Blockchain or distributed ledger technology should be rigorously tested before they can be implemented in the payments system, Yves Mersch, Member of the Executive Board of the European Central Bank, said recently.
Speaking at the Bank Negara Malaysia Monetary Policy Conference, Kuala Lumpur, Mersch added a word of caution in terms of the cost savings from new technologies such as the distributed ledger. He said that detailed research is required for the system to be beneficial to all the parties.
Considering an example of Digital Base Money (DBM) – an electronic claim on the central bank, Mersch said if a central bank switches to just providing DBM instead of cash, it could lead to two possibilities:
“Would the system involve each individual having an account at the central bank, or involve a decentralised system where each individual has an electronic wallet and the central bank is unaware of transactions that take place. Either system could be implemented using a distributed ledger, but the set up would be quite different in each scenario.”
To that end, he said that DBM would require significant safeguards to protect individuals from theft and from loss of personal information.
“Adopting untried technology that ultimately proves unreliable could seriously endanger public trust in the currency and in the central bank. Any new payments system technology should be rigorously tested before implementation, with due regulation and oversight thereafter,” Mersch added.
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