output even if its usage is low”
In 2016, Canada’s central bank carried out an exploratory test termed “Project Jasper”, to ascertain whether payment infrastructure within the country can be positively influenced by distributed ledger accounts.
The project was carried out by the Canadian central bank and other financial institutions such as Payments Canada.
Uncertainty about distributed ledger
The doubt about distributed ledgers was shared by central bank representatives of Canada and the Netherlands at the Kyiv conference.
According to policy advisor of Dutch central bank, Harro Bowen,
The essence of the DLT infrastructure is that no single party should be trusted enough, but don’t we just trust a central bank to maintain the integrity of the global ledger?
Scott Hendry, who piloted the Jasper Project, affirmed that,
You don’t need a DLT to make a central bank digital currency.
“There doesn’t seem to be a lot of benefits if you look at a DLT system and the current efficient centralized system for the sole purpose of interbank payments,” Hendry said, pointing further that in his own working environment, “they wouldn’t change anything now in the current level of technology in use”
However, none of the speakers were particularly against the use of DLT for a CBDC, although none were vocal about the technology.