Distributed ledgers have made their impact on the financial sector. Such a development simply makes a lot of sense. However, not everyone sees it in a positive daylight. The Dutch Central Bank considers DLT to be “inferior and underwhelming”.

Not everyone is smitten by blockchain technology. That is only to be expected at this stage. After multiple years of hyping up this technology, very few use cases exist. Solving that problem will not be easy by any means. The Dutch Central Bank made it clear they see little future for DLT. More specifically, the technology can’t live up to the bank’s expectations.

DLT is Immature and Incomplete

After three years of experimenting, DLT still fails to surpass various stress tests. The technology is not capable of replacing current financial market infrastructures. A very worrisome and grim outlook for this multi-billion dollar industry. Even so, it is important to adjust one’s expectations where this technology is concerned.

De Nederlandsche Bank explains its stance:

“Today’s payment systems are highly efficient, can handle large volumes and offer the legal certainty that a payment is completed. The blockchain solutions we tested proved to be inefficient – in terms of both costs and energy consumption – and unable to handle large numbers of transactions. Furthermore, several consensus algorithms we used will never achieve the full certainty of a transaction, so that it cannot be undone, which the central banks’ Target2 system offers.”

This doesn’t mean the bank is giving up on blockchain either. More specifically, DNB remains confident DLT can improve the financial infrastructure at some point. Right now, it is simply not in the right stage to make any official impact. Whether or not other banks will come to similar conclusions, remains to be determined.

Header image courtesy of Shutterstock

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About Author

JP Buntinx is a 30-year old FinTech and Bitcoin enthusiast living in Belgium. His passion for finance and technology made him one of the world's leading freelance Bitcoin writers, and he is working to achieve the same level of respect in the FinTech sector.

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