Three monetary and foreign exchange experts discussed on Saturday the challenges and prospects for central bank digital currencies (CBDCs) at the Bitcoin Expo 2020 conference of the Massachusetts Institute of Technology.
The experts admitted that the distributed ledger technologies (DLT) could improve the global monetary system. Nevertheless, they argued that there are major challenges as regards privacy, interoperability and scalability of blockchain.
Central banks should not rush to implement DLT
Sonja Davidovic, an economist at the International Monetary Fund (IMF), said the central banks should not rush into the implementation of blockchain systems without properly scrutinizing the technology first.
She went up to say:
“What we’ve seen a lot is that there’s a hype out there and people are quickly jumping to choosing that technology just because it’s popular.”
“That certainly happened with blockchain. The result of that is that we’ve seen central banks that are directly engaging with it without going through the proper process of testing the technology in a proof of concept, selecting vendors through an open bidding process, and having a request for proposals,” she added.
Despite a set of DLT systems available to central banks, Davidovic claims that none of them have demonstrated strong privacy and interoperability.
In addition, the IMF official said:
“It’s about the weakest link. You can have a secure system, but if the people who’re operating the system click on a phishing email or allow a security breach, your most robust system is not going to help with security.”
For his part, Robleh Ali, a former official at the Bank of England, predicts that the CBDC will eventually take different “mixed” forms.
“You’ll likely end up with a hybrid in the end. I don’t think every central bank would choose the same system. How they interact with each other will be key, so you can sort them into a single system,” Ali said.
Earlier, Cryptolydian reported Lael Brainard, board member at the Federal Reserve, as saying that the central bank is more interesting in the idea of central bank digital currency than before.