A quick 3min read about today's crypto news!
The world’s banks should brace themselves for the new era of decentralized finance (DeFi) by preparing the necessary technology to maintain and exchange cryptoassets and central bank digital currencies (CBDCs), according to a recent report by blockchain company Cypherium and the Boston Consulting Group (BCG).
Cypherium and the BCG say that banks should prepare for the incoming major disruption through the following four non-exhaustive steps:
The report came to the above conclusion with several challenges in mind.
The study recognizes three major central banks at the vanguard of this process, namely the People's Bank of China, Sweden's Sveriges Riksbank, and the European Central Bank (ECB) - as they are “ahead of the curve in terms of digital currency experimentation”.
The ECB, for example, has proposed both centralized and decentralized implementations for the digital Euro, the report said, adding:
“To retain an element of bank intermediation, it seems likely the currency will indeed be built on a combination of centralized ledger and distributed ledger, using a system such as asymmetric cryptography. Both ledgers give the central bank power to supervise transactions."
Meanwhile, the US has not yet announced any technical roadmap related to its CBDC project, but “it is likely that it will favor a centralized design, as China has done,” according to the study.
The introduction of CBDCs and the rise in popularity of cryptocurrencies threaten banks from two directions: big techs can take over a share of their markets, and central bank-backed alternatives to cash can make banks redundant as intermediaries, say Cypherium and the BCG.
This said, for “the most part, it is likely that banks will continue to act as distributors, maintaining some balance in the system,” according to the report.
The way banks should think about CBDCs is in the same way they would approach the introduction of any new payment rail offered by central banks," said the report. "
"At a minimum, they must address the many misunderstandings associated with blockchain technology and ensure existing systems are future-proofed for the disruptive changes ahead," the report concludes.
Learn more:- Central Banks Look To Two-Tier Retail CBDC Model Amid Disruption Fears- Check Out FSB's Roadmaps for Stablecoins and CBDCs- The Financial System Is In 'An Age of Disruption,' BIS Official Admits- IMF: Issue CBDCs, Improve Cross-border Payments to Counter Crypto’s ‘Phenomenal Growth’- Visa Testing Regulatory Waters Before ‘Forcing Though’ its CBDC Solution- Ripple Says it Will Pilot a CBDC for Bhutan