October 27, 2020

Opinion of the head of the Central Bank: Digital currencies of central banks do not need blockchain

Opinion of the head of the Central Bank: Digital currencies of central banks do not need blockchain

Last week, the head of the Central Bank of Chile, Mario Marcel, took part in the Organization’s blockchain forum Economic Cooperation and Development (OECD),where he stated that the digital currencies of central banks (CBDC) do not need a blockchain. He noted that the very concept of CBDC is not new and has existed since the advent of the first real-time gross settlement systems (RTGS).

The official explained that blockchain technology is usefulin the event that several participants of the same system require access to a source of information or in the case when network participants do not trust each other (and the algorithm of proof of work makes the register almost unchanged).

However, when the central bank issues itscurrency in physical or digital format, "trust should be taken for granted." In addition, not all market participants should have access to confidential information, such as CBDC transactions.

For example, the digital currency of the Central BankUruguay (e-Peso) was released without the use of blockchain technology. In addition, the official believes that developing countries should pay attention to other alternatives, such as quick payment solutions.

Interestingly, the Central Bank of Chile alsoexploring other uses of the blockchain. Marcel noted that the central bank is working with the local central securities depository to explore the possibility of issuing blockchain bonds.