Central bank officials said that DLT could improve the global financial system. DLT can offer the possibility of programming a CBDC to perform specific functions and build intelligent tools in addition to money to track transactions.
09 March, 2020 | AtoZ Markets – Three currency and monetary crypto experts discussed the challenges and prospects of CBDC at the Massachusetts Institute of Technology (MIT) Bitcoin Expo 2020. The fears of coronaviruses have led to the postponement or cancellation of major cryptocurrency events around the world. But one event that went as planned was the much-anticipated Bitcoin Expo 2020.
Experts recognized that distributed ledger (DLT) technologies might improve the existing global financial system But they argued that significant challenges remain regarding the privacy, interoperability and extensibility of blockchains.
DLT Can Ramp Up Global Monetary System
Sonja Davidovic works with the International Monetary Fund (IMF). She said that this is a good sign that central banks actively involved in the research and development of blockchain and distributed ledger (DLT) technology. But they are asked not to make hasty decisions when it comes to putting them implemented. She said:
“What we have often seen is that there is hype, and people are rushing to choose this technology simply because it is popular. Central banks are engaging directly without going through the proper process of testing the technology in proof of concept.”
Sonja also said that despite a wide selection of DLT systems available to central banks, they have failed to pass the bar for interoperability and data security. When there are third-party vendors involved, who help integrate the technology, the security risks double.
Davidovic says that none of the distributed systems has demonstrated its robustness in terms of confidentiality and interoperability. The IMF official added that central banks face increased risks when implementing these technologies, as they typically outsource development to third-party companies.
Explaining the problem in more detail, Davidovic said that technology has to be as safe as a vault. However, whenever there is a need for manual intervention. A staff member may click on a malicious phishing email to allow a significant security breach and lose control of all of the data.
DLT to Handle Multi-Trillion Transaction Volumes
Robleh Ali is an MIT Digital Currency Initiative researcher and former Bank of England official. He predicts that central bank digital currencies will eventually take many different “hybrid” forms.
“You will probably end up having a hybrid. I don’t think all central banks would choose the same system. How they interact will be decisive so that you can sort them out in one system.”
Bob Bench works at the Federal Reserve Bank of Boston. He argued that Bitcoin is an exciting concept. But it cannot extend to meet the huge transaction load that central banks have to bear at daily. You need a system that can handle trillions of transactions at once without collapsing. It will support the gigantic retail economy like China’s, said Bench.
Think we missed something? Let us know in the comment section below.