Page 8 - July 2018 Disruption Report

DIGITAL CURRENCIES JAJNULAYRY20210818
BUILDING A NEW FINANCIAL SYSTEM WITH BLOCKCHAIN
Building a new financial system with blockchain
Finance-focused, blockchain-based building blocks are receiving lots of VC money and attracting talent.
Source: CB Insights
Image source: Felix Feng 37 Recent buzz on the creation of digital currencies by central banks
The Bank of International Settlements wrote:
A related medium-term policy question concerns the issuance of [central banks digital currencies (CBDCs)], including who should have access to them. CBDCs would function much like cash: the central bank would issue a CBDC initially, but once issued it would circulate between banks, non-financial firms and consumers without further central bank involvement. Such a CBDC might be exchanged between private sector participants bilaterally using distributed ledgers without requiring the central bank to keep track and adjust balances. It would be based on a permissioned distributed ledger, with the central bank determining who acts as a trusted node.
While the distinction between a general purpose CBDC and existing digital central bank liabilities – reserve balances of commercial banks—may appear technical, it is actually fundamental in terms of its repercussions for the financial system. A general purpose CBDC—issued to consumers and firms— could profoundly affect three core central banking areas: payments, financial stability and monetary policy. A recent joint report
by the Committee on Payments and Market Infrastructures and the Markets Committee highlights the underlying considerations. It concludes that the strengths and weaknesses of a general purpose CDBC would depend on specific design features. The report further
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