CBDCs and blockchain: The question of trust

  • CBDC doesn’t want a blockchain, said managers of European central banks
  • The implementation of blockchain for a national cryptocurrency has no purpose; execs were adamant
  • For the past two years, they didn’t change opinion

This is one of the conclusions of the European Blockchain Convention Virtual 2020 conference held on September 21st. Due to the Covid-19 pandemic, Martin Diehl from Deutsche Bundesbank’ and Swiss central bank’s Thomas Moser agreed during the virtual discussion that the world’s CBDC plans, such as China’s digital yuan, don’t need blockchain technology.

They both pointed out numerous reasons for this claim and held a firm position toward blockchain.

Moser stated that blockchain’s original purpose is to grow trust when some central body doesn’t exist. He cited Bitcoin as an example.

Moreover, he said that the participation of the central banks provides trust. Thus, the application of blockchain is needless.

“I think … it’s not really straightforward to reason that you need a blockchain,” Moser noted.

He also announced that the Swiss National Bank will shortly issue a report with a proposal for retail CBDC that doesn’t include blockchain. He explained that the subject of privacy would be solved with the use of blind signature technology.

Martin Diehl, the head exec of payment system analysis at Deutsche Bundesbank, also said that CBDC doesn’t need blockchain technology. He pointed out two main CBDCs projects, Sweden’s e-krona and Chinese digital yuan, as an example.

“Neither Swedish Riksbank, nor the People’s Bank of China seem to be using blockchain, so blockchain is not a must,” he stated.

In one moment, Diehl said that the implementation of blockchain for a national cryptocurrency has no purpose. He was pretty adamant about this opinion. Diehl stated that if a network for the cryptos like Bitcoin or Ether exists, a central party can’t hold public blockchain. Hence, he said systems are opened to everyone, and anyone can participate.

“Unpermissioned blockchains being used for official blockchain transactions for me is not conceivable,” Diehl noted.

Privacy is a crucial characteristic of cash transactions.

The attitude of these two central bank executives doesn’t come by accident. In February 2020, the survey among bank professionals showed that 65 percent of them examined data on CBDCs. The survey revealed another important information. Reserve banks don’t need to accept a blockchain for national cryptocurrencies in their countries. They didn’t refuse to issue digital currency but rather would use DLT-based platforms.

Only one reserve bank claimed it would use the blockchain for a CBDC.

CBDC is what the cash is not

They are easy to surveil, censor, and distribute in the digital economy. Personal privacy is guaranteed, so you cannot be denied access to open, for example, a private business even if you have a disagreement with the ruling party in your country, and maybe you’re on some blacklist.

CDBCs should be built on the tech companies’ efforts to make payment more comfortable and safer. CBDCs should increase the capability of money to be sent through apps, emails, and instant messages. In that way, third parties, such as banks, will not have any role in payments. 

European Blockchain Convention showed that the European central banks currently don’t want to use blockchain to launch the national cryptocurrencies. They moved for zero in the past few years.

In June 2018, Thomas Moser said that cryptocurrencies and blockchain are not cutting-edge enough, so there is no reason to issue a national digital currency. He compared blockchain with the “useless innovation” of CDs. He also said that cryptos are just an imitation of financial products like bonds or digital shares.

It looks like nothing has been changed since then. Will it change ever?

Disclaimer. The information provided is not trading advice. Cryptopolitan.com holds no liability for any investments made based on the information provided on this page. We strongly recommend independent research and/or consultation with a qualified professional before making any investment decisions.

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