Global think tank suggests blockchain in public finance could help reduce fraud

The Official Monetary and Financial Institutions Forum, or OMFIF, an independent global think tank on central banking and economic policy, has released a report suggesting that blockchain technology in a public finance management system could provide information critical to “formulating and designing fiscal policy. “

According to a Tuesday report, OMFIF said modernizing public financial management through blockchain could help governments identify potential corruption and waste by providing “improved transparency and traceability of payments.” The report suggested that the technology could facilitate the prevention of embezzlement of funds given the global increase in fraud from cases including ransomware and cyber security attacks.

As well as helping to reduce the risk of theft from invoice fraud – allowing users to send payments with “the click of a button” rather than providing personal information – the think tank reported that with the system set up for a central bank’s digital currency, ” the state’s financial position” could be clarified. A system updated using blockchain could provide transparency for public spending.

“While a digital currency fits well with this type of system, it is certainly not a necessity,” the report said. “Many of the benefits can be achieved without changing toll rails, simply by improving [public finance management] architecture. Governments will also be more efficient at effectively managing their cash and predicting their future cash position.”

Ernst & Young Global commented in the report:

“Blockchain for public finances can reduce the administrative effort associated with financial reconciliations, tracking and reporting. Business terms or eligibility and compliance rules can be built into the system to automate transaction checks via smart contracts. Automated tracking and reporting can significantly reduce costs for partners when interacting with the authorities.”

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OMFIF was founded in 2010 and has published many reports on blockchain and digital assets. In 2020, the think tank launched the Digital Monetary Institute, aiming to bridge digital currencies with traditional financial institutions and a CBDC’s potential use in payments among wholesale and retail markets