The first central bank digital currency (CBDC) might go live in 2018. Yes, you read that right central bank and cryptocurrency might co-exist. Well, this is according to the research director at global banking consortium and distributed ledger software start-up R3, Anthony Lewis who made this bold prediction during a panel debate at the Deconomy event in Seoul, South Korea, earlier on Wednesday.
As per Anthony Lewis, he stated, “For wholesale use (of CBDC), I feel we are looking at the current year. We have spoken with central banks who have mandates to fix certain payment glitches, and one solution they came up with is a blockchain type of platform.”
However, Lewis clearly stated that this would not provide customers with a new payment option that functions like how bitcoin or ether work in today’s date. He instead projected that initially, only some certain financial institutions would make use of such a cryptocurrency.
Along these lines, Lewis argued that such a system would most likely just be utilized as a part of certain circumstances, for example, in situations of disaster recuperations given their present limitations.
“Don’t make your secondary (decentralized) system look like your primary (centralized) system. Otherwise, If a primary system tumbles due to an attack, then all the attackers have to do is play the same old trick. Then it’s not resilience, it’s just another IP address which can be targeted.”
Other panelists didn’t share the same level of optimism as Lewis when they presented their projects, however, they did give the nod for a few points.
For instance, Stanley Yong, global CBDC lead at IBM and a former CBDC researcher at Singapore’s central bank, told that he believes that eventually, a blockchain system will find its way onto being implemented by commercial banking.
“If it issues cryptocurrency to millions and billions of citizens, it will have to keep a record of all these individual accounts, which fundamentally increases the market and credit risks,” as per the statement was given by Yong.
Ian Grigg, a financial cryptographer, had contrasting views as he mentioned that issuing a retail CBDC may not even be fundamental role of central banks. Using the example of Bank of England, Grigg clarified that the policy of the institution is to provide backing to the deposit of commercial banks, Thus by directly issuing a cryptocurrency to the public, it could challenge the deposit base of existing commercial banks, which would then go on to affect the loan market.
The view resounded to the earlier comments made by the Bank of International Settlements, which a previous statement revealed that a CBDC could lead to “higher unsteadiness of commercial bank deposit funding.”
Amidst contrasting views, there was still an optimistic view that blockchain could indeed replace existing banking technology, as Yong went the distance by saying that such traditional systems are “due for retirement.”