A report from the De Nederlandsche Bank (DNB) released June 7th implies that blockchain technology is not yet ready for implementation in financial markets.
After three years of experiments with Distributed Ledger Technology (DLT), including blockchain, the DNB has reached the conclusion that the current algorithms used are unable to handle the volume of transactions of the financial market in a secure and energy efficient way.
According to the report, The DNB initially developed and tested four prototypes with the goal of understanding the technology and its usefulness in improving payments and securities traffic.
After evaluating the results, the DNB concluded that while blockchain tech is interesting and shows promise, current systems that do not use DLT are efficient, can handle large volumes of data and provide the legal certainty of having paid.
The report continues on, saying that:
“The blockchain solutions tested show that they are not sufficiently efficient, with regard to costs and energy consumption, and they can not handle the large numbers of transactions.”
The De Nederlandsche Bank isn’t the only central bank casting an inquisitive eye at the potential impact blockchain tech and crypto might have on the banking sector. Last March, The UK Treasury revealed the formation of a cryptocurrency task force consisting of representatives from the Bank of England and the Financial Conduct Authority. More recently, leaders from several central banks such as Bank of England, the Bank of Lithuania, the Bank of Canada and the Swiss National Bank spoke at the Money 20/20 conference about the relationship between cryptocurrencies and the traditional banking sphere.