HSBC: Blockchain Technology Could Help Central Banks’ Policies

UK-based banking giant HSBC sees blockchain technology to benefit state-installed central banks, institutions that are tasked and responsible for a country’s economic growth and wellbeing.

In a document obtained by Business Insider, HSBC sees the potential of blockchain technology to transcend private and investment banks and influence or even enhance central banks’ policies.

The publication reports that HSBC sees central banks’ current method of helping the economy through interest rates has a few drawbacks. Notably, there’s no guarantee of the money pumped into the real economy as the choice rests among the banks and the creation of excessive additional debt can also lead to stagnation of the economy.

A recent example of a country’s central bank trying to pump life into a slowing economy is China’s Central Bank that recently slashed bank rates.

A blockchain-based infrastructure, on the other hand, sees HSBC contend that central banks will benefit from a scenario where all transactions are recorded in real-time in an instantaneous money transmission system. Furthermore, the UK bank also lays claim to an economy managed more efficiently by the government, due to the clearer picture a blockchain based system would provide.

That clarity and knowledge of the working economy, HSBC says, will help conduct a sweeping move to inject cash directly into the real economy. A “helicopter drop,” in other words, wherein an effort to move money into the real economy had economist Milton Friedman famously relate it to flying helicopter dropping money to a community of people.

This “helicopter money,” according to HSBC, would be outside money, unrelated to a debt held by a private sector bank and directly funneled to the real world from a central bank.

An excerpt from the HSBC document read:

If we move towards an economy where all transactions become recorded in real-time on a Blockchain type of technology, it will not be too dissimilar to the current eco-systems that many e-commerce giants have around the globe.

Such a transition would empower the government or the central banking authority to understand the fluctuations and the habits of the economy, in a way more than it ever has.

“Online e-commerce stores are able to give out loans to merchants without collateral, because they know all the flows already from the merchants’ point of view: from how much people are spending to the conversion rate of pages viewed to purchases,” the document points out.

In the same way, a modernized monetary transmission system, based on real-time big data analysis through Block chain, could allow the government to balance the economy more efficiently and systematically.

HSBC notes the problem of trust when it comes to such funneled money from the central. If, in other words, people trust the central bank enough to solve an economic problem. If there’s too much helicopter money, it could prove to be ‘wildly inflationary,” the Business Insider article contends.

Ultimately, it is to circumvent these hurdles and gain a better perspective of the economy where HSBC sees the blockchain benefiting the government to make the right calls with a country’s economy.

This post was last modified on 10/11/2015 12:37

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Samburaj Das @sambdas

Samburaj is the Editor for CCN, among the earliest and foremost publications covering blockchain, cryptocurrency and financial technology news. He has authored over 1,500 articles for CCN and is invested in Bitcoin. Email him samburaj(@)ccn.com or find him barely tweeting @sambdas

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