The central banks’ skepticism of blockchain technology is ever-present as executives from Major European banks have claimed in a recent conference that new Central Bank Digital Currencies (CBDCs) don’t need the application of blockchain technology at all.
European Blockchain Convention Virtual 2020
Two major bank executives from the Swiss National Bank and the German Deutsche Bundesbank were recently at a blockchain conference called the European Blockchain Convention Virtual 2020 and gave their two cents on the upcoming phenomenon of centralized digital currencies and how it could transform the world. Thomas Moser representing the Swiss National Bank was of the opinion that these new centralized digital currencies donot need blockchain technology at all. Martil Diel, the executive from the German bank concurred with Moser and echoed similar statements.
However, they both didn’t argue that there was no use for blockchain technology. According to Moser, blockchain technology is useful when there is no trust on a central authority and according to him, Bitcoin was a good example of the application of blockchain technology because there was no trust factor involved in the creation and transaction of Bitcoin. However, he was of the opinion that since the Central Bank was providing the trust factor through a centralized regime, blockchain technology’s use case remain limited in the case of CBDCs.
But if you have a central bank, then this is the central party. And if you trust that central party, I think then it’s not really straightforward to reason that you need a blockchain.”
Wholesale vs Retail CBDCs
However, Moser said that the tech could be used wholesale on CBDCs. Retail CBDCs involve various other financial institutions and such that its use would be limited. However, according to blockchain analytics firm R3, only wholesale CBDCs are being currently developed around the world with little or research on retail CBDCs occurring. Moser also claimed that he was working on a retail CBDC solution without involvement of blockchain technology for this purpose.
Martil Diehl, the German bank executive also echoed similar statements and said that blockchain technology wasn’t necessary for CBDCs at all, citing the recent examples of the Chinese Digital Yuan and the Swedish e-Krona, both of which have been implemented without a public blockchain. Diehl also discouraged the use of public blockchains for central bank operations in any country.
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