Central Banks

A digital transformation of the flow of money is a natural evolution from the current inefficient and risky dependence on physical cash, to a more efficient and secure digital payment system. By harnessing the potential of DLT and blockchain technology, it is possible for central banks to make this transformation.

Most central banks are conducting research into CBDC. Many are progressing from conceptual work into experimentation and proofs-of-concept, including in cooperation with other central banks. To meet the payment needs of the future, physical cash is unlikely to be the main answer. Yet, most people will have to wait to use a CBDC. However, central banks are working hard to make sure the wait is worth it.

- Bank of International Settlement Papers No 101 “Proceeding with caution – a survey on central bank digital currency” By Christian Barontini and Henry Holden, Monetary and Economic Department, January 2019

Benefits of a Central Bank Issued Digital Currency (CBDC)

Increased Seigniorage - through the issuance of CBDC, central banks could save an estimated 90% on the costs associated with minting and issuing physical notes and coins, secure transportation, storage, and distribution, and the collection and replacement of damaged notes and coins. This means that seigniorage has the potential to increase by as much as 90%.

Non-counterfeitability - Cryptographically produced CBDC cannot be counterfeited. Each Digital Dollar (DXD) will have its own digital serial number and the central bank digital watermark. The DXD money supply will be exclusively issued and monitored by the central bank. The system proves authenticity constantly through digital verification, and every transaction taking place in DXD is instantaneously verified by the distributed ledger for authenticity and will not be processed unless it is issued by the central bank.

Auditability - Each DXD has its own digital serial number that the central bank can track and audit. Each transaction is recorded and can also be viewed and tracked in real-time, facilitating better compliance with AML and CFT frameworks.

Logistical Advantages - Instant issuance and distribution of Digital Dollars will eliminate the time, costs, and other challenges of distributing and managing physical cash.

Monetary Policy - Bitt’s Central Bank Management Panel software is designed to provide real-time detailed information and reports on transaction activity including number of transactions, speed of transactions, and velocity of circulation of money. This gives central banks the ability to accurately monitor the effect of monetary policy actions and make adjustments accordingly

Efficiency - Central bank issued DXD will be able to facilitate lower cost transactions, compared to existing mechanisms such as wire transfers, cheques, inter-bank transfers, bill payment, etc. lowering the overall cost of doing business.

Financial Inclusion - Because universal financial inclusion underpins eight out of the seventeen 2030 SDGs (particularly those related to poverty and inequality), the World Bank has set a goal of universal financial access by 2020. Traditionally, commercial banks have had prohibitive costs and requirements for products and services resulting in the exclusion of many, especially the most vulnerable in society. DXD will enable all users to access a broad range of affordable financial services, but this could potentially be most meaningful for the unbanked, underbanked and underserved.

Control - central banks will be able to not just monitor but also exercise a measure of control in order to effect, for example, freezing and/or blacklisting of accounts / wallets as necessary.

Documents Available for download

  • Central Bank Brochure

    An Introductory Guide to Bitt's Central Bank Digital Currency Issuance Solution

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