EconPapers    
Economics at your fingertips  
 

Decrypting the role of distributed ledger technology in payments processes

Amber Wadsworth
Additional contact information
Amber Wadsworth: Reserve Bank of New Zealand, http://www.rbnz.govt.nz

Reserve Bank of New Zealand Bulletin, 2018, vol. 81, No 5, 20 pages

Abstract: The financial sector has grown ever more interested in crypto-currencies and the innovative Distributed Ledger Technology (DLT) that underpins them. For central banks, in their role as providers of currency and critical payments infrastructure, a key area of interest is whether DLTs could be used to enhance existing payment processes. This article gives a high-level explanation of how different DLTs can change payments processes. The answer depends on what form the distributed ledger takes. We identify four binary elements that determine the different properties of distributed ledgers and use case studies to evaluate how these elements can improve on, or fall short of, existing payments infrastructure. We find that Blockchain – the most well-known DLT that underpins Bitcoin – brings benefits in terms of the speed of cross-border settlement and improves security by removing the single point of failure, but has drawbacks in terms of slowing the speed and increasing the cost of smaller domestic transactions, and being energy intensive. Some central banks have experimented with other forms of DLTs that try to capture some of the benefits of Blockchain while minimising the costs, but so far these DLTs have tended to mimic existing payment processes and have not demonstrated many additional benefits.

Date: 2018
References: View references in EconPapers View complete reference list from CitEc
Citations Track citations by RSS feed

Downloads: (external link)
https://www.rbnz.govt.nz/-/media/ReserveBank/Files ... 018/2018may81-05.pdf

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:nzb:nzbbul:may2018:5

Access Statistics for this article

More articles in Reserve Bank of New Zealand Bulletin from Reserve Bank of New Zealand Contact information at EDIRC.
Bibliographic data for series maintained by Reserve Bank of New Zealand Knowledge Centre ().

 
Page updated 2018-06-23
Handle: RePEc:nzb:nzbbul:may2018:5