The Bank for International Settlements (BIS) has presented its ambitious strategy for 2024, highlighting its focus on Central Bank Digital Currencies (CBDCs) and tokenization.
However, this emphasis on CBDCs raises critical questions, especially when it comes to the very essence of cryptocurrencies: decentralization.
CBDCs, designed to be issued and backed by central banks, represent a significant shift in the decentralized paradigm that characterizes cryptocurrencies like Bitcoin.
While cryptocurrencies seek to eliminate intermediaries and empower individuals with a financial system outside of government control, CBDCs reinforce central authority.
This shift towards CBDCs raises the fundamental question :
Is it possible to maintain decentralization in a world where central banks seek their own CBDCs?
Following testing of its wholesale interbank system and retail CBDC prototype in 2022, Project Aurum, in collaboration with the Hong Kong Monetary Authority (HKMA), enters its next phase.
Project Aurum explores the privacy of retail payments through cryptofiats, while presenting technological advances, it also highlights concerns about individual privacy.
Mass data collection by centralized entities can undermine financial privacy, a crucial aspect of more traditional cryptocurrencies.
Project Promissa, the result of collaboration between the BIS, the Swiss National Bank and the World Bank, aims to digitize promissory notes, a traditional form of paper-based financial commitment.
The tokenization of promissory notes in Project Promissa, while promoting innovation in financial management, also raises questions about the true preservation of sensitive information.
This emphasis on CBDCs, while it can be seen as a natural evolution in the financial landscape, poses the risk of undermining the original philosophy of cryptocurrencies.
In addition to projects focused on tokenization and digital fiat currencies, BIS is introducing four additional initiatives – Project Leap, Project Symbiosis, Project Hertha and Project NGFS Data Directory 2.0 – addressing issues of cybersecurity, green finance and financial crime prevention.
As the BIS moves forward with its 2024 strategy, it is crucial to reflect on how the implementation of Cryptofiats could upset the delicate balance between financial innovation and preserving the fundamental values of the blockchain ecosystem.
Decentralization, which has been the backbone of crypto movements, is threatened by the increasing centralization driven by CBDCs.
In a world where cryptocurrencies were born as an act of resistance against centralized control, the mass adoption of CBDCs could take us in the opposite direction.
With the conclusion of the Project Promissa testing phase scheduled for early 2025 and the continuation of projects such as Mandala, Pyxtrail and Cambridge, it is clear that BIS is firmly dedicated to CBDCs, automation and experimentation in various areas of this subject.