Elliot Hill has recently published a really interesting Blog post on Medium exploring how permissions-less blockchains may provide the best platforms for Central Bank Digital Currencies (CBDCs).
Central bank digital currencies, often abbreviated to CBDCs, are digital analogs of fiat currencies, such as the US dollar or Japanese yen, issued at a state level. CBDCs can either be issued by a central or national bank or alternatively by government agencies, and they are being explored for a number of use cases.https://medium.com/cardanorss/building-the-worlds-new-reserve-currency-do-cbdcs-really-require-a-permissioned-blockchain-980c7dc41c12
Digital forms of traditional fiat currencies could pave the way for instant and cheap cross-border payments without the need for payment processors, and also expedite the interbank securities settlement process. They could improve anti-money laundering and know-your-customer requirements compared to cash-based currency. For retail users, CBDCs could also reduce banking costs, and therefore potentially increase interest rates and banking benefits.
In association with banks from around the world, the Bank of International Settlements (BIS), headquartered in Switzerland, laid out three key principles required from a CBDC:
- Coexistence with fiat and ‘other types of money’,
- Supportive of monetary and financial stability,
- Promoting innovation and efficiency.
The blog explores how these have historically been seen to required a permissioned (or controlled) blockchain unlike Cardano which is public and permission-less, and how the tide may be turning.
We would suggest there are good reasons why “walled gardens” always fail in the longer term, and there are solid reasons for thinking this will apply to blockchains in the same way it applied to the internet in its early days and still does.