Klaas Knot: The evolution of power of blockchain - a central banker's balancing act

Speech by Mr Klaas Knot, President of the Netherlands Bank, at the EBF Conference "The Evolution of Power", Groningen, 5 October 2018.
Central bank speech  | 
15 October 2018
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In his speech at the EBF Conference The Evolution of Power, Klaas Knot shares the current thinking of De Nederlandsche Bank on blockchain and distributed ledger technology solutions, highlighting both the opportunities and the risks. Innovations like distributed ledger technology have potential in the financial system where there are some interesting and promising business. Yet, more widespread trading of cryptos may lead to reputational risks for financial institutions, and affect confidence.

Introduction

The title of this conference, ‘Evolution of power’, puts me in a somewhat awkward position. I am after all the president of a central bank. And the core concept of power in a blockchain is decentralization. Bitcoin, for instance, was created as a peer-to-peer network. So there would be no

need for a central authority. In the words of Satoshi Nakamoto, the pseudonym of its founding father: “The problem [with a central authority solution], is that the fate of the entire money system depends on the company running the mint”. In this case, the mint is run by the institution that issues currency, in other words, the central bank. So, blockchain’s evolution of power is a development away from a regulatory authority, away from the central bank.