The Dutch central bank has committed to developing an internal blockchain prototype dubbed “DNBCoin”, according to a recent publication.
Buried in the latest annual report from the De Nederlandsche Bank, published on 16th March, is a tiny item detailing the experiment. Elsewhere in the report, DNB posits that blockchain tech could improve its business – a possible indication of how it may look to apply lessons learned from the DNB project.
Described only as a “prototype coin based on blockchain technology”, there are no details on the project’s release or objectives. DNBcoin is mentioned under a heading that loosely translates to “aims for 2016”, suggesting that the project is a priority for in-house developers this year.
Mentioned on several occasions during the report, blockchain technology is offered as possible cost-saver in the financial industry, though the central bank concedes it’s early to say what possible applications might take shape in the years ahead.
The report states:
“[Blockchain technologies] can affect the revenue models [of] banking systems, they can also benefit with new ways to generate revenue and [reduce] costs.”
As pointed out by payments and banking consultant Simon Lelieveldt, the development signals a desire on the part of the Dutch central bank to explore blockchain tech as an avenue for swapping physical cash with digital replacements.
“So when we now see central banks moving forward in the electronic cash domain (now conveniently labelled: blockchain/FinTech) it might be to no longer spin it off to the market, but to create a permanent digital replacement of cash,” wrote Lelieveldt. “Therefore, this time it might be different.”
Central banks and blockchains
In recent months, a growing number of central bank officials from around the world, particularly the Bank of England, have suggested that blockchain technology could be applied to create more centralized digital currencies.
Yet the process of doing so, it has been argued, could have a lasting impact on the legacy banking system.
In a speech earlier this month, Bank of England deputy governor for monetary policy Ben Broadbent – who indicated his belief that bitcoin won’t see major adoption – reckoned that a central bank-issued digital currency could reshape depositor behaviors and, in extreme cases, inhibit the ability of banks to extend loans should consumers migrate to the digital currency.
These concerns haven’t stopped ideas from being proposed focusing on how a central bank could issue its own cryptocurrency.
Researchers in the UK have gone as far as to propose a new kind of cryptocurrency, dubbed ‘RSCoin’, which was inspired by recent work done by the BoE but did not actively involve the central bank.