The Bank for International Settlements urged central banks to carefully study the implications for financial stability and monetary policy of issuing digital currencies.
BIS cautioned that central bank digital currencies, or CBDCs, if made widely available, could pose a threat to financial stability.
CBDC could allow for “digital runs” towards the central bank with unprecedented speed and scale, the Basel-based BIS said in a report compiled by its committee on payments and market infrastructures and the markets committee.
The bank concluded that each jurisdiction considering the launch of a CBDC should carefully and thoroughly consider the implications before making any decision.
The BIS report was released ahead of the meeting of G20 finance ministers next week in Buenos Aires, the capital of Argentina. Cryptocurrencies will be on the top of the agenda.
General purpose CBDCs could revolutionize the way money is provided and the role of central banks in the financial system, but these are uncharted waters, Benoit Coeure, who is Executive Board member of European Central Bank and the Chair of BIS committee on payments and market infrastructures, said.
Cryptocurrencies are poor imitations of money, Coeure said in an opinion piece in the Financial Times newspaper, published on March 13. Yet, while bitcoin and its cousins are something of a mirage, they might be an early sign of change, he wrote.
CBDCs could potentially help streamline many cumbersome clearing and settlement processes that are currently required to complete securities and foreign exchange trades, the banker said.
Although experiments with such forms of CBDCs have not resulted in conclusive benefits for wholesale payments, technology and design are evolving quickly, added Coeure.
by RTT Staff Writer
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