It helps when enterprises embarking on MPS undertakings have a fuller sense of the value that partnership can bring. Consider an area where MPS is having extraordinary impact: money.
The first large-scale popular implementation of an MPS technology was Bitcoin in 2009. A decentralized digital currency that is not controlled by a central bank, Bitcoin can be exchanged from one user to another through a peer-to-peer network without the need for intermediaries. Bitcoin transactions are verified by network nodes through cryptography and recorded in a blockchain. Its success has touched off a wave of similar cryptocurrencies, all built on decentralized peer-to-peer networks — today, there are more than 4,000 cryptocurrencies in existence, including Ethereum, Litecoin, Cardano, Polkadot, Bitcoin Cash, and Stellar, to name a few. While many of them have little to no following or trading volume, some are immensely popular among dedicated user communities and investors.
This brave new world of cryptocurrencies is prompting many federal agencies to study the potential ramifications they may have on their missions and business operations. For example, numerous federal investigative organizations — including the Treasury Department’s Office of Global Targeting, the IRS Criminal Investigation (IRS-CI), the Postal Inspection Service, and the Army Criminal Investigation Command — are reviewing their procedures and exploring solutions that can help them track digital currency transactions that involve individuals, entities, and organizations that are blocked from conducting business with Americans or that are potentially criminal in nature.
But the flood of new cryptocurrencies has also catalyzed many governments and central banks around the world to think anew about the need to update their government-backed currencies for the digital age. As of January 2021, 86 percent of the world’s central banks were considering issuing “Central Bank Digital Currencies” (CBDCs), according to a report by the Bank of International Settlements (BIS). A CBDC is a digital form of a country’s fiat currency; instead of printing money, the central bank issues electronic coins or accounts backed by the full faith and credit of the government. Because CBDCs are the liability of the central bank, the government must maintain reserves and deposits to back it up.
CBDCs are attractive to central banks for many reasons. First, being digital, the maintenance and handling expenses of CBDCs — printing, managing, and transferring, for example —are far less than for hard currencies. Also, people can have access to money on their smart phones, making it more accessible and safer. And because there is a digital track record for every unit of currency, there is greater transparency and more checks on illicit activity. But there are risks as well: our regulatory processes, financial transaction systems, and payment systems are not updated to deal with these new forms of money. Also, the proliferation of digital currencies could hamper the ability of policymakers to track cross-border monetary flows, presenting challenges concerning the use of sanctions and economic policy tools.
In October 2020, the International Monetary Fund (IMF) began working with the Group of 20 to establish a set of standards for CBDCs. Accenture has been working with central banks across the globe as they explore their digital programs and it is likely we will see the first CBDCs come to fruition in the next 12 to 24 months. For instance, The Digital Dollar Project — a non-profit partnership between Accenture and the Digital Dollar Foundation — is advancing a collaborative framework for developing a CBDC in the United States, and the central bank in Sweden, the Riksbank, is piloting the e-krona to test its viability. The project will launch at least five pilot programs over the next 12 months with interested stakeholders and DDP participants to measure the value of and inform the future design of a U.S. CBDC, or “digital dollar.”