The indications for Bitcoin on the website of the European Central Bank (ECB) are not very encouraging for potential Bitcoin investors. Statements like “No one is backing it. It is not a generally accepted form of payment. Users are not protected. It is too volatile,” nearly pull the biggest cryptocurrency to pieces. For central banks, the Bitcoin is an object of speculation. Nevertheless, they are developing great interest in Blockchain and the Distributed Ledger Technology (DLT). According to a World Economic Forum report from the end of March (“Central Banks and Distributed Ledger Technology: How are Central Banks Exploring Blockchain Today?“, more than 40 central banks worldwide are currently working on how they can use the DLT themselves as the “Central Bank Digital Currencies” (CBDC).
CBDC aims to tackle “long-standing challenges”. According to the report, these include “financial inclusion, payments efficiency, and payment system operational and cyber resilience.” With this broad application of the new digital technology, the central banks thus assign the Bitcoin technology a high competence to solve problems in the payment traffic. – Not without contradiction to the judgment of Bitcoin as a pure speculation object. Overall, the report lists nearly a dozen potential uses or fields of research where central banks operate.
But how do the central banks stand to the real genius of blockchain technology – a payment system that is not controlled by individuals, but only by the worldwide community of those who expand the algorithm? Professor Joachim Wuermeling, Member of the Board of the Deutsche Bundesbank, describes this as “an extreme variant of decentralized accounting”. At the Financial Week Stuttgart in early April he expressed the opinion that this is not viable within the regulated financial sector, because it is not compatible with basic principles of regulation. Always one party (at least) must take responsibility for the risks: “A completely decentralized network in which no one takes the responsibility for the proper functioning of the network is simply incompatible with this principle. Institutes using distributed ledger technologies therefore rely on closed networks with authorized members”.
However, the fact that a completely decentralized network can function smoothly, even though nobody has the responsibility, is constantly being proven by the internet. On the contrary, an internet regulated in some way by a party would be hard to imagine. Even a regulated blockchain in the hands of a party is like swimming in shallow water. Hence, it remains exciting to see how Bitcoin and the banking system will evolve in parallel.