HSBC Says Blockchain Technology Could Assist With Economic Stimulation

HSBC, the British banking and financial services institution, has been reported as saying that central banks like the Federal Reserve and Bank of England could utilize a blockchain to distribute money directly to the public in an effort to stimulate economic growth, , according to a document obtained by Business Insider.  This is a digital version of Milton Friedman’s ‘Helicopter Drop’ where deflation would be combated by dropping money out of a helicopter onto the public.

Currently, one of the main ways in which banks control the economy is by varying interest rates; however, this does not necessarily give the desired results as there is no guarantee on how much money will make it into the economy and there is a risk of people getting into debt and doing little to contribute to the growth of the economy. Injecting money directly to a system’s users would bypass some of the problems although there is still an issue with calculating the right amount of money, such that it stimulates growth yet does not lead to inflation.

According to the document obtained by Business Insider, HSBC believes:

If we move towards an economy where all transactions become recorded in real-time on a Blockchain type of technology, it will not be too dissimilar to the current eco-systems that many ecommerce giants have around the globe. Online e-commerce stores are able to give out loans to merchants without collateral, because they know all the flows already from the merchants’ point of view: from how much people are spending to the conversion rate of pages viewed to purchases. In the same way, a modernised monetary transmission system, based on real-time big data analysis through Blockchain, could allow the government to balance the economy more efficiently and systematically.

The end goal of the idea would be that with such an increase in information on the state of the economy and a direct system of interjecting money, the government could effectively regulate the economy, although the blockchain being used would have to be one where individuals could be identified to ensure the money was distributed to the correct people.

HSBC has joined 24 other major global banks in taking part in R3’s research and development project for determining blockchain technology standards in banking and finance.