{"id":100871,"date":"2019-04-06T02:00:31","date_gmt":"2019-04-06T09:00:31","guid":{"rendered":"https:\/\/cryptoslate.com\/?p=100871"},"modified":"2026-04-26T13:51:24","modified_gmt":"2026-04-26T12:51:24","slug":"central-banks-looking-to-cryptocurrency-to-replace-cash","status":"publish","type":"post","link":"https:\/\/cryptoslate.com\/central-banks-looking-to-cryptocurrency-to-replace-cash\/","title":{"rendered":"Central banks looking to cryptocurrency to replace cash"},"content":{"rendered":"

A central bank digital currency (CBDC) would see central banks distribute digital money which could be redeemed for their respective domestic fiat currencies. In the case of an American CBDC, this would be the US dollar or in Russia<\/a>, this would be a \u201cCryptoruble<\/a>.\u201d These digital currencies would be maintained on any number of blockchain networks and propose a handful of different advantages.<\/p>\n

To get a better idea of the current state of research in this specific field, the World Economic Forum (WEF<\/a>) prepared a March 2019 report<\/a> that asks, how are central banks exploring blockchain today?<\/p>\n

Canada, England, Singapore, and France Leading the Race<\/h2>\n

Despite central banks historically being risk-averse, a number of different nations have contributed numerous white papers, reports, and investigations into how blockchain technology could improve their operations. In a cursory report from the Bank of International Settlements (BIS<\/a>), researchers Christian Barontini and Henry Holden wrote<\/a> that:<\/p>\n

\u201cA survey of central banks shows that a majority are collaboratively looking at the implications of a central bank digital currency.\u201d<\/p><\/blockquote>\n

The Bank of England<\/a>, for instance, has been developing research since 2014 starting with two seminal papers.<\/p>\n

In their work<\/a> \u201cthe economics of digital currencies,\u201d a group of British researchers concluded that the incentives models at that time were the greatest impediment to widespread adoption. In a companion piece, the Bank of England described<\/a> the ways in which digital currencies differ from traditional monetary schemes and wrote broadly about the technology\u2019s advantages. Both documents indicate an early and unwavering interest in the possibilities behind cryptocurrencies and distributed ledger technology.<\/p>\n

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Related:\u00a0Global Banking Standard Setter Admits Bitcoin and Crypto are a Risk to Banks<\/a><\/figcaption><\/figure>\n

In November 2018, the central banks from England, Canada<\/a> and Singapore<\/a> teamed up to write one of the first large scale reports<\/a> on how digital currencies could improve cross-border interbank payments and settlements. The trio determined that \u201ccross-border payments and settlements have not kept pace with advances in domestic payments and continue to be based on the correspondent banking model, which has not evolved materially over the decades.\u201d<\/p>\n

With such little change in the finance sector, a series of different CBDC pilots have emerged that explore the above-mentioned subject among others. Typically, these pilots have been launched on Linux Foundation\u2019s Hyperledger Fabric<\/a>, R3\u2019s Corda<\/a>, J.P. Morgan\u2019s Quorum<\/a>, or a novel iteration of the Ethereum<\/a> network.<\/p>\n

For a full range of different research topics, WEF\u2019s blockchain lead Ashley Lannquist has compiled a comprehensive list<\/a> of resources.<\/p>\n

The most promising pilot and ultimate implementation of this technology came from the Bank of France with their Project MADRE<\/a> initiative in 2016. The bank used a blockchain-based solution to improve a relatively time-consuming procedure in which multiple banks needed to be in constant contact.<\/p>\n

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Related:\u00a0Largest Bank in the US, JP Morgan Chase, Unveils Cryptocurrency \u201cJPM Coin\u201d<\/a><\/figcaption><\/figure>\n

The replacement of SEPA Credit Identifiers (SCIs<\/a>) with \u201cthe alternative system decentralizes and automates the SCI management and sharing process with \u2018smart contracts\u2019 or programmes within Ethereum and other blockchains that enable automatic transactions among participants using predetermined terms.\u201c<\/p>\n

At the time of press, smart contracts \u201care used to issue 100 [percent] of the SCIs in the system.\u201d For the uninitiated, SCIs refers to the centralized mechanism through which member states of the EU can identify a creditor without making reference to a specific account.<\/p>\n

Top 10 Blockchain Use Cases for Central Banks<\/h2>\n

Central banks around the world have all been exploring their iteration of CBDC and blockchain technologies.<\/p>\n

Brazil, for instance, is piloting a decentralized information exchange platform (Project PIER<\/a>), South Africa is looking into a CBDC for domestic interbank payments (Project Khokha<\/a>), and Sweden is hoping to use a CDBC (e-krona<\/a>) in a push to become a cashless society.<\/p>\n

While many central banks are tinkering with blockchain technology rather than a CBDC, the WEF report outlines nine other potential use cases that central banks could implement:<\/p>\n