-
Federal Reserve Chair Janet Yellen encouraged her fellow central bankers to accelerate their studies of new financial technologies, specifically mentioning bitcoin, the blockchain, and other distributed ledgers, according to the trade group whose conference she attended.
June 6 -
The distributed ledger technology has an answer for updating every core function of the antiquated financial system.
May 12 -
Though lukewarm about Bitcoin itself, bankers see promise in the technology it runs on, specifically the distributed ledger, for efficiency and security improvements in areas like payments and securities handling.
June 1
We all know that virtual currency resides on the blockchain. But what about regular currency? It may be just a matter of time before blockchain money is a reality. Pragmatism and (ironically) central bankers may propel it.
I recently participated in the fintech
The apparent interest of central bankers in blockchains could be an enormous benefit. And when the first major country issues fiat currency on a blockchain, that nation will gain a substantial competitive advantage. An obvious strength is cybersecurity, especially in light of the Swift attacks.
Blockchains use decentralized IT architecture, which is harder to hack than centralized, single-point-of-failure systems. And the bitcoin blockchain is robust IT architecture. Although it has lived fully exposed in the warzone of Internet security, and has a
A central bank that issues money on a blockchain will find that its domestic financial system suddenly becomes transnational. Capital will flow in. It will become the key hub of global payments. The pragmatic benefits would be immediate. In contrast to the delays, cost and opacity that multinational companies face today when moving money globally, they would rejoice over a truly global payments platform. The voices of these companies matter in currency markets because, through their day-to-day activities, their payments underlie foreign exchange volumes.
The world has more than
Central banks should embrace blockchain to fight their own irrelevance. "Central banks, just like everyone else, can't afford to be Uber'd," a top Bank of England official, Andrew Hauser,
But central banks face more than just threats from each other. A de-nationalized system could also "Uber" monetary systems around the world. Denationalized money – such as bitcoin, ether or XRP – is tiny today but it is steadily gaining momentum in far-flung corners of the world. If central banks don't up their game, I believe corporations within 10 to 20 years will gravitate toward such superior architecture, which is faster, simpler and more transparent while containing zero counterparty risk.
Among the central banks already considering issuing fiat currencies on a blockchain are
A blockchain-dollar could, however, become truly global money. A blockchain-dollar would make it easier for the Fed to keep dollar money-market rates consistent around the world, which is harder as offshore dollar-denominated debt has proliferated. A blockchain could untangle the
Were a blockchain-dollar to exist, regional and community banks in the U.S. could settle directly with the Fed. Or companies could use the blockchain-dollar themselves, just as some companies use Swift directly today. Or individuals could use blockchain-dollars. Bank of England official Ben Broadbent has
In a sense, money issued on a blockchain is already happening – on the island nation of Barbardos. In emerging markets, restricted access to the global financial system through correspondent banks because of
Its governor, DeLisle Worrell, detailed the extent of de-banking in the country to the Financial Stability Board in Tokyo
So the Barbados central bank approved issuance of digital representations of the Barbadian dollar, each equaling a dollar issued by the Central Bank of Barbados, using the bitcoin blockchain. The approved platform, operated by the tech startup
The embrace of blockchain by a larger nation may not be that far behind.
Bank of England Gov. Mark Carney will very soon give his annual "Mansion House" speech in which he is expected to
Caitlin Long worked on Wall Street for 22 years until this past April, and was most recently a managing director in global capital markets at Morgan Stanley. She has been active in bitcoin since 2012 and blockchains since 2014. Her website is