Central banks in 46 countries are considering creating a central bank digital currency (CBDC) using a constrained form of distributed ledger technology (DLT), according to a new survey. But they’re leery of blockchain.
London-based journal Central Banking, a specialized publication supported, among others, by the Bank of International Settlements (BIS) and the European Central Bank (ECB), found in its inaugural CBDC survey released last week that 65% of respondents had actively researched digital currencies.
But the survey, conducted in February, found only one central bank would use blockchain as the basis for a CBDC. Described as a “small African central bank,” the survey noted that bank said it would only consider using blockchain “if found to be the best available platform.” That and the other 45 banks were not identified.
Central Banking’s survey doesn’t delve much further into why central banks don’t want to use blockchain. One North African central bank said it had concerns about blockchain’s security and scalability issues. Whether this was an attitude held by other survey respondents isn’t clear.
While most central banks dismissed blockchain, 71% of respondents said they would consider building a CBDC on DLT – a broader category of network architectures, blockchain being one of them – if they reached the issuance stage.
The survey added the caveat that the majority of central banks researching CBDCs had no plans to actually move forward with issuing one.
DLT includes private and permissioned networks, shared with a handful of known and trusted nodes. In the survey, banks indicated there was a trade-off with decentralization: distributed frameworks created operational resilience against a single point of failure; but there were also privacy issues, with more parties likely having ready access to confidential transaction data.
The survey also cites the Bank of England’s CBDC discussion paper from March, which shows that while there are clear benefits to…