Bitcoin: The Central Banks will NOT go quietly ...

There is a quiet revolution about to take place in some of the world’s most influential central banks. (1) The heads of some of these most influential central banks will change soon. (2) The central banks are doing a lot of research and testing of crypto-currency related technology.

Changing of the Guard

In February 2018, Yellen’s term as Chair of the FOMC expires and it is unlikely that she will continue. The sitting president is the one who will nominate the next chair and it is highly unlikely that Trump will re-nominate Yellen.

After Yellen, next up will be the Bank of Japan with Haruhiko Kuroda’s term expiring in April 2018. Current headlines indicate that there is a strong likelihood that his term will be renewed as the Japanese government has expressed satisfaction with the BOJ’s policies under Kuroda.

In 2019, the terms for Mark Carney at Bank of England (BOE) and for Mario Draghi at the European Central Bank (ECB) will expire. Due to the bylaws of the ECB which state that the term of the ECB presidency is for an eight-year non-renewable term the ECB has to find a new president and it cannot be Draghi. It remains to be seen what will happen with the BOE Governorship as Carney has been seen as a strong leader.

These central banks are always in the spotlight for headline monetary policy decisions about interest rates and printing money (eg. quantitative easing). These policies have profound impacts on all of our daily lives and the central bank heads have a lot of influence on shaping these policies.

While we were busy looking at interest rates and quantitative easing, this is happening...

In the meantime, there is a steady stream of news coming out on the research that central banks are doing on blockchain, crypto-currencies and distributed ledger technologies (DLT). They are definitely not sitting idly by and are on the contrary, investing quite a bit of time and effort. Initially I wanted to do a deep dive post on what the central banks were doing but was quickly overwhelmed. So, instead I opted just to bring to the forefront the fact that the central banks will definitely not go quietly in the wake of the evolution of currencies and banking technology. It is still too early to tell how these technologies will be folded into monetary policy of central banks. The first roll-outs that we are seeing are mostly around optimizing inter-bank settlement.

Nonetheless, the amount of effort that central banks are putting into this is impressive …. and potentially alarming. Here at The Hutch Report (@thehutchreport and www.thehutchreport.com) we are trying to stay tuned to spot, hopefully earlier than later, who the winners will be, whether it is technology providers that can be invested in, blockchain platforms or crypto-currencies.

Here are just a handful of links referencing what various central banks are doing in regards to DLT, crypto-currencies and blockchain research. I am sure there are many more examples from more countries and central bank. You can see countries and central banks of all sizes are actively working and conducting research ranging from the currently most influential ones including the Fed, China, BOE, BOJ, ECB as well as many others. Interesting to read all the headlines of the FUD about China banning crypto-currency exchanges, Russia cracking down - and yet their central banks are working on competing systems.

Belarus:

• http://www.bankingtech.com/918011/belarus-central-bank-builds-blockchain-based-information-network/

Canada:

• https://www.coindesk.com/canadas-biggest-bank-tests-blockchain-for-cross-border-payments/
• https://www.coindesk.com/project-jasper-lessons-bank-of-canada-blockchain-project/

China:

• https://www.coindesk.com/chinas-central-bank-vows-push-blockchain-five-year-plan/
• https://www.cryptocoinsnews.com/ripple-hosts-chinese-central-bank-officials-san-francisco/
• https://futurism.com/china-becomes-first-countrchina-becomes-first-country-in-the-world-to-test-a-national-cryptocurrencyy-to-test-national-cryptocurrency/

India’s central bank:

• https://www.coindesk.com/central-bank-backed-group-plans-blockchain-platform-launch-india/

Japan:

• https://www.cnbc.com/2017/03/01/japanese-banks-plan-to-adopt-blockchain-for-payments.html
• https://www.technologyreview.com/the-download/608963/japanese-banks-are-planning-to-launch-j-coin-a-digital-currency-meant-to-kill/

Japan (and Europe):

• https://www.finextra.com/newsarticle/31038/ecb-and-bank-of-japan-conclude-dlt-not-ready-for-rtgs-systems/blockchain

Germany:

• https://www.bundesbank.de/Redaktion/EN/Topics/2017/2017_09_20_monthly_report_dlt.html

Papua New Guinea:

• http://www.nasdaq.com/article/central-bank-of-papua-new-guinea-adopts-blockchain-technology-cm836726

Russia:

• https://www.rt.com/business/398308-russias-banks-blockchain-digital-currencies/
• https://www.coindesk.com/russian-central-bank-group-prepares-masterchain-ethereum-fork-testing/
• https://www.cryptocoinsnews.com/russia-national-digital-currency/

Singapore:

• https://www.coindesk.com/details-emerge-on-monetary-authority-of-singapore-plan-for-blockchain/

United Kingdom:

• http://www.bankofengland.co.uk/research/Pages/onebank/cbdc.aspx