A form of central bank issued digital currency (CBDC) could go live this year, according to Antony Lewis, R3 director of research, cash and CBDC strategy, speaking on panel of experts at the Deconomy conference this week at the Walkerhill Hotel in South Korea. All panelists speaking…
A form of central bank issued digital currency (CBDC) could go live this year, according to Antony Lewis, R3 director of research, cash and CBDC strategy, speaking on panel of experts at the Deconomy conference this week at the Walkerhill Hotel in South Korea.
All panelists speaking on “Industry Evolution Through Distributed Ledger” were hopeful that CBDC will be launched for select financial institutions.
Lewis believes that blockchain technology will be used by select financial institutions.
“We have had conversations with central banks who have mandates to fix certain payment problems, and one solution they look to is a blockchain type of platform,” Lewis said, according to a report posted by Korea Coin on YouTube.
Lewis said this does not mean consumers will have a new payment choice that functions like bitcoin or Ether. Instead, Lewis predicted that only select financial institutions would use such a cryptocurrency to start.
Such a system would likely even be used in situations such as disaster recovery, he said.
“Don’t make your secondary (decentralized) system look like your primary (centralized) system,” Lewis said. Otherwise, if a primary system goes down in an attack, the attackers would only need to play the same trick.
“Then it’s not resilience, it’s just another IP address to attack,” he said.
Panelist Stanley Yong, global CBDC lead at IBM and a former CBDC researcher at Singapore’s central bank, agreed that a blockchain system will eventually be best applied to commercial banking and was hesitant about its application to consumers.
“If it issues cryptocurrency to millions and billions of citizens, it will have to hold all these individual accounts, which inherently increases the market and credit risks,” Yong said.
Panelist Ian Grigg, a financial cryptographer, said it might not even be the fundamental role of central banks to issue a retail CBDC.
The Bank of England, for example, supports the deposit of commercial banks, Grigg said. Hence, directly issuing a cryptocurrency to the public could undermine existing commercial banks’ deposit base, ultimately impacting the loan market, he said.
The Bank of International Settlements previously stated that a CBDC could give rise to “higher instability of commercial bank deposit funding.”
The panelists were hopeful that blockchains will replace existing banking technology.
Yong went as far as to state such systems are “due for retirement.”
Featured image from Shutterstock.
Last modified: January 24, 2020 11:11 PM UTC