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This week, the central banks of Australia, Malaysia, Singapore and South Africa have launched a new experiment. It is the construction of a cross-border central bank digital currency system. “Project Dunbar”, Under the auspices of the Bank for International Settlements.
The idea is to enable institutions in these countries to use cryptocurrencies and distributed ledger technology to make cheap instant payments in a variety of currencies. And if Dunbar works (a big “if”), this will give a new twist to digital finance in the 21st century.
Some central banks, such as the Bahamas, are testing the domestic CBDC, including the Monetary Authority of Singapore and SwitzerlandWe have tested domestic and cross-border payment systems in one currency, but none have worked on multiple currencies.
The Central Bank’s Digital Finance Holy Grail is the linking of different silos and currencies. Dunbar isn’t the only initiative trying to do this.Central banks in Hong Kong, China, United Arab Emirates and Thailand will soon be so-called mCBDC Use different technologies to bridge projects for the same purpose.
Does anyone who is not a central bank or crypto enthusiast need to care? Yes, there are four reasons. First, these experiments show that cryptocurrencies and distributed ledger technology, while plagued by financial fringes, are now mainstream.So much, the Federal Reserve Board of Governors Report on our unique efforts to build a dollar CBDC — For domestic purposes only.
Second, central bank experimental mushroom hunting shows that a fierce battle is underway in the financial gut. Private sector entrepreneurs are competing to decide which computing solution offers DLT in the safest and most scalable way, with a surge in products such as Ethereum, Cardano, Solana and Polkadot. Is producing.
Central bank officials are working on strict policy choices as they peruse technical options such as how to maintain a centralized ledger (and control) when adopting elements of the DLT. increase. Some are testing ideas with private sector partners. MAS I have been working with JP Morgan. DBS and software provider ConsenSys have focused on Ethereum. Others, such as the Federal Reserve, use their own technology. Agustín Carstens, head of BIS, expects this homemade route to become more popular. “The CBDC is so important that we can’t outsource the production of the CBDC to the crowd,” he tells me.
In any case, the acronym “CBDC” can refer to a wide range of models, none of which is yet dominant. Carstens adds:[The issue] How to interconnect and how to generate a network of CBDCs with different governance and connectivity models for cross-border transactions. However, there are many ways to do this. “
Third, Asia is leading much of this innovation.This is China Develop a digital source To enhance its global power, and the People’s Bank of China is ahead of most rivals in this regard. However, the central banks of Singapore and Hong Kong are also moving rapidly.
“Asia is definitely jumping over other regions [since] “There is a growing desire for technology and fewer legacy systems,” said Charles Dorsey, a former Hong Kong government official who runs ConsenSys’ Asian operations. ” Or, Charles Hoskinson, who runs a company focused on Cardano technology, said:
However, the fourth (and perhaps most important) point revealed around Dunbar is that the world of cryptocurrencies and DLTs may not feel the direct impact of the CBDC experiment. It seems unlikely that the CBDC (or privately created digital token) will soon become an effective form of money for retail finance. Traditional systems such as credit cards, cell phone banking, and even banknotes are still fast. Also, while DLT is already effective in some corners of wholesale finance, its application is limited because the technology is still clunky.
It may change rapidly. But even before that happened (if any), the debate over CBDC and private sector experiments FacebookEncourages legacy operators to scramble to avoid oncoming competition. Singapore is a good example. Domestic banks have been competing to make existing mobile banking services more efficient.
“In Singapore, we can pay each other with three clicks and cross borders with countries such as Thailand,” said Sopnendu Mohanty, Chief Technology Officer of MAS. .. “So why do you need a CBDC?” He asks. “The answer is that we can dramatically reduce the cost of transfers.” Therefore, it further increases the competitive threat.
There is probably the biggest reason to see Dunbar and its likes. Andrew McCormack, senior BIS employee, said:
Therefore, if the CBDC can sometimes shake the sleepy financial cartel, we all need to support it. And celebrate the principles that economist Adam Smith defended three centuries ago. Competition is great for driving innovation and growth.
gillian.tett@ft.com
Finance cartels face digital currency shake-up Source link Finance cartels face digital currency shake-up
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