"We are nowhere near the web yet."
So said Neha Narula, director of research at MIT's Digital Currency Initiative, at a one-day event hosted by the MIT FinTech Club this weekend.
Speaking at MIT Fintech Conference 2017, Narula discussed where blockchain is in terms of its evolution, offering strong words of caution for more novice observers.
The comments cut to the core of popular comparisons to the internet that seek to portray blockchain as a mature technology vertical. Further, Narula's comments were a stark contrast to other voices on the panel, there to focus on blockchain and its impact on banking.
Narula told attendees:
"At MIT, we are pretty certain we are in the 1970s or 1980s. We think we are around TCP/IP era. We are just figuring out the basic protocols of what is going to be network technologies.”
Banks and blockchain
At other points in the panel, conversation switched to external interest in blockchain tech.
For example, Tim Grant, CEO at R3 Lab and Research Centre, argued blockchain tech won't overhaul the banking system until we get governments, regulators and central banks all on board.
He told the audience:
"You don't know regulations until you get into financial services."
That's not to say that there was broad agreement on that opinion, however.
Karen Hsu, head of growth at blockchain web services startup BlockCypher, countered, stating that, in instances like remittances, "need" and "pain" will lead onerous regulations to adapt.
Because blockchain cuts out the middleman, the technology has the potential to make sending money across borders easier, she argued. Though, even those efforts have run into regulatory problems.
On the other hand, as Andrew Keys, head of global business development of ethereum startup ConsenSys, pointed out, we are seeing a tremendous push for digital ledger technology internationally.
Some of the more active jurisdictions, he noted, have been places like Dubai and Singapore – smaller regions that may be more aggressive in implementing the tech.
Last year, for example, Dubai's government announced it intends to shift all transactions to blockchain by 2020 as part of a strategy to make all departments more efficient. Further, local regulators like the Dubai International Financial Centre (DIFC) are becoming involved.
Snag in the plan
Still, some financial processes, like trade settlements, may continue uninterrupted.
Mainly due to a process called 'netting', it is unlikely blockchain technology will ever be useful in settling trades, according to Mark Wetjen, managing director and head of global public policy at Depository Trust & Clearing Corporation (DTCC), a post-trade financial services company.
Netting, a process for consolidating transactions, minimizes the regulatory burden that comes with trading capital markets.
While the DTCC processes $3.5tn worth of trades every day, those transactions don't happen in real time. Instead, payments are aggregated, so that only a net value is settled between parties based on a security on a particular day.
"Is there some way where netting isn’t so important anymore, in which case, some technology like a blockchain-based approach could work? Otherwise you are dealing with the concept of gross settlement, where you settle every single trade that takes place in the course of a day. It is massive and introduces a hell of a lot more risk, so most firms don't want to do that."
On the other hand, he argued, distributed ledger technology is ideal for credit default swaps and 'repos' – a use case the utility is actively exploring with startup Digital Asset Holdings.
In fact, DTCC announced earlier this year a plan to use blockchain to rebuild its platform that processes $11tn worth of credit default swaps.
One thing the panel did agree on, however, is that the blockchain tech still has a long road to travel before meeting the mainstream.
If that is the case, some of the big disruptions many hope to see in banking, even if they occur incrementally, are still some way off in the future.
Hsu summed up the sentiment, saying:
"While we are making clear, quick wins in areas like reporting and reconciliation, to reach real promise it will take many more years, more collaborations."
Senators in the state of Nevada have unanimously backed a proposal that would block local authorities from instituting taxes or fees on blockchain use.
According to public records, after just over a month of deliberation, the Senate advanced the measure following a 21-0 vote, with zero abstentions.
As CoinDesk reported last month, it’s the first measure of its kind that would prevent local officials from charging money to use a distributed ledger or a smart contract tied to one. Sen. Ben Kieckhefer initially submitted the measure on 20th March.
The bill stipulates:
"A local governmental entity shall not: (a) Impose any tax or fee on the use of a blockchain or smart contract by any person or entity; (b) Require any person or entity to obtain from the local governmental entity any certificate, license or permit to use a blockchain or smart contract; or (c) Impose any other requirement relating to the use of a blockchain or smart contract by any person or entity."
Other elements of the bill would clear the way for smart contracts and blockchain signatures to become acceptable records under state law, similar to a measure that was signed into law last month in neighboring Arizona.
The bill now moves to the Assembly – the lower chamber of Nevada’s bicameral legislature – for further consideration.
The cryptocurrency world is maturing and the debate over the right long-term consensus protocol is intensifying. The outcome of this debate will shape the future of the entire ecosystem.
The purpose of a consensus algorithm in a public Blockchain network is to make sure that the network’s participants agree on the current state of the Blockchain without the need to trust each other or to have a central authority.
It all started with Proof of Work
The use of Proof of Work mining was initially proposed to establish that a given block had required a certain amount of work to be mined. This allowed users to simply pick the longest valid chain with the highest amount of work as the correct chain.
However, Proof of Work is extremely inefficient in terms of energy consumption. This makes it expensive and incentivizes miners to centralize the hashing power. So, instead of pushing us towards a truly distributed network, these concentrated mining farms have become de facto authorities.
Another alternative was needed.
The focus switched to Proof of Stake
A Proof of Stake algorithm has nothing to do with mining. Instead, it is about validating. The specific actor responsible for the next block in the chain is determined by the Proof of Stake algorithm. In order to avoid overly concentrating this power, the algorithm must have some kind of randomness. At the least, voting shares must be distributed properly to avoid morphing into a centralized system.
In a Proof of Stake system, each validator must own some stake in the network. These stakes are bonded, which means that network participants deposit some money into the network using it as a collateral to vouch for a block.
In a Proof of Work network, everyone accepts the chain as valid because a significant amount of effort has been employed. Meanwhile, in a Proof of Stake network participants trust the chain with the highest collateral.
Within the cryptocurrency world Proof of Work remains the most widely adopted consensus algorithm. However, a few prominent projects including NXT, BitShares and Ethereum use or are migrating to Proof of Stake.
Even within the Bitcoin community, some members are considering trying to change the digital currency’s Proof of Work consensus mechanism to address scaling issues and improve the network’s operation.
But could there be a better alternative?
One project that launches its ICO on May 1st uses a technical design that goes far beyond both Proof of Work and Proof of Stake. The project is called VIVA and it introduces the concept of Proof of Authority.
What is Proof of Authority?
VIVA introduces the concept of Proof of Authority as an algorithm which delivers instant transactions and seamless consensus over a truly distributed network.
We recently asked William Banks, CTO at VIVA, to compare Proof of Authority with PoW and PoS models. “While Proof of Stake might have certain advantages, it is not a panacea. The problem is that there is no guarantee that the validator with the highest collateral deposited for a block is going to operate the network in its best interests.”
“In fact,” he says, “Proof of Stake coins are plagued with issues because rational people tend to act in their own self-interest. PoS works only because the best interests of the largest stakeholders usually do align with those of the network. In the case of a disagreement, however, the largest stakeholder might assume the role of the supreme commander.”
Keeping the endgame in mind is important
The distributed Proof of Stake algorithm was created to solve problems with the earlier Proof of Work algorithms. To make it work the decisions are weighted based on multiple factors.
First and foremost, the size of the stake and the interests of a validator are taken into account. Secondly, it is important to check when their decision last became the primary decision agreed upon by the network’s participants. Finally, it needs to be considered whether the outcome of this decision met with approval by the majority of the network participants.
“The proposed algorithm, however, does not account for the long time player who has the final endgame in mind from the very beginning.”
The Proof of Authority model suggested by VIVA disposes of certain egalitarian notions involved in weaker consensus models replacing them with cryptographic signature proofs and business contracts enforced and backed by the network.
The authority in this algorithm is de juris mutual assent to a settlement between the various parties based on the pledge of one set of assets against a whole other set. Thus, if one party falls out of consensus, the other parties automatically assume the non-consenting party’s assets and liabilities so that end users remain unaffected.
Banks goes on to explain:
“Nothing is lost in this scenario and a worst case event results in bankruptcy of the one who issued the uncovered notes, rendering it feeble and powerless until debts are repaid and the party is brought back into consensus.”
Each participant plays a distinct role and the network is able to respond to price changes by increasing or decreasing the energy in the system whether in a specific location or globally. Price and supply are used in the system just like the accelerator and brake pedals in a car.
Reinventing the Blockchain
The VIVA team asserts that their Blockchain differs significantly from previous models.
It is designed to be a multidimensional graph rather than linear like a traditional chain. Under this design, the VIVA network is said to be more akin to neural networks, with linked, weighted, interconnected data and an optimizing mechanism. This solves the NP hard “traveling salesman problem”, in order to reroute the network into multiple optimal configurations depending on the tasks required of it.
By drawing from information in their Content Addressable Network (CAN), the VIVA ecosystem allows for a more robust and intelligent network. Rather than reinvent the wheel, the VIVA team took advantage of hundreds of millions of dollars in research and investment by starting off with a custom fork of the powerful Hyperledger Fabric, which is backed by the likes of IBM and Intel.
VIVA has a three-tier cryptocurrency model consisting of VIVA Crowns, VIVA Coins and market-pegged instruments called vX which are tied to local fiat currencies for storing value like vUSD, vMXN or vEUR, etc. Within the system, VIVA Crowns are an indivisible digital asset secured by the best cryptography available. They grant the owner rights to access the network, operate a business referred to as a mint, and receive a Treasury Right (TR) every 90 days to mint a share of the total VIVA coins allotted within that quarter.
Within the VIVA network, coins are not mined, they are minted. A mint here can be thought of as a hybrid between a master node and a mining pool, which is allowed to conduct any business activity except minting VIVA Coins to sell on the open market. VIVA Crown Holders who do not operate a mint can sell their quarterly Treasury Rights to other mints who need them to cover their operational expenses.
With a few tricks up their sleeve
The VIVA Network goes far beyond being just another cryptocurrency. From its inception, it relies on real world business applications to bring in energy into the system. For example, TradeQwik is the crypto/fiat exchange and the primary gateway in and out of the VIVAconomy. It is the first operating mint on the evolving VIVA Network and is currently available in beta.
All transactions on TradeQwik are done using the network token VIVA Coin, with a few exchange pairs being offered for trading, including Bitcoin, Litecoin, Ethereum, Steem, Dash, Golos, XAU/GBG, USD, and MXN.
Another VIVA Business Application is Cashola, which is a peer-to-peer payment system which utilizes text messaging as a tool for making transactions. The solution will enable money transfer services to people around the world who may not have smartphones with a stable Internet connection but do have a cellular service. The VIVA team is planning to expand their money transfer licenses to further develop the service while also making it more simple and convenient for end users.
VIVA has also developed MedicAxess, an application which hopes to become a game changer in the medical industry. The app will allow individuals to control all of their medical records rather than having them scattered between medical clinics, hospitals, labs and health care providers. Individuals will be empowered to control who has access to their records when they seek medical care. MedicAxess is a unique application in that medical services providers will be allowed to store medical records on the network securely and for free. They will only pay a small fee when they access records on behalf of a patient.
Last, but not the least, VIVA introduces POETS (Proof of Educational Transcript System). In the near future, this application will connect educational institutions into a single network of credits earned by students. They will be able to choose courses and instructors from a pool of institutions, collecting the credits over a lifetime, and ‘cashing them in’ when they are degree-ready, and the issuing institution agrees. A lot has been said about life-learning, now there is an actual tool to ensure it, provided by VIVA.
The VIVA team is building an entire ecosystem encouraging each and every member of the community to participate. On May 1, VIVA is launching their ICO, which is going to last until May 21. During the ICO, a total of 6500 VIVA Crowns will be available for sale. After the ICO only one Crown will be discovered per week with no more than 42,000 Crowns ever being issued.
To learn more about the VIVA project, applications currently being developed and the upcoming ICO, please visit their website.
In what is likely the highest-profile purchase of an industry firm so far in 2017, music streaming giant Spotify has acquired blockchain startup Mediachain Labs.
As profiled by CoinDesk last year, Mediachain sought to develop a platform that would enable creators to attach information to projects and create a record on the bitcoin blockchain. That information would then be stored on the InterPlanetary File System, or IPFS.
While the terms of the deal were not disclosed, according to Spotify, the startup's team will be integrated into its New York offices where work could continue on similar initiatives.
Spotify said in a statement:
"The Mediachain team will join our New York City offices and help further Spotify's journey towards a more fair, transparent and rewarding music industry for creators and rights owners."
In a blog post announcing the move, the Mediachain team said that its Mediachain protocol will remain open-source.
"As we sync up with Spotify, we will turn Mediachain over to the [open-source software] community — all source code and documentation will remain open source and openly licensed," they wrote.
The startup declined further comment when reached.
Mediachain previously attracted $1.5m in seed funding from a number of big-name investors, including Andreessen Horowitz and Union Square Ventures.
Ripple is adding 10 new banks and financial services providers to what it's now calling its "blockchain network".
Founded in 2012, Ripple has raised nearly $100m for its distributed ledger tech and related payments products, but it has been increasingly active of late in seeking to formalize enterprise partnerships amid a wave of high-profile consortium efforts.
The new partnerships find Ripple showcasing its reach and influence. New members include MUFG (Japan), BBVA (Spain), SEB (Sweden), Akbank, Yes Bank (India), Axis Bank (India), SBI Remit (Japan), Star One Credit Union (US), EZ Forex (US) and Cambridge FX (Canada).
In an interview, Ripple VP of product, Asheesh Birla explained the company is beginning to define its offerings in more collaborative terms. While its product allows for faster cross-border payments, Ripple is also creating a set of standards for banks to follow while using its underlying tech, he said.
Birla told CoinDesk:
"You need a whole ruleset, and that's why we call it a blockchain network and when we say that partners are joining, they’re actually agreeing to the standards and rules that accompany the technology as well.”
The new partner banks and companies are a mix of inbound and outbound services. As Birla explained, Indian banks Yes Bank and Axis Bank are receiving more cross-border payments rather than issuing payments out.
MUFG in Japan, on the other hand, manages both. "They would be processing payments for a lot of Japanese that want to send money to other destinations like Turkey and India but then there’s a lot of demand for sending payments into Japan as well," he said.
Faster payments is one advantage, but members also cited other advantages.
Evan Shelan, chairman of EZ Forex said, "The benefits [of the blockchain] are about adding the most advanced level of security to each payment through the distributive ledger for our financial institutions."
Of course, a global network is perhaps a natural fit given Ripple's recent focus on the cross-border DLT opportunity. According to Birla, many banks are feeling the need to process more international payments than ever before.
As such, Birla framed DLT as an advance that could help financial institutions with a broader set of problems. For instance, without a standardized procedure, he argued things gets messy when operating payments to several different countries.
"[Banks are] looking at this as a new kind of service that they can offer that would compete with a lot of the startups in their space," he said.
Still, work needs to be done to boost the Ripple ecosystem, and Birla said that banks were chosen, in part, due to their expertise with their local regulatory environment.
"The reason that we chose to work with banks is that they are experts in local regulation. A lot of them have that pull and understand the regulatory environment and we built our product in such a way that it fits within the different regulatory schemes around the world."
During the past year, a number of blockchain projects have focused on trading bullion, but what about gold that's still in the ground?
That seemingly unlikely business model is precisely the aim of a new partnership announced last month between Orebits, a startup providing asset-digitization for precious metal reserves, and blockchain product provider Symbiont.
The deal would see the creation of so-called smart certificates, or smart contract investment instruments, tied to proven gold reserves (supplies of the metal known to be in the ground, but that haven't yet been processed).
Despite the physical restrictions of the gold itself, the smart certificates, known as 'orebits', can now be freely traded and exchanged as tokens on a blockchain platform provided by Symbiont.
Michael Zimits, Orebits’ president and COO, told CoinDesk that each of the certificates will be backed by five ounces of proven gold reserves.
"Orebits derive their value from the price of traded gold, providing exposure to the price movement of the precious metal without having to deal with the physical properties and logistical concerns of holding the asset in tangible form."
As for how someone might confirm the gold reserves are real, Zimits explained that the smart contracts house this information directly.
"This documentation is made available on the distributed ledger as part of the smart contract and includes geological surveys and findings, geologist verification, registered chain of custody, corporate documentation and owner background verification," he said.
As such, the partnership represents the latest effort to bridge the worlds of gold and blockchain. So far this year, companies like Euroclear and long-standing institutions like the UK Royal Mint have revealed plans to launch marketplaces enabling gold exchange via the technology.
In this light, Orebits is the latest entry in what is proving to be an attractive use case for blockchain, and further fits into the broader trend of enterprises seeking to leverage blockchain tech to open new revenue streams.
Chinese internet conglomerate Tencent is building a suite of blockchain services, detailing the plans in a new white paper.
The firm – the maker of popular social services such as QQ and WeChat – is planning to use the technology to offer digital asset management, authentication and "shared economies", among others services. The new platform, dubbed "TrustSQL", is envisioned as a three-part system, incorporating the core chain layer, a product and service layer, and an application layer.
In statements, Tencent said that it would leverage its technological resources to push the platform, and that it sees the project as an open-ended one that encourages collaboration with other firms. (TrustSQL is envisioned as a way "to promote the development of [a] trusted internet", according to a rough translation of the paper.)
The white paper further included a call for the government to play a more active role in the development of blockchain within China.
"The involvement of government in the development and regulation of block chains is necessary and should encourage in-depth research on blockchain technology and block-chain applications," the authors wrote.
Though the exact timing of the launch isn’t yet known – statements indicate that the platform is still in development – the unveiling nonetheless represents Tencent's most direct move in the blockchain space to date.
Last summer, a subsidiary of Tencent was among 31 companies in China to back a Shenzhen-based blockchain consortium. Tencent-backed Webank also took part in a blockchain event in September of last year.
Swift has officially selected Hyperledger's Fabric codebase for use in its most prominent blockchain project.
Designed to simplify the nostro-vostro accounts banks held to facilitate international transactions, the trial includes participation from BNP Paribas, BNY Mellon and Wells Fargo, as well as three other global financial institutions.
As a founding member of the Linux-led Hyperledger project, it's perhaps not surprising Swift has decided to base its trial on the technology, though it lauded the final work for functionality including user-tailored access to data and other privileges.
If the blockchain proof-of concept (PoC) is successful, Swift's head of the global payments innovation (GPI) initiative, Wim Raymaekers, went so far as to say it could save as much as 30% of the reconciliation costs associated with cross-border payments.
Raymaekers told CoinDesk:
"We're really looking to see if banks can gain better visibility on their information; to optimize the liquidity that they have on one end, but also to reduce the cost of reconciliation."
Other banks participating in the PoC include the Australia and New Zealand Banking Group (ANZ), the Development Bank of Singapore (DBS) and RBC Royal Bank, which were already working with Swift on GPI.
These partners will be joined by 20 other institutions during the test phase of the implementation.
Notably, the trial will also attempt to capitalize on existing standards used by Swift members. The data stored on the blockchain and the APIs used to query and update that data will conform to Swift's ISO 20022 message formats.
If successful, the blockchain PoC could be incorporated into Swift's GPI solution.
"When in comes to exchanging data between nostro and vostro data in accounts, there are solutions today," Raymaekers said. "We are looking to see if DLT is a better solution."
To facilitate international transactions, banks typically store money all over the world in what are called nostro accounts. Yet settlement times can take weeks depending on the complexity of the transaction.
While nostro accounts are designed to save time by moving money closer to where it's needed, before it's needed, that money lies dormant when not in use, collecting less interest than if it was applied in a more active way.
To test if a distributed ledger could minimize the reliance on correspondent banks, Swift divided the trial into two parts, according to Raymaekers.
First, there's the technology itself. Swift's Fabric PoC is being built to leverage the bank messaging platform's existing GPI resources. While launched in February with 12 members, 30 banks are now in some stage of implementation of GPI, with more expected to go live soon.
Using more traditional technology on the GPI toolkit, Raymaekers said Swift has already improved the speed and transparency of its services and now wants to see if blockchain can take it even further.
"Several hundreds of thousands" of messages have been sent since GPI's launch, he said.
The second part of the PoC centers on business. On top of the blockchain implementation itself, Swift's developers plan to build and run a smart contract that could help automate the transfer process.
"We are using DLT to exchange the debits and credits," said Raymaekers. "We are building value added on top through a smart contract application that will show to a bank in real time what it's position is."
Still, the test also occurs within the wider narrative surrounding Swift, since earlier on in the frenzy surrounding blockchain tech and its possibilities, the financial messaging provider was identified as one of the middlemen most likely to be disintermediated.
Along with the DTCC and others, supporters of the existing legacy financial infrastructure were targeted by startups built from the ground up to capitalize on the efficiency of distributed ledgers.
Yet, this year Swift has established itself as open to the idea of evolving its own business model for possible integration with blockchain tech.
While some skeptics persist in doubting Swift's willingness to let go of its market position and adapt to a new paradigm, Raymaekers asserted that its receptivity to changes goes beyond this project alone.
"Maybe there’s a completely new way where you don’t need to hold money at accounts with your correspondent bank. But that is a complete rethinking of the correspondent banking paradigm."
There are more businesses incorporated in Delaware than there are people – a balance the state's leadership hopes blockchain can help change.
Already the location to more than 1 million incorporated businesses, many of which actually conduct their business elsewhere around the world, Delaware believes blockchain has a significant enough global pull that it could inspire companies to set up brick-and-mortar offices in the state.
To that end, Delaware representatives have exclusively revealed to CoinDesk a new partnership with European strategy firm Spitzberg Partners – one designed to leverage the expertise of the firm, as well as its own technological and regulatory development around blockchain, as a means to entice international businesses to set up shop in the state.
Delaware recently reduced its revenue projections for the year. Yet, the injection of capital that could arise from the project has the potential to make a significant impact, according to Andrea Tinianow, the director of state-run business development initiative Delaware Global.
She told CoinDesk:
"People know about Delaware because companies incorporate here. But, we want people to know that it's more than just where to incorporate, they can do business here and if it's distributed ledger, even better."
Initially revealed at CoinDesk's Consensus 2016 conference in New York, the Delaware Blockchain Initiative has grown from an effort to build a stock trading solution with New York-based Symbiont to include a number of regulatory measures crafted with the help of law firm Cooley LLP.
Tinianow said the state of Delaware is already being approached by companies all over the world interested in incorporating in Delaware to take advantage of its historically light regulatory touch and its progressive stance on blockchain and other financial technology.
Germany-based Spitzberg Partners, she went on, is already working with its clients to help "create awareness" of what they consider the benefits of opening a physical presence in the state, including the absence of state income tax and a chancery court that not only doesn’t use juries, but has proven to be rather knowledgeable regarding blockchain tech.
"This is the first chapter. I think there’s a lot of exciting things that lie ahead."
Already, ties exist between Delaware and Spitzberg Partners, which was co-founded by Karl-Theodor zu Guttenberg, Germany's former Minister of Economics and Technology.
In 2015, the then-state governor, Jack Alan Markell, conducted a trade mission to Germany in search of bilateral trade opportunities, and later helped open Factory Berlin Delaware – a co-working space modeled after an existing German initiative.
To help continue that trend as part of the new partnership with Delaware Global, Ulf Gartzke, Spitzberg's co-founder and managing partner, told CoinDesk his firm will introduce the state to "corporate decision makers from around the world".
"Our role will be to identify companies that are prime candidates to expand to the US," said Gartzke. "And of course, blockchain in one very important part. But we are also looking at other industry verticals."
Spitzberg's public partners include Toronto-based merchant bank Acasta Capital, Munich-based Ming Labs (which has offices in Shanghai and Singapore), and Zurich-based Mountain Partners.
The firm also has relationships with the Wall Street Blockchain Alliance in New York and distributed financial technology firm Ripple, which has been seeking to grow its presence in Japan and elsewhere from its base in San Francisco.
But there's another reason the partnership could end up having an impact not just on Delaware’s local economy, but on the future of public companies.
Part of Spitzberg's role will be to play a match-maker of sorts, finding startups around the world that might want access to more than just Delaware's blockchain-friendly regulations.
The availability of US capital also plays an important role to Delaware's appeal, and the state has been working with Symbiont to develop a blockchain-based way to sell shares in a company.
So, starting in tech hubs like Hamburg, Berlin and Munich, Spitzberg’s Steven Ehrlich says his firm will be looking for mature startups interested in being among the first to go public on a blockchain.
"There’s going to have to be a critical mass of them before companies start issuing shares and stuff like that," said Ehrlich, conceding that it's likely to be more of a "medium to long-term play".
Tinianow was positive about the prospect, however, concluding:
"It’s really not about Delaware, we just want to be the launching pad."
Central banks could allow access to accounts around the clock if they used blockchains or cryptocurrencies, a senior Bank of Japan official speculated last week.
Speaking during a finance forum on 21st April, deputy governor Hiroshi Nakaso touched on the subject of so-called central bank digital currencies, or CBDCs, and their potential impact on how people interact with their accounts at a given time.
One proposal is to offer central bank accounts to retail customers through a CBDC (something that officials at the Bank of England have highlighted in the past). In his speech, Nakaso brought up this idea, suggesting that, depending on the degree of adoption, such an arrangement could give accountholders continuous access to funds.
"In an extreme case in which CBDC provides the same functionality as banknotes as an alternate measure, it could enable everyone to access central bank accounts 24/7, year-round. Some overseas central banks have started to consider the rationale for or to conduct researches and analyses on CBDC."
Many central banks today are testing the concept of a legal tender issued in a wholly digital medium.
In the past month, Hong Kong's de-facto central bank moved to begin testing a CBDC, and in March, authorities in Singapore completed a similar trial. Central banks in Canada, China, Sweden and the UK, among others, also have projects in various states of development.
The Bank of Japan itself has been trialing the tech, noting in statements in December that it was "test driving" the concept ahead of any possible applications. Late last year, for example, the Bank of Japan inked a deal with the European Central Bank to collaboratively research blockchain.
Still, the Bank of Japan has been largely mum on the work's potential impact, choosing to emphasize its early and experimental nature.