Will Central Banks Approve of Blockchain Technology?

Blockchain is the future. This statement has become a fact in recent months, and it is simply a matter of time before it is fully implemented into our financial system. The question we are faced with is simple: What will be the impact of Blockchain on Central Banks?

The argument presented by many technology websites is that Blockchain technology will free up billions of dollars for banks, in turn revolutionizing the finance industry. Financial institutions will completely change their system, a system that has been in place for over one hundred years.

Four major banks are at the forefront of the Blockchain revolution. UBS Group AG, Bank of New York Mellon Corporation, Deutsche Bank AG, and Banco Santander S.A. are teaming up in order to create a digital-only payment system that will improve trade settlements immensely.

This system will provide generous cost savings because it will allow back-office settlement systems to process trades far more rapidly than they do today. It is going to streamline the process and make it more efficient. Experts in the industry estimate that financial institutions spend over $65 billion each year to clear and settle trades.

This is where we get to Central Banks. All of these predictions about broad success and cost-savings will only work with adoption central banks. The Federal Reserve, the Bank of Canada, and the Bank of England have all launched investigations into digital currencies, questioning the security of digital currencies, and also the stability of the banking system.

If the plan succeeds, it will save billions of dollars for banks, however, for that to happen, the system would need to obtain approval from central banks.

The Dutch central bank is one that the Federal Reserve should be taking some notes from. They have begun developing an internal Blockchain prototype that they hope to launch in the next year. The Bank of England is not far behind, with the deputy governor for monetary policy, Ben Broadbent, indicating that a central bank-issued digital currency is soon to come. It will allow for the ability of banks to extend loans should consumers migrate to the digital currency. Researchers in the United Kingdom have also proposed a new cryptocurrency that the Central bank might look towards adopting. The French central bank said that distributed ledger models will replace the traditional operating mode clearinghouses.

Here you can see how the Hong Kong central bank is looking to leverage Blockchain!

One thing is sure for the future, the Central Banks will make sure to keep their leverage throughout the expansion of Blockchain.

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2 Responses to Will Central Banks Approve of Blockchain Technology?

  1. Robert Luba November 18, 2016 at 7:17 pm #

    An argument can only be represented as well as the advocate can present it. the poster here exhibits the utmost confidence and assurance to the viewer that block-chain banking is the direction banks are or are going to be traveling. If nothing else, this impressive confidence in the subject interests the reader to search further and find the root of this advocacy. As discussed in other posts on this blog, there is a lot of projected investment into the block-chain system. Another post discusses its application in future elections and presents to one that it would be the most secure way of preventing fraudulence in elections. This presented a new question all together, do people value their fair vote or their money higher. By the logic and simultaneous occurrence of these transfer systems, it would appear to be equal.
    the article duly notes that tens of billions of dollars are lost each year through ineffective transactions. Like an electrical wire, the more insulate it is, the less electricity is lost during travel and the more efficient it can be.
    Money is something that has dominated the world. Most nations in the world are capitalist and the ones that are not. Aside from most red nations, that do also put a high value on cash, just not in the hands pf its people, there is almost always a currency that governs what people will do. While the material or shape of the currency may not be consistent, most everyone around the world would agree that money is good to have in great quantities. It is an amazing universal constant that appears in the minds of every person that knows what a little cash can do and has imaged what a lot might. While the root of all evil, it is far from taboo.
    People take large steps to protect their money. On a small scale, people have been known to buy safes or fire arms to protect what is theirs personally. In terms of large businesses, it has become a profitable business to hold money outside of a nation in order to pay minimally for owning one’s cash. Not just earning money, but saving it is something that people have been focused on doing for as long as currency has existed. It is fine to have great revenue, but if the cost is equal or higher, the profit is little to none. This new system of keeping money from being stolen or lost, I think appeals to the efficient money owner who likes to spend as much as he can of what he has earned. In other words, everyone.
    As soon as this is realized, the system will undoubtedly be accepted widely until, inevitably, it is breached and a new system must be developed. The world is too hungry for profit to allow any more cash be lost before net income is declared. Although it may present some problems at first, people have had to become used to some features of other security boosters. If nothing else, its inception and broad use will hopefully do away with any sort of chip.

  2. kaitlyn healy November 22, 2016 at 8:00 pm #

    In the blog “Will Central Banks Approve of Block Chain technology?” by Rafael Gabrieli was difficult to understand until I watched the videos attached to the article. Although they were long and at times confusing, I started to understand the concept of Block Chain technology and understand why it would seem so important to implement in our financial system worldwide. The system that we know now has been in place for over one hundred years so this is a huge step in technology. One of the speakers on the video had a great quote that stated that the technology genie has been let out of the bottle and now we have to move forward with this. The idea of using this type of technology, which is a technology that utilizes blocks of transactions that cannot be erased and are all digital. This form of technology will save so much money because trades will be passed digitally and faster as compared to old technology with ledgers. The speed and accuracy because of this technology will save the banks money and time.

    When discussing the Central Banks this means the banks that oversee a countries currency, supply and interest rates. The Central Banks of each county are usually labeled as “The bank of….” An example is “The Bank of England”. In the United States are Central Bank is the Federal Reserve. These banks could all work together with this digital technology that could make everything easier from around the world and make our financial systems safer. Dealing with digital currency is not new as a matter of fact according to this article a few banks have started launching their own systems already. The idea of block chain is that transactions are immutable meaning they cannot be deleted.

    This digital currency once adopted by the central banks will move our world of banking and fiancé forward. The Central Banks do govern all commercial banks in their countries so the approval of digital currency has to happen for it to become widespread. The use of this technology is estimated to save financial institutions sixty billion dollars, and so much more time in trade speed.

    After watching all of this I realized that the reason we need to be so far advanced in our financial institutions is because thieves have evolved as technology has evolved. Bank robberies were used to be done with mask and guns and now the cyber skilled thieves can attack our bank accounts and credit information. How many times in the last few years have we seen cyber-attacks on different companies? If it can happen with the federal government who’s to say it cannot happen with the Federal Reserve, and if the Federal Reserve is attacked it most likely would be terrorist because if our financial system is compromised it could cripple our national and create a worldwide catastrophe.
    We as a digitally advanced world need to be a step ahead of all threats and that is the only way we can keep our assets safe.

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