The Official Monetary and Financial Institutions Forum (OMFIF) and IBM recently came together, to conduct a survey which intended to study, how traditional financial institutions might use digital currency in the near future, to enable interbank fund transfers.
Till now banks and other conventional financial institutions have refused to embrace cryptocurrency, due to its unpredictable and volatile nature, and its ability to topple the existent system of fiat currency.
The reports of this survey were launched a couple of days back and the observations indicate a wind of change might be blowing in bitcoin’s favor. The results showed that more and more Central Banks are actually considering a Central Bank Digital Currency (CBDC). A CBDC is a digital alternative to fiat currency and is backed by the government regulations.
The report reads;
“No major central bank intends to implement a retail CBDC in the near term. However, the debate about wholesale CBDCs has moved on from questions of feasibility to practical considerations.”
The survey was conducted on 21 central banks from a period of July-September 2018. Out of this, 54 percent believe that a change to CBDC would ensure faster, cheaper and a more efficient cross-border transfer system. While 69 percent of the banks confessed that they are indeed struggling with cross-border funds transfer institutions.
The survey has revealed that blockchain technology is not necessarily being considered as a platform for launching the CBDC on. 61 percent of the banks have admitted that they do not see distributed ledger technology as a novel invention. Despite that, 50 percent of the sample has expressed some degree of willingness to work with IBM to explore blockchain technology.
The survey instead focused on finding out how CBDC could be tested and released on a centralized payment network. Discussion on the possibility of CBDC being backed by a single fiat currency vs being backed by myriad assets, is something that the report highlighted.
However, making CBDC a universal asset might spell more geographical and regulatory complexities for the banks. On that note, the report stated;
“Clearinghouses and existing payments systems would have to either adapt to new, more efficient systems or find themselves disintermediated from payment and settlement processes in the long term.”
Jesse Lund, global vice-president of IBM Blockchain stated,
“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.“