NEW YORK–It may have been created by “libertarian-minded programmers with a deep suspicion of central banks,” but it is those same central banks that are doing some of the most ambitious work around the technology introduced by Bitcoin.
The New York Times reported that central bankers do not want their institutions to own or use Bitcoin itself, but instead are hoping they can use the decentralized method of record-keeping that is based on the blockchain, or distributed ledger, to complete and record transactions in the real economy more efficiently, quickly and transparently.
Among the most enthusiastic of central banks in tackling the technology, the Times reported, are the Bank of England and the People’s Bank of China. Both have discussed issuing their national currencies onto some sort of distributed ledger, a name that comes from the concept of several parties keeping records simultaneously, the Times stated.
The Times noted that blockchain allows several different players to keep a shared spreadsheet using cryptography and so-called consensus mechanisms that provide a way to agree on which transactions happened at what time. CUNA and a number of other CU organizations are engaged in a blockchain initiative of their own.
According to the Times, for the central banks, the promise of the “technology is that it would allow them to track every pound or renminbi on every step of its travels through the financial system in real time — something that is impossible now. The goal would be to make the financial system more transparent, fast, efficient and secure.”
The Times reported that the Bank of England has produced several research papers on the topic. One suggests that the economic benefits of issuing a digital currency on a distributed ledger could add as much as 3% to the country’s economic output.
Federal Reserve Chair Janet L. Yellen has also said that “innovation using these technologies could be extremely helpful and bring benefits to society.”
The Bank of Canada, meanwhile, has teamed up with the nation’s five largest banks — and the blockchain consulting firm R3 — for what was known as Project Jasper. In a simulation run this summer, the central bank issued so-called CAD-Coins onto a blockchain similar to the one that underlies the Bitcoin alternative known as Ethereum, the Times reported.