The Official Monetary and Financial Institutions Forum, or OMFIF, an independent global think tank for central banking and economic policy, has published a report suggesting that blockchain technology in a public finance management system could provide essential insights. to “formulate and design fiscal policy.”
According to a report on Tuesday, OMFIF said modernizing public finance management via blockchain could help governments identify potential corruption and waste by providing “greater transparency and traceability of payments.” The report suggested that technology could make it easier to prevent embezzlement, given the global rise in fraud from cases such as ransomware and cybersecurity attacks.
In addition to helping reduce the risk of bill fraud theft – by allowing users to send payments with “the click of a button” instead of providing personal information – the think tank reported that with the system in place for a digital currency of the central bank, “the financial position of the government” could be made clear. An updated system through blockchain could bring transparency to public spending.
“Although a digital currency would be a good fit for this type of system, it is certainly not a necessity,” the report said. “Many of the benefits can be achieved without changing the payment rails, simply by improving the architecture [de gestión de las finanzas públicas]. Governments would also be more effective in managing their cash and forecasting their future cash position.”
Ernst & Young Global commented within the report:
“Blockchain for public finance can reduce the administrative effort associated with financial reconciliations, tracking and reporting. Trade terms or eligibility and compliance rules can be embedded in the system to automate transaction controls through of smart contracts. Automated tracking and reporting can significantly reduce the cost to partners of interacting with the government.”
Founded in 2010, the OMFIF has published numerous reports on blockchain and digital assets. In 2020, the think tank launched the Digital Monetary Institute, aimed at bridging digital currencies and traditional financial institutions and the potential use of a CBDC in payments between wholesale and retail markets.
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