The Chairman of the Board of the Bank of Lithuania has spoken about the merits of central bank digital currencies. He has labeled them as a new, more efficient, offering from central banks across the globe. Vitas Vasiliauskas has gone on to mention the benefits of distributed ledger (DLT) in regards to mitigating the need for intermediaries.
Vasiliauskas, whose country’s central bank falls under the BIS, was speaking at a Washington conference made public earlier this week.
Vasiliauskas underlined how a central bank digital currency (CBDC) would be a unique ‘novel’ kind of central bank money. Notably, he added that it would be true money as in his and the BIS’s view, cryptocurrencies such as Bitcoin do not fall into that category.
The BIS hit the cryptocurrency media space in 2018 when its general manager, Agustin Carstens, admonished crypto programmers to leave the task of creating money to the bankers.
Agustin Carstens: Banks Should Not Issue Digital Currencies https://t.co/CoFOtUiqaV— CCN.com (@CCNMarkets) March 22, 2019
A new central bank money
Vasiliauskas explained that currently, the central banking system issues two kinds of money. However, if they were to open the doors on CBDCs, it would allow them a third offering that could have many benefits derived from permissioned blockchain technology.
“Under the current financial architecture central banks issue two sorts of money: currency in circulation in the form of the good old banknotes and coins, and digital money, available as reserve or settlement accounts with the central bank,” Vasiliauskas explained.
“The CBDC would be a novel type of central bank money. Although also digital, it should be distinguished a traditional reserve account. The CBDC would also be fundamentally different from private crypto assets. This is because it would be money!”
He went on to stress that a CBDC would not be a conventional reserve account, nor a private crypto asset. Instead, he claimed it would operate a lot more like what JP Morgan is trying to do with its JP Morgan Coin.
Why JP Morgan’s ‘Bitcoin Killer’ isn’t Even a Real Cryptocurrency https://t.co/TpMT7XxKb2— CCN.com (@CCNMarkets) February 14, 2019
The significant benefit for central banks
Vasiliauskas went on to discuss the merits of a CBDC, even touching on the benefits of blockchain tokens and their lack of intermediaries as he discusses the accessibility these CBDC would add.
“Some argue it could be run on a distributed ledger,” mused the chairman of the board. “In such a case, it would replace or complement reserves at the central bank with a restricted-access digital token.”
“A token would be a bearer asset, meaning that during the transaction the sender would transfer value to the receiver, without intermediaries. This is something fundamentally different from the current system in which the central bank debits and credits the accounts without transferring actual values.”
“But here is only one of several possible scenarios for the wholesale CBDC,” he added.
Seeing the wood for the trees
Vasiliauskas’ speech outlines the potential benefits of a distributed ledger token for central banks and this is a positive step for the adoption and advancement of the technology. However, central banks still seem steadfast on denying the value of existing public cryptocurrencies like bitcoin.
The goals and efficiencies central banks are looking to achieve with these CBDCs seem to be dancing around the current cryptocurrency system. The bankers are rather looking at CBDCs to be primarily in their control, but able to run independently without the need for intermediaries.
The likes of the JP Morgan coin, and even Ripple’s XRP token to some extent looks merely to be a watered down, centrally controlled version of an actual cryptocurrency. For central banks and their traditional centralized control, this is quite suitable. However, one has to wonder when they will begin looking at the more profound potential of fully decentralized cryptocurrencies.