Blockchain Roundup

I was recently asked to explore Central Bank stances on the use of blockchain. As you imagine, Central Banks really don’t seem to mind blockchains or distributed ledgers. They care tremendously what you do with them, though! Digital cash is quite scary, for one. The right to be forgotten is another.

I have pulled together some research from across the internet what Central Banks think of blockchain, distributed ledgers, and crypto currencies. Have fun going down the rabbit trail!

Why are Central Bank policies on blockchain solutions important?

• For established, traditional banking institutions, there are many use cases for blockchain solutions, but few business cases.
• • Blockchain solutions create dis-intermediates distributed networks of untrusted participants.
  • The fundamental reason for the existence of a bank is to be a central trusted intermediary.
• Existing bank back office functions, while slow, cumbersome, and error-prone, still work
• So, truly industry changing solutions most likely must be instigated by Central Banks

Central Bank stances on digital currencies

• Digital currencies are one of the truly industry changing opportunities
• • 26% of central banks expect to deploy blockchain solutions within 5 years
  • 80% of central banks are exploring blockchain for their own digital currency
  • The FT once argued for digital currencies, but has since changed its mind
• Central Banks are across the spectrum on digital currencies
• • US: Privacy worries
  • Euro: Tulip-like
  • Japan: Not a currency
  • Germany: Investors beware
  • France: Great caution
  • India: Not allowed
  • Singapore: Official warning
  • Brazil: Support innovation
  • Canada: Asset-like
  • South Korea: Crime watch
  • Russia: Pyramid scheme; but some interest in digital rouble to bypass sanctions
  • Australia: Speculative mania, but ASX is consider
  • Turkey: Important element
  • Netherlands: Most daring
  • Scandinavia: Exploring options
  • New Zealand: Too unstable
  • Morocco: Violating law
  • Bank for International Settlements: Can’t ignore

What if a Central Bank issues digital money?

• Many unanswered questions when a central bank holds retail deposits
• What role do traditional deposit taking banks play when central banks compete?
• Will the market becomes less stable due to higher risk of runs on banks?
• Is customer choice curtailed when deposits held in only the central bank?

Central Bank perspectives on bitcoin or other crypto currencies

• Not a major concern to the stability of the financial system yet
• May require regulation to protect consumers (e.g. Initial Coin Offerings or ICOs)
• In some ways, the bitcoin speculative bubble may be protecting other assets from excess liquidity (controversial!)
• But many Central Banks are intrigued by the idea