Stablecoins — cryptocurrencies that retain a nominal value or are backed by fiat currencies — have grown in popularity over the past several years hand in hand with the explosive growth of decentralized finance. Now, major financial institutions around the world including global banks are experimenting with digital currencies, and stablecoins are providing an ideal entry route in numerous instances.

The Bank of England has officially announced that it will examine the potential benefits of implementing a digital currency. Officials from the Bank of England will meet with the following banks to pool research and discuss the potential implementation of a central bank digital currency:

The Bank of Japan

The European Central Bank (ECB)

The Sveriges Riksbank

The Bank of Canada

The Swiss National Bank and

The Bank for International Settlements (BIS)

New Whitepaper on Central Bank Digital Currencies

At Davos in 2020, ConsenSys released a whitepaper that presents a practical proposal for central bank digital currencies on the Ethereum blockchain: “ Central Banks and the Future of Money.”

The whitepaper also provides an overview of the history and the current state of central bank digital currencies as well as an example of how a CBDC could be designed and built on the Ethereum blockchain.

What are Central Bank Digital Currencies?

Central Bank Digital Currencies are digital assets that are accounted for using a single ledger (distributed or not) that acts as a single source of truth. Central bank digital currencies represent a claim against the central bank, similar to how banknotes function today. Finally, the currency is central bank controlled — meaning the supply of CBDC is fully controlled and determined by the central bank. A CBDC differs from a traditional cryptocurrency stablecoin where issuance isn’t controlled by a bank, but rather a group of individuals.

The whitepaper provides an overview of the potential and risks of CBDC, as well as an example of how a CBDC could be designed and built on the Ethereum blockchain. The intention is to give the reader not just a good background to this important topic, but also — by means of a concrete proposal — a practical look at what the implementation of a CBDC might entail.

Read the full post on our blog at ConsenSys.net.

Download “Central Banks and the Future of Money” for free today!