About a decade ago it was unthinkable to see present day (contemporary) FIAT Banks all over the world using cryptocurrencies and blockchain for their finances and financial transactions.
Fast forward 10 years to 2021; It is all in the works! But not using Bitcoin, Doge or Ethereum, but by using blockchain technology which is a form of distributed ledger technology. These banks are creating their own cryptocurrencies equivalent to the currency used in their respective country. More and more countries around the world are adapting to blockchain technology and its benefits of:
– Instant transfer across the systems worldwide with minimal fees
– Liquidity movement possibilities that were never possible with old bank transfer systems
– Integration of blockchain/smart contract currencies with other countries, making a network between chains in globally recognized environments.
– Safety and security of the features blockchain carries with itself.
Over the past couple of years, there have been multiple alliances between banks and between countries to set up a system which offers support for currencies across the board being used on CDBC, Central Bank Digital Currency. At this stage it has been cut into two parts; 1) The wholesale central bank digital currencies and 2) retail central bank digital currencies.
The wholesale central bank digital currencies focus is on facilitating more efficient central bank clearing operations between the central bank and its member banks.
The retail central bank digital currencies is the new currency which would be usable by the public to replace bank notes and coins in the ecosystem, in digital form.
As global banks have noticed, cryptocurrencies and blockchain technology is catching up fast with modern day economics and usability. Smart Contracts, possibilities with instant supply/demand, logistics and swaps are within reach and could speed up processes to an instant transaction instead of one which could take days before it jumped through all the ‘hoops of approval’.
CBDC Central Bank Digital Currency
The CBDC has given a small group of centralized programmers the access to the main system, which is built for the whole banking industry worldwide. This system is currently on its own chain, thus secluded from any public access. This is for them to protect and adjust the chain accordingly while it is still in the early stages of use.
CBDC possibilities that are possible to monitor and use in the short term are:
– Digital currency could provide a real-time insight in the movement of assets and money flowing through the system. Providing a nice economic picture in a certain region or a whole country.
– Economic data could be available on the spot from the systems reading out the activity on the blockchain and use of its currency.
– It could help against fighting crime and corruption when the flow of money could be traced back many steps from the original source.
The adoption of the CBDC chains is in full progress. Its evolution increased since 2019. In 2019 the federal and global banks decided they would give countries the approval to create their own projects based on the main CBDC product. This provided more space for countries to experiment and come up with new solutions in this space.
An example of a new side-project from Canada is ‘Project Jasper’ where the bank is finding a way together with wholesale parties to make an efficient integration of digital flow of money worldwide in an economical eco-system. This was first explored in 2017, but not being expanded since the development was given more working space. Additionally, the Bank of England is working on a project that will create a ‘Global Digital Currency’ which would be supported by some of the biggest banks across the world. These projects stimulate development and are no longer being ignored. Finally, Japan is trying to implement a digital currency before the next Olympics but still has not fully delivered on the product yet.
Looking back at the progress countries are making, they are certainly on the move. But the old ecosystem which has been used for decades, or in some cases, or for hundreds of years is hard to break at once. Evolution will continue to happen until we are all on a trusted blockchain in the world economy, and then to improve it further.