The impact of blockchain deployment on central bank digital currencies is still being debated by economists throughout the world.
According to an economist at Switzerland’s central bank, blockchain, the underlying technology of cryptocurrencies such as Bitcoin (BTC), is not the best option for a central bank digital currency.
According to the German-language Swiss newspaper The Handelszeitung, Carlos Lenz, chief economist of the Swiss National Bank, blockchain-based decentralization characteristics are inefficient for state-controlled digital currencies like the digital franc.
According to reports, the economist stated that there are numerous technological options for creating a digital franc. “One could imagine a direct account with the National Bank. Not that we want to do that, but that would be the simplest form,” Lenz explained.
Another approach, he suggested, is to use blockchain technology to enable digital currency activities without the need for a central authority. Nonetheless, the economist claims that blockchain is “very inefficient,” and that “a decentralized solution is not ideal.”
Lenz went on to explain that the Swiss central bank has no intentions to develop a digital franc at this time. The economist noted that Switzerland’s “existing payment system works well” and that a CBDC is unnecessary.
If Switzerland intends to stay out of the CBDC development, the economist added, there is no possibility that the franc will be supplanted by other currencies such as the euro.
Several worldwide financial experts have questioned the use of blockchain technology for state-controlled digital currency.
Last year, SNB alternative member Thomas Moser claimed that using blockchain for a retail CBDC is unnecessary because trust already is supplied by the central party of a central bank.
The SNB, on the other hand, was still researching blockchain-enabled CBDC implementation options last year.
Despite continued debates about whether CBDC truly requires blockchain, the Chinese government continues to test the distributed ledger technology for CBDC transactions.
The People’s Bank of China utilized blockchain technology to successfully execute salary payments in the digital yuan in mid-June.
