"While the case for digital currency is not universal, we should investigate it further, seriously, carefully, and creatively."
A revolution is under way in the world of payments and a well-articulated speech by IMF Managing Director, Ms. Christine Lagarde, advocates this revolution by launching the starting pistol for central banks across the globe to evaluate the importance of their roles in providing a central bank sanctioned digital currency.
While it is now evident that distributed ledger technology has application in many different sectors, the financial industry’s readiness for it has been misconstrued. The revolution of fiat money as we know it has already begun and embracing the changing nature of money by central banks is now time-critical and inevitable.
"What role will remain for cash in this digital world? Already signs in store windows read "cash not accepted," noted Ms. Lagarde during her speech at the Singapore Fintech Festival 2018.
Precursors of this revolution, ProgressSoft Corporation, has developed a Blockchain-based Central Bank Digital Currency, PS-CBDC, which is an advanced, secure form of cryptocurrency based on the most mature form of permissioned distributed ledger technology. The solution eliminates the need for clearing, settlement and reconciliation by enabling an instant transfer of digitized money ownership, one which comes with a one-to-one exchange rate with fiat money.
"This currency could satisfy public policy goals such as financial inclusion, and security and consumer protection; and to provide what the private sector cannot; privacy in payments." revealed Ms. Lagarde.
Indeed, not only does PS-CBDC provide secure, real-time transactions with no intermediaries which thereby promotes financial inclusion, it also achieves interoperability with existing financial ecosystems while maintaining Blockchain data privacy and transaction confidentiality. Furthermore, the Central Bank is the sole authority for PS-CBDC and this is what gives it the legitimacy it needs to be an accepted currency; it is regulated. It is a fully decentralized peer-to-peer solution with no single point of failure and multi-phases of validations and consensus protocols; providing comprehensive, immutable ledgers of all transactions and money movements, and real-time balance inquiry for all PS-CBDC registered wallets.
PS-CBDC also allows for the autonomous enforcement of business rules and regulations through the execution of smart contracts and the integration of complex documents with the payments process i.e. mortgages or business contracts. The Central Bank is empowered with identity management capabilities to register, enroll, or revoke permissioned network users based on multiple certificate authorities, and special privileges for the Central Bank to be able to perform monetary functions. "Putting it another way: the central bank focuses on its comparative advantage—back-end settlement—and financial institutions and start-ups are free to focus on what they do best—client interface and innovation. This is public-private partnership at its best," stated Ms. Lagarde during her speech.
PS-CBDC grants central banks with what they have been longing for; a form of currency that serves as a practically costless medium of exchange; a secure store of value; and a stable unit of account.
And now, with the provision of an advanced currency and the launch of the starting pistol for central banks; will nations be quick to adapt, or will they fall behind the rapid Winds of Change?