A newly released paper examines the potential of ‘public crypto networks’ as financial market infrastructures. Co-authored by Ulrich Bindseil, the European Central Bank’s (ECB) Director General for Market Infrastructure and Payments, and Omid Malekan from Columbia University, the paper presents an optimistic view regarding the opportunities for financial innovation within crypto networks. The authors assert that numerous advantages of public blockchains “could enable crypto networks to offer financial market infrastructure with unparalleled efficiency. ” This includes support for decentralized finance (DeFi), the elimination of intermediaries, and the facilitation of automation. If regulators approve it, Europe might see a central bank digital currency (CBDC) in three to four years. The paper notes, “there is no technical barrier preventing a CBDC from being issued on a public crypto network. A central bank – if it accepts the associated risks …- could issue a cash-equivalent claim against its balance sheet on Ethereum as readily as on a permissioned 'unified' ledger controlled by the BIS. ” Regarding permissioned distributed ledger technologies (DLTs), the authors express some reservations, particularly in light of the ECB’s recent trials involving wholesale DLT settlements, primarily focused on permissioned options. They echo the perspective of many crypto proponents, suggesting that a permissioned blockchain essentially functions as an intricate database burdened by cryptographic complexities. The authors emphasize that institutions often prefer them for reasons related to privacy, scalability, and regulatory compliance. The paper concludes that “the greatest beneficiaries of ongoing advancements in ICT may be financial engineers tasked with creating innovative products inspired by potential futures rather than constrained by historical limitations. ” Summary The paper analyzes permissionless blockchains through five key dimensions, starting with a temporal perspective.

Public blockchains operate continuously, and there are no technical limitations preventing wholesale central bank systems from functioning on weekends. Each blockchain varies in block times and finality. Other discussed dimensions include: - The capacity for streaming payments - Support for diverse assets and conditional transactions - Programmability - Disintermediation Given the involvement of a central banker, the paper maintains a balanced view. It acknowledges certain challenges associated with public chains, such as hacking vulnerabilities, governance issues, and concerns about illicit finance. Mr. Bindseil has previously expressed significant criticism of Bitcoin, including in a recent report, a viewpoint that aligns with this latest paper. His main concern lies in Bitcoin being a speculative, unproductive asset, which he believes could divert capital away from more viable real-world investments. He further observes a wealth shift from early Bitcoin adopters to more recent ones.