Jump to content
TheFoundation

IMF Deputy Managing Director Tao Zhang confirms: Central banks testing distributed ledger technology to make cross-border payments more efficient

Recommended Posts

1 minute ago, TheFoundation said:

This is a cross-post from my reddit post.

On May 8th, The IMF (International Monetary Fund) Deputy Managing Director Tao Zhang hold a speech on Atlanta Federal Reserve Bank Conference.

Topic: Digitization of Money and Finance: Challenges and Opportunities

Full speech is available here: http://www.imf.org/en/news/articles/2018/05/08/sp050818-digitization-of-money-and-finance-challenges-and-opportunities

He went through the folloging steps:

  • First, I will discuss how financial services may be transformed by the adoption of financial technology;
  • Second, I will examine how crypto-assets rise may pose challenges to financial integrity and stability;
  • Third, how central banks and regulators can mitigate potential stability risks without impeding innovation;
  • And finally, I will highlight the work the IMF is doing to help its 189 member countries address these challenges.

He made references to useful services:

"Some useful technology is being developed to improve market efficiency. For example, services have slashed from days to minutes the time it takes for cross-border payments to reach destinations. These include relatively small firms like BitPesa in Africa and BitOasis in the Middle East and such well-known companies as Western Union and Moneygram."

He gives the answer on how regulators and central banks should respond?

  • First, regulators need to complement their focus on entities with increasing attention to activities. This responds to the reality that an increasingly diverse group of firms and market platforms are providing financial services.
  • Second, governance needs to be strengthened. Rules and standards will need to be developed to ensure the integrity of data, algorithms, and platforms—in other words, to ensure that they operate in a manner that does not expose consumers or the financial system to undue risk.
  • Third, policy options could be considered to support open networks, and licensing policies could be adjusted to help foster competition.
  • Fourth, legal principles need to be modernized. Maintaining trust in financial services may also require the development of new legal frameworks to clarify rights and obligations within the new financial landscape.

They already begun!

He confirms:

"In fact, a group of central banks is actively experimenting with the use of digital currencies and distributed ledger technology with the aim of making cross-border payments more efficient."

That last line was a thing of beauty..." use of digital currencies" aka XRP and DLT aka Ripple Net

 

serious we need regulations to come in drop the hammer already.........

Share this post


Link to post
Share on other sites
23 minutes ago, mm34505 said:

That last line was a thing of beauty..." use of digital currencies" aka XRP and DLT aka Ripple Net

Why do you think "aka XRP" instead of central bank digital currencies (CBDC)?

Share this post


Link to post
Share on other sites
10 minutes ago, RafOlP said:

Why do you think "aka XRP" instead of central bank digital currencies (CBDC)?

I don't know why they always think that.

Somehow it doesn't register with them that a CBDC can do anything a public blockchain can, as far as simple transactions go; it's just that for CBDC, trust is a solved problem, everyone trusts the central bank for it.

Put ILP and some (centralized) FX brokers or a DEX between the CBDC networks, and the system never has to traverse a public blockchain again.

Things like XRP will be needed until the financial system overhauls itself in this manner - between the nations that did and the nations that didn't yet. 

Edited by corak

Share this post


Link to post
Share on other sites
5 minutes ago, alanwatts said:

Because that wouldn’t help them with cross-border payments.

Why not? It's called FX brokers. They have better spreads and liquidity than cryptocurrency exchanges do in many cases. And likely bridging through USD or another popular fiat will get you competitive rates.

The problem isn't with exchanging the assets, the problem is the correspondent banking system. Either way, it gets circumvented.

Edited by corak

Share this post


Link to post
Share on other sites
Just now, corak said:

I don't know why they always think that.

Somehow it doesn't register with them that a CBDC can do anything a public blockchain can, as far as simple transactions go; it's just that for CBDC, trust is a solved problem, everyone trusts the central bank for it.

Put ILP and some (centralized) FX brokers or a DEX between the CBDC networks, and the system never has to traverse a public blockchain again.

Things like XRP will be needed until the financial system overhauls itself in this manner - between the nations that did and the nations that didn't yet. 

I don't know why you always think this.

Like I said earlier, if you're using ILP the fastest and cheapest digital asset available is XRP.

Share this post


Link to post
Share on other sites
2 minutes ago, Flintstone said:

I don't know why you always think this.

Like I said earlier, if you're using ILP the fastest and cheapest digital asset available is XRP.

The cheapest digital asset to use will be the one with the best liquidity available. Fees and settlement time will not be a meaningful component, expect them to be near zero, we are talking about 10 years from now

Edited by corak

Share this post


Link to post
Share on other sites
1 hour ago, TheFoundation said:

He gives the answer on how regulators and central banks should respond?

  • First, regulators need to complement their focus on entities with increasing attention to activities. This responds to the reality that an increasingly diverse group of firms and market platforms are providing financial services.
  • Second, governance needs to be strengthened. Rules and standards will need to be developed to ensure the integrity of data, algorithms, and platforms—in other words, to ensure that they operate in a manner that does not expose consumers or the financial system to undue risk.
  • Third, policy options could be considered to support open networks, and licensing policies could be adjusted to help foster competition.
  • Fourth, legal principles need to be modernized. Maintaining trust in financial services may also require the development of new legal frameworks to clarify rights and obligations within the new financial landscape.

This post was invaluable, and something I have been thinking about quite a bit.  Glad you found it and posted it.  I am especially eager to herar more about the details of what is quoted above, but at the moment it DOES look very promising, the way they are viewing this transition into the digital realm. 

20 minutes ago, corak said:

Fees and settlement time will not be a meaningful component, expect them to be near zero, we are talking about 10 years from now

We are talking about ten years from now yes, and I agree with your premise that CBDC will eventually take over the job of fiat/correspondent roles right now.  Yet in the meantime there is a necessity to achieve faster payments, and XRP is primed as that mover today. 

I am also relieved that Ripple's strategy doesn't only extend to the banking system.  Over a reasonably modest timeframe that could yield great results with P2P and browser payments/all the other end tail use cases...

Great first post

@TheFoundation

Edited by xrphilosophy

Share this post


Link to post
Share on other sites
1 minute ago, xrphilosophy said:

This post was invaluable, and something I have been thinking about quite a bit.  Glad you found it and posted it.  I am especially eager to herar more about the details of what is quoted above, but at the moment it DOES look very promising, the way they are viewing this transition into the digital realm. 

We are talking about ten years from now yes, and I agree with your premise that CBDC will eventually take over the job of fiat/correspondent roles right now.  Yet in the meantime there is a necessity to achieve faster payments, and XRP is primed as that mover today. 

I am also relieved that Ripple's strategy doesn't only extend to the banking system.  Over a reasonably modest timeframe that could yield great results with P2P and browser payments/all the other end tail use cases...

Great first post

@TheFoundation

I agree with everything you said

Share this post


Link to post
Share on other sites
1 hour ago, TheFoundation said:

"In fact, a group of central banks is actively experimenting with the use of digital currencies and distributed ledger technology with the aim of making cross-border payments more efficient."

Now we know why we don't hear much about BG.

The man is busy af !

Share this post


Link to post
Share on other sites
Just now, corak said:

The cheapest digital asset to use will be the one with the best liquidity available. Fees and settlement speed will not be meaningful component, expect them to be near zero, we are talking about 10 years from now

I think there will need to be an intermediary asset. I cannot see all countries agreeing on one particular country's asset as a means of exchange. The likes of China are already moving away from the USD as a reserve. 

I'm not all that clued up on world economics but @JCCollins seems to be clued up in this area and may be able to contribute some useful information.

Share this post


Link to post
Share on other sites
40 minutes ago, Flintstone said:

I think there will need to be an intermediary asset. I cannot see all countries agreeing on one particular country's asset as a means of exchange. The likes of China are already moving away from the USD as a reserve. 

I'm not all that clued up on world economics but @JCCollins seems to be clued up in this area and may be able to contribute some useful information.

It's one thing to use a country's fiat as reserve and another to use it to bridge payments. Just like XRP can be used as a bridge with xRapid, one could also use a CBDC from the U.S Federal Reserve to fill this specific role.

Fiat would have astronomical liquidity under such a system. Stocks and bonds are trading for fiat and compared to the volumes in those markets, crypto is a drop in the bucket. But who knows really, a lot can change in 10 years, and it will easily take that much time to deploy such networks

Edited by corak

Share this post


Link to post
Share on other sites

@corak CBDC's seem a bit of a minefield! https://www.bis.org/cpmi/publ/d174.pdf

I'm out of my depth here.

I thought your 10 year estimate was conservative Corak, but quite possibly a lot longer and therefore I think we are way too premature with speculation and will likely be cashed out by the time the world is using CBDC's.

Thanks for your contrary opinions. They are appreciated.

Share this post


Link to post
Share on other sites

Create an account or sign in to comment

You need to be a member in order to leave a comment

Create an account

Sign up for a new account in our community. It's easy!

Register a new account

Sign in

Already have an account? Sign in here.

Sign In Now

×
×
  • Create New...