Central banks, as our data shows, are actively testing blockchain technology for a variety of different use cases, everything from new central bank digital currencies, new payment systems, to records management - having some kind of audit trail for certain functions and so on.
There's actually a long list of things central banks are looking at blockchains to do. There's a number of advantages, potentially, to central banks by incorporating blockchains. Probably the most significant is the resilience of the blockchain technology. The fact that bitcoin has been operating for just about nine years now and has suffered not a nanosecond of downtime is quite compelling, I mean, not very many large IT systems today can claim the kind of uptime that bitcoin claims.
If you're a central bank providing critical infrastructure - payment systems, thinking about maybe moving away from physical cash to a completely electronic money-based system, having a technology that is resilient and will have zero downtime is actually really important.
We can imagine the kind of chaos that would ensue if we moved to an electronic money system and that system went offline for any significant period of time - days, weeks or more. You would likely see pandemonium in the streets if people can't make payments.
So, blockchain can be quite resilient, it can also be a way to create greater transparency into central banking, more credibility because of the rules a blockchain-based system enforces.
But there are a number of challenges too. There's a concern around the lack of privacy, interestingly, of blockchain technology. Bitcoin's famous for offering high levels of privacy, but actually blockchains leak data, leak information, it's possible to figure out who's doing what on a blockchain system because it's a public record.
So the lack of privacy could be a concern and a hesitation for central banks thinking about blockchain technology.
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