Central banks looking to cryptocurrency to replace cash

A central bank digital currency would see central banks distribute digital money which could be redeemed for their respective domestic fiat currencies.

To get a better idea of the current state of research in this specific field, the World Economic Forum prepared a March 2019 report that asks, how are central banks exploring blockchain today?

Despite central banks historically being risk-averse, a number of different nations have contributed numerous white papers, reports, and investigations into how blockchain technology could improve their operations.

"A survey of central banks shows that a majority are collaboratively looking at the implications of a central bank digital currency."

In November 2018, the central banks from England, Canada and Singapore teamed up to write one of the first large scale reports on how digital currencies could improve cross-border interbank payments and settlements.

The bank used a blockchain-based solution to improve a relatively time-consuming procedure in which multiple banks needed to be in constant contact.

Central banks around the world have all been exploring their iteration of CBDC and blockchain technologies.

It is for this reason, as WEF states, that many banks are still sidelined but attentive to developments in the space.

The report describes three tiers in the central banking space in which the banks of England and France have looked closely into the subject and launched pilots, another demographic that is curious, but content to "Largely [monitor] activity by peer institutions and within the private sector," and a third group which sees no interest in the technology at large.

"Over the next four years, we should expect to see many central banks decide they will use blockchain and distributed ledger technologies to improve their processes and economic welfare. Given the systemic importance of central bank processes, and the relative immaturity of blockchain technology, the banks must carefully consider all known and unknown risks to implementation."