Chilean Central Bank Governor: Central Banks Digital Currencies Can Be Issued Without Blockchain

According to Chile’s Central Bank Governor, Mario Marcel, digital currencies issued by the central banks are beneficial and can run outside of the blockchain technology, the Block reports.

The governor was speaking during the OECD's Global Blockchain Policy Forum that was held last week. Marcel stated that CBDCs are not new in the finance industry as they have existed ever since the real-time gross settlement (RTGS) were founded.

Marcel intimated that blockchain technology is highly useful in a situation where there are many participants of a given platform and they require to access the ledger information or in situations where the participants distrust each other. In this case, Marcel explained, proof of work is imperative as it makes the register immutable.

According to Marcel, in the case of a central bank issuing a currency whether in the form of fiat or virtual, trust should always be a guarantee. The governor also added that ‘it's far from obvious’ that an entire lot of participants are entitled to crucial and sensitive information and data like CBDC transactions and movements.

Marcel gave an example of Uruguay whose digital currency, ePeso, that has already been issued in the pilot phase, is not developed on the blockchain technology. The Chile Central Bank Governor does not seem too optimistic about his country having a CBDC, arguing that developing and emerging economies need to pursue other alternatives first like offering fast and efficient payment solutions before issuing CBDC’s.

Marcel’s comments do not mean that Chile’s Central Bank is not keen on blockchain technology. The bank is currently exploring how it can use blockchain technology for other solutions other than virtual currencies such as bonds. According to the governor, the Central bank is partnering with domestic central securities depository (CSD) in efforts to find ways of issuing blockchain-based bonds. At the moment, proof-of-concept is going on and the governor stated that once the report is released more details about the project will be released.

Marcel’s comments come at a time when various central banks are exploring the idea of issuing their own digital currencies especially after Facebook announced the Libra project.