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CBDC Does Not Need To Rely on Blockchain Technology

Mario Marcel, Governor of the Central Bank of Chile, has said that while central bank digital currencies (CBDCs) can be beneficial, these do not necessarily need blockchain.

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Marcel made the comments at a panel discussion on the OECD’s Global Blockchain Policy Forum last week. He added that CBDCs are “not a novelty” concept and exist since the first real-time gross settlement (RTGS) systems were around.

The Governor explained that blockchain technology is more useful when several participants of a given system need to have access to a ledger of information and/or when participants “do not necessarily trust each other (and therefore proof of work requirements make the register almost immutable).”

However, when a central bank issues its currency, either in physical or digital format, “trust should be a given.” Further, it is “far from obvious” that all market participants should have access to sensitive information such as CBDC transactions.

Giving an example, Marcel said that Uruguay’s digital currency (e-Peso), issued in a pilot program, was not blockchain-based. The governor also does not seem keen on the idea of issuing a CBDC, saying that countries, especially emerging economies, should evaluate other alternatives, such as fast payment solutions.

Interestingly, the Central Bank of Chile is exploring other use cases of blockchain, such as bonds. Marcel said that the central bank has collaborated with a local central securities depository (CSD) to explore the feasibility of issuing blockchain-based bonds. The proof-of-concept is ongoing and a report is expected to get released in November, he added.

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