While central banks are known for being some of the most cautious and prudent institutions in the world, chances are that these may become among the first to implement blockchain and distributed ledger technology (DLT), according[1] to a new white paper published by the World Economic Forum (WEF).
Dozens of central banks around the world are currently investigating whether blockchain can help solve various issues in banking as well as improve financial inclusion, and are conducting several research projects and pilots with blockchain technology.
A January 2019 report by the Bank for International Settlements (BIS) in Basel, Switzerland, suggests that at least 40 central banks around the world are currently, or soon will be, researching and experimenting with central bank digital currency (CBDC).
Over the next four years, WEF expects to see many central banks decide whether they will use blockchain and DLT to improve their processes and economic welfare. Their decisions to implement DLT and digital currency technologies in the future will have “far-reaching consequences on financial and monetary systems, domestic economies, and the welfare of citizens,” WEF said, noting that DLT could help enhance efficiency, financial inclusion, resiliency, and security in financial systems.
In the paper, titled Central Banks and Distributed Ledger Technology: How are Central Banks Exploring Blockchain Today?, WEF details the top ten blockchain use cases central banks are currently exploring. These include:
- Retail CBDC: A central bank-issued digital currency that is operated and settled in a peer-to-peer (P2P) and decentralized manner widely available for consumers. The Swedish central bank (Sveriges Riksbank), for instance, is investigating a blockchain-based “e-krona” to serve as an alternative form of money as cash usage in the country declines.
- Wholesale CBDC: A decentralized, blockchain-based, central
