An independent global think tank for central banking and economic policy known as the Official Monetary and Financial Institutions Forum, or OMFIF, has published a report in which it makes the case that a public finance management system using blockchain technology could provide information necessary to “formulate and design fiscal policy.”
The OMFIF claimed that by enhancing payment transparency and traceability through blockchain, upgrading public finance management might assist governments in identifying possible fraud and waste. Given the rise in fraud throughout the globe caused by occurrences like ransomware and cybersecurity breaches, the report suggested that technology might make it simpler to prevent fraud.
The think tank reported that with the system set up for a central bank digital currency, “the government’s financial position” could be made clear in addition to lowering the risk of theft from invoice fraud by enabling users to send payments with “the click of a button” instead of providing personal information. Transparency for public expenditure might be provided via a system updated using blockchain technology.
The paper stated that while a digital currency would work well with this kind of system, it is not absolutely necessary. “By simply enhancing the [public financial management] architecture, many of the benefits can be obtained without modifying the payment rails. Additionally, governments would be better at projecting their future cash position and managing their funds more effectively.
Blockchain for public finance can lessen the administrative work required for tracking, reporting, and financial reconciliations. To automate transaction controls through smart contracts, business terms or eligibility and compliance requirements can be incorporated into the system. The cost for partners to interact with government can be greatly decreased by automated tracking and reporting, Ernst & Young Global commented.
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