Is Central Bank Digital Currency really the future?
Some of the most prominent experts in the blockchains and CBDC (Central Bank Digital Currency) space came to Deconomy 2018 to discuss the possibilities and challenges of CBDC. The panel participants were Clark Thompson, solution architect at Consensys, Ian Grigg, financial cryptographer, Antony Lewis, research director at R3, and Stanley Yong, CBDC lead at IBM.
When Jeff Paik, the moderator, asked “Should central banks issue digital cash?”, Grigg pointed that fact that central banks serve commercial banks, having no interest to issue national digital currency. He argued that digital cash issued by the central bank would take away the deposits of the commercial banks.
Stanley Yong emphasized that people should not be confused about transactional system that moves money around and accounts that hold the fund. He explains that bank accounts actually back many forms of payments, such as credit card, direct debit/credit, and all these forms of payments rely on single bank account. So when people think about CBDC, whether retail type or wholesale type, the implication for the central bank ultimately is “how many bank accounts that need to be tracked”
Following up, Antony Lewis explained that Blockchain-based CBDC differs from the current RTGS as it can add multiple asset classes. Theoretically, various assets on blockchain-typed ledger can achieve atomic swaps in between, with no effort needed to manage systems per asset. Antony argues that the ability to do delivery-versus-payment between cash and financial instruments is truly a step forward for the financial infrastructure.
Clark Thompson also added that traditional RTGS has a choice; either gross settlement or deferred net settlement, and the treasurers of the wholesale bank make a decision about types of settlement forms, not by virtue of what’s the optimal outcome from the liquidity perspective and management of money supply, but simply they need to make a payment at certain period of time that has least impact on treasury. He argues that the beauty of blockchain-based RTGS with smart contract is that banks have opportunity to have a single system where the choice of settlement mechanism is not limited by technical capability of the system, it’s only limited by the optimal choice from perspective of operators.
If you’d like to know what CBDC is all about, the panel discussion video is available below or go to youtube and subscribe Deconomy