While the Central banks of some countries are going to become part of the digital revolution, creating their own cryptocurrency (CBDC), the Bank for international settlements (BIS) is concerned about the «horrific consequences for the global financial system», which it can cause.
Senior adviser at the European Central Bank’s (ECB) Klaus Leber and head of financial stability Dutch Central Bank (DNB), Aerdt Hoban has prepared a report, which outlined in detail the negative impact that CBDC can have on the economy.
According to the report, these digital currencies could be a direct competition for traditional Fiat, which can lead to an increase in interest rates.
«The implementation of the national crypto-currencies will cause fundamental problems that go far beyond payment systems, as well as transmission and implementation of monetary policy. The state of cryptocurrency can lead to greater instability of funding for commercial Bank deposits. Even if they were created with the purpose of use as a means of payment, it may lead to the fact that banking operations will occur more frequently, which can adversely affect the solvency of the Bank, by challenging commercial banks. Implementation of national cryptocurrencies can also lead to the increased presence of Central banks in financial systems,» the report said.
The authors argue that the introduction of a national cryptocurrency, Central banks will occupy a leading position in the distribution of economic resources, which could result in total economic losses, if such organizations in the allocation of resources will be less efficient than the private sector.