Are CBDCs and the blockchain compatible? This economist has doubts…
The deployment of blockchain for central bank digital currencies (CBDCs) raises endless questions among economists. Carlos Lenz of the Swiss National Banks has weighed in on the debate.
A preference for the status quo
Carlos Lenz, chief economist of the Swiss National Bank, said that blockchain is not the ideal technology for the implementation of CBDCs. Lenz says the Swiss central bank does not intend to introduce a digital franc. This institution is content, for the time being, with the existing payment system. There is no need to adopt a CBDC since other currencies, including the Euro, seem sufficient and do not require any substitute. He mentioned that a large number of technological alternatives already exist, and a digital currency is not needed.
In his opinion, the blockchain is too inefficient and a decentralised solution is too much. He argues that opening a bank account would be the simplest solution: why even consider digital currencies not regulated by a central authority?
China making progress
In an interview with the Swiss business weekly Handelszeitung, Lenz claimed a large number of global financial experts have their doubts about the blockchain. Still, if Switzerland seems reluctant to develop the CBDC, it is because its population trusts its central bank. Last year, SNB member Thomas Moser explained that the Swiss’ trust in the SNB means that a decentralised retail CBDC is unnecessary.
China, on the other hand, does not seem deterred by these economists’ arguments. Its experiments with general ledger technology as a catalyst for CBDC transactions are continuing as planned.
So, as usual, central banks and defenders of the blockchain are not on the same page. After all, if a system works for you, why change it?
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