The central banking race for digital currencies has officially started.
In a recent press release from the European Central Bank (ECB), a suite of national central banks, including the Bank of Canada, Bank of England, Bank of Japan, Swiss National Bank, ECB, Sveriges Riksbank (Sweden’s central bank), and the Bank for International Settlements (BIS) are teaming up to explore the potential of central bank-issued digital currencies.
The landmark announcement comes amid a changing backdrop of the web. As society progresses further into the possibility of a digital age, more infrastructure, institutions, and social tools will continue to be ported from the physical to the digital world.
In particular, money and identity.
Digital currencies will necessarily require an adequate digital identity counterpart — a notion not lost on Maxonrow, the KYC and identity blockchain. Maxonrow is fresh off the release of its recent MAX-Scan product release, and the timing couldn’t be more propitious.
Forecasting Digital Currencies
A central bank-issued digital currency necessarily requires a strict KYC/identity infrastructure since the monetary system would originate from a national government.
Ever since Facebook’s high-profile exhibition of Libra, the corporate-backed digital currency, regulators have been at odds with the notion of digital currencies while furtively exploring their potential at the same time. A digital currency, especially within a collaboration of central banks as mentioned in the ECB statement, has several advantages — particularly for nations outside the US.
Evidence of foreign interests in “dethroning the dollar,” is rapidly ballooning. Many governments intend to utilize blockchain-based digital currencies as the weapon to erode the dollar’s hegemony. Launching a new monetary system outside the SWIFT system controlled by US regulators, or bypassing US intermediary banks installed throughout payment routes around the world, is enticing for both US allies and enemies.
But the possibilities of central bank-issued digital currencies are inextricably linked to the development of robust digital identity infrastructure.
There’s a reason banks prefer their own digital currencies over bitcoin — their versions wouldn’t be pseudonymous.
Playing the devil’s advocate, bitcoin launched an industry that empowered money laundering and made absconding with stolen funds (to the tune of billions of dollars) much more straightforward for cybercriminals. Governments naturally frown upon such retrogression. But they have not shuttered the idea of cryptocurrencies entirely, primarily because of their subtle advantages.
Digital currencies can prove to be the glue that helps mold a new financial era. A vision that is congruent with a long-tail vision of revamping outdated financial asset dynamics (e.g., lack of interoperability).
But that complementary identity infrastructure is missing.
Governments want the advantages of blockchain-issued digital currencies and standardized digital identity but without the public outcry over privacy intrusions. Ironically, companies like Facebook have elevated those outcries to a fever pitch in recent years.
The Best of Both Worlds
Maxonrow carefully crafted a blockchain that respects user privacy.
However, it still adheres to KYC standards, is congruent with issuing digital assets (True Asset Issuing), and can be wielded as a private solution for digital identity that complements the digital currency endeavors of major governments.
The compromise between a private KYC blockchain and government overreach is the type of identity transformation the Internet needs.
For example, the MAX-Scan block explorer enables users to trace transactions on the Maxonrow blockchain while maintaining a degree of privacy. User attestations of KYC adherence can be appended to transactions, with the sensitive details only recoverable by government authorities in cases of illicit activity.
Anonymity is preserved on the blockchain as long as no illegal activity is discovered, which strikes a balance between cypherpunk ethos and government’s consent for digital identity infrastructure.
Within the context of digital currencies, blockchain platforms like Maxonrow can become the standardized medium through which institutions, businesses, and individuals register for, say, a KYC whitelist concerning a specific asset class denominated in the national digital currency.
Many people would likely feel uncomfortable registering a permanent financial identity with a central bank digital currency — the dystopian complications are daunting. Nonetheless, the use of cash is rapidly declining around the world. Something needs to fill the void.
Solutions, such as Maxonrow, can function as a KYC buffer between full-blown government surveillance and the type of KYC/identity infrastructure the web of the 2020s requires.
Whether you’re a cypherpunk or central banker, that’s a compromise worth considering.