A new survey from the Official Monetary and Financial Institutions Forum (OMFIF) and IBM finds increasing support for central bank issued digital currencies (CBDC).
OMFIF describes itself as “an independent think tank for central banking, economic policy and public investment” and says the new report describes potential use cases for central banks to support central bank digital currencies.
A CBDC is a digital form of fiat money, which is a currency established as money by government regulation. It differs from digital currencies, which are not issued by the state and lack the regulations of a government.
The survey of 21 central banks, which ran from July-September 2018, revealed that 54% of respondents believe CBDCs can be used to improve the speed, efficiency and resilience of cross-border payments. Around 69% found significant issues with existing cross-border transaction processes.
Other key findings included all respondents being optimistic about the use of smart contracts, since this affords central banks flexibility in payment and settlement processes, such as what form a token would take and who the backer would be. Equally, 69% of those surveyed stated that system resiliency has become an increasing priority for central banks.
The report also explains the purpose of unifying CBDCs, as well as the motivations and business use cases for central banks to adopt digital currencies. It outlines key characteristics of such a system, including who the developer and issuer should be; the technology options and requirements for a successful payments system; the practical and regulatory challenges; and the possible risks and policy implications.
Survey respondents came from institutions that are researching and trialling wholesale CBDCs (38%), as well as those who are not currently active in this field (62%). The Banco Central do Brasil, South African Reserve Bank, Norges Bank, Deutsche Bundesbank, European Central Bank and the Bank of Finland were among the institutions that participated in the survey.
“Today, central banks play an essential role in managing monetary policy, and they will continue to do so as the foundation of stable economies worldwide,” saysJesse Lund, global vice-president of IBM Blockchain. “As we continue to see the advancement of blockchain and how it is applied in various instances across a number of industries, these new use cases indicate that central banks are now willing to explore blockchain. This will help create added layers of trust and transparency, and quite possibly usher in a new banking era guided by the technology that brings profound new efficiencies to the banking infrastructure.”
Philip Middleton, deputy chair of OMFIF, adds, “Many central banks have devoted considerable effort to examining the viability of introducing digital fiat currency as a complement to physical cash. In the wholesale domain, the prospects for digital payment or electronic token exchange appear capable of delivering benefits while avoiding some of the difficulties inherent in retail CBDCs.”