Economies at Scale
Like traditional banks and many businesses, central banks are increasingly seeing the potential of blockchain technologies. While central banks certainly face a different set of challenges than other institutions, blockchain can still be applied to deliver real benefit. Central banks around the globe are currently exploring blockchain to help in a number of key areas – from reducing crime to reducing system friction.
Much of the interest in blockchain comes from its ability to provide a thorough, immutable transaction history. The technology, by definition, creates accountability that has long been a major challenge in every economy. Stopping tax evasion and targeting the black-money trade become almost trivial in the face of open blockchain. Additionally, and perhaps most importantly, is the amount of insight that central banks can glean from a national digital currency. This information becomes invaluable in helping those organisations plan and execute monetary policies more efficiently and effectively.
As the use of cash worldwide continues to fall, national digital currencies represent a greater and greater economic, social and political opportunity. While central banks have been trying to dematerialise cash since long before the creation of Bitcoin, open blockchain is the first technology that satisfies all the criteria central banks consider. Reducing cash management costs, reducing cash anonymity and being able to directly manage tax are just a few of the areas where the immense advantage of blockchain can be felt.
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Opportunities in Central Banks
National Digital Currencies
nChain helps central banks ease the transition to a world where blockchain technology is the foundation of business. Central Bank Digital Currencies (CBDCs) built on blockchain offer a number of benefits – both in reducing crime and reducing system friction. We are working with central banks across Europe to develop digital forms of central bank money that will reduce costs in the minting, distributing and reconciliation of transactions, making more cost effective cross-border payments, creating the auditing tools to develop better monetary policy and more.
Accuracy in Auditing
Counteracting the growing distrust of central banks, blockchain can help allow for greater transparency – creating public knowledge of how and when currency is minted and distributed and providing an undeniable portrait of central bank capital reserves.
Forecasting and Reconciliation
Blockchain affords the ability to capture and parse data from across the economy. With the insight there created, central banks are able to make faster and more effective monetary policy decisions. With legacy systems, it can take months to reconcile transaction and provide useful forecasts for future planning. Having data available in near real-time means that central banks can build a more accurate view of the economy.