After a Three-Year Test of Blockchain, Dutch Central Bank is Not Impressed
As blockchain technology becomes increasingly popular, there are many financial institutions that have started to experiment, hoping to see if the fintech can benefit them. One of the longest-running tests has been with the Dutch Central Bank, which created its own distributed ledger technology (DLT) prototypes to evaluate for the last three years. Reports from The Banker and The Next Web stated that blockchain hasn’t quite performed as they’ve expected.
The only use case that the central bank has found so far is with cross-border payments. However, markets that already have an established and effective payment system do not really have much to gain, as they are already at an optimal performance level. Instead of benefits, the company found several limitations, including the high energy consumption, a lack of confirmation over completed payments, and shorts in the actual capacity of the tech.
Petra Hielkema, who is De Nederlandsche Bank’s (DNB’s) director of payments and market infrastructures, commented that the institution started with “baby steps.” He and the bank took the time to examine the software that supports Bitcoin and the differences between centralized and decentralized mining. From there, DNB created and tested the aforementioned prototypes.
A developing use case for this technology appears to be the tokenization of assets, though Hielkema admitted that there are “certain activities” using smart contracts that could also benefit from the blockchain. He added that other banks and financial institutions around the world would benefit from experimentation with blockchain technology and artificial intelligence as well, since
“more innovation is needed.”
As far as cryptocurrencies, Hielkema stated that the bank does not believe that these assets are not considered actual money. Still, at this time, there’s no intention of banning them. The Minister of Finance in the Netherlands, Pete Hoekstra, was advised this year to create a licensing system that would work with crypto services, which could open the door for other use cases that banks can explore.