Bank For International Settlements Distances Itself From Centralized Digital Currencies

Bank For International Settlements Distances Itself From Centralized Digital Currencies

To address this failing, central banks must improve global payment channels and rise to the challenge bitcoin is presenting fiat currencies, the opinion piece asserts.

Jacqueline Loh, chair of the markets committee at the BIS, said: "A general goal central bank digital currency could impact bank deposits, a major source of funding for commercial banks, with implications for financial stability". Introducing a central bank digital currency could result in a wider presence of central banks in financial systems. Moreover, it also cautioned that digital currencies could disrupt the traditional financial ecosystem if offered directly to the public.

As reported in Bloomberg, the BIS said: "A CBDC could allow for "digital runs" towards the central bank with unprecedented speed and scale".

"But more work and experimentation would be needed to explore these benefits", he added.

It has considered the move due to a decline in the use of cash in Sweden.

Central banks lend digital currency only to retail banks and to the public in notes and coins so an unofficial fast-transacting cryptocurrency is a looming threat to the monopoly central banks have on the supply and creation of money.

What the world's central banks are saying about cryptocurrencies.

Mark Carney, the Bank of England governor and chair of the Financial Stability Board, said issues surrounding central bank-issued digital currencies "need careful consideration".

A new joint European banking report has poured cold water on the effectiveness of so-called central bank digital currencies (CBDCs). However, it warned them that issuing CBDCs could be an innovation too far.

The BIS concluded that wholesale digital currencies and their underlying technologies have the potential to make settlement of securities and derivatives transactions more efficient, even though proposals so far look broadly similar and not clearly superior to those in place.

The appeal of a such a currency would be more pronounced if it were interest-bearing. The situation could have an immediate impact on financial stability at times of market tension.

The BIS also highlighted that, like banknotes, digital currencies can fall victim to illegalities - as a direct target or a means of transaction.

"There are risks we do not fully understand at this point", BIS markets committee chair Jacqueline Loh (羅惠燕) said.

At the G20 meeting on March 19-20th March in Bueno Aires, Argentina, finance ministers of the world's top 20 economies intend to discuss regulating digital tokens, and how it could help the current financial ecosystem. "The policy issues that this would raise, for central banks and society more generally, need careful consideration".

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