WEF Report: More Than 40 Banks are Researching and Experimenting with Blockchain

blockchain world economic forum

Several central banks are in the process of experimenting or outright deploying blockchain technology to help them execute their mandates to their residents. According to a report by the Davos-based World Economic Forum (WEF) released this Wednesday Aril 3rd, 44 banks have shown the interest to launch a blockchain network or what the report terms as central bank digital currencies (CBDCs).

The report, which was co-authored by Ashley Lannquist, the project lead in blockchain and distributed ledger technology at the World Economic Forum states that some countries have been researching this field for a few years now and are far ahead of the curve in terms of both research and implementation. “It’s very much the case that several central banks are looking at this,” she said.

The aim of the report according to Lannquist is to highlight the work that has been done by these central banks thus far with the hope to enable those that seek to join the bandwagon to piggyback on such research.

Several of these banks have been researching without revealing their plans or their findings to their counterparts.

“Pilot and experimentation work thus far on this subject has yielded some mixed results, some optimistic results, and the summary of where we are right now is that central banks are proceeding with caution, yet highly involved in research,” Lannquist added.

The report highlights the extent to which these banks have researched and implemented their research to create a CBDC. Countries such as France have already deployed their blockchains while others are in their late stages to launch their networks and yet still others are just starting out in this journey.

Lessons learned by those central banks that are further ahead could very much benefit these banks starting out. Over the next couple of years, Lannquist estimates that at least two banks will be launching their digital currencies.

“I’d say in the next couple years, speculating towards the future and being a bit conservative, I would expect a couple of central banks to issue a central bank digital currency and that’s because we know that at least a few are.”

One bank that is highlighted in the report is the National Bank of Cambodia which is gearing up to launch its blockchain network in the hopes of supplementing its national payments system before the end of the year. Using blockchain, the bank is seeking to solve the challenges of unbanked and underbanked residents while at the same time increasing efficiency in its banking system.

“They currently have a very fragmented domestic payment system and many [residents] are unbanked,” Lannquist said.

“Instead of using the bank they use private payment apps that don’t even use the bank so they sometimes can’t pay each other.”

The National Bank of Cambodia is not planning on launching the digital currency through a pilot program but instead are launching it fully with a network of ten local banks already signed up. “They’re jumping right into it.”

As much as the report focusses on the positive side of the blockchain technology and how it could help central banks perform their mandate more efficiently, they report also highlights a few pain points associated with the technology.

For instance, the report points out that central banks have to consider the issue of network scalability, key management, transaction speeds, and population marginalization through the introduction of digital payment systems not to forget the inherent risks to financial stability owing to bank disintermediation.