Big 4 accounting firm Deloitte says that Bitcoin could contain part of the blueprints of a “state-sponsored cryptocurrency” as the race for central bank digital currencies (CBDCs) develops.
In a new report titled “State-Sponsored Cryptocurrency: Adapting the best of Bitcoin’s Innovation to the Payments Ecosystem,” Deloitte analysts hash out the main differences between Bitcoin – what some would argue to be an already perfect global decentralized payment system – to a CBDC system that governments and central banks would prefer.
“The foundation of a state-sponsored cryptocurrency would be much like Bitcoin – individuals or companies would utilize computer-generated public ‘addresses’ to send and receive payments,” they said.
“Payers could use an electronic wallet on a smartphone or computer to send money to the public address of the recipients. Unlike Bitcoin’s current system, however, banks and other financial institutions, previously approved by the Central Bank, would be the custodians of a shared, distributed computer-based ledger (called a blockchain in Bitcoin parlance).”
Deloitte says that by combining the best attributes of Bitcoin’s technology with the features of an established fiat currency under the sponsorship of a central bank, “the result may very well just be a new method of handling payments that would revolutionize the current system.”
“Under state-sponsored cryptocurrency, supporting cross-border payments would be straightforward and not require any additional steps than previously described. The payer and payee requirements would be the same; that is, foreign entities (banks, businesses or private citizens) would obtain a private key on the cryptocurrency’s distributed ledger through the previously mentioned regulated channels.
Once they have the private key, they could seamlessly transfer money in the source currency, applying the same conversion rates as fiat currencies do today.”
According to Deloitte, one of the major differences between Bitcoin and a state-sponsored crypto is that the latter would have no cap on supply contained within its protocol. Additions to and subtractions from the ledger could only be done by a central bank. In addition, the ledger wouldn’t be public, instead only viewable by regulated financial institutions and banks. The firm also argues that a CBDC wouldn’t be permissionless, but would require involvement with a regulated financial institution in order to obtain a private key.
Deloitte’s theory comes as many major governments around the world mull CBDCs. According to the Atlantic Council’s CBDC tracker, 9 countries have launched one, 15 countries are in the middle of a pilot program, and 16 more are in the process of developing a CBDC.