Central bankers are trying to reduce fears that their efforts to develop digital currencies (CBDC) might take business away from commercial banks.
Benoit Coeure, the head of the Bank for International Settlement’s Innovation Hub, said in Stockholm on Wednesday that commercial lenders should consider central bank digital currencies (CBDC) “as an opportunity that will enable them to offer new services to their customers, as part of a broader set of new technologies.”
Central banks from China to Sweden are working on their own digital money as the shrinking usage of traditional notes and coins is impending the coup in payment methods. At the same time, emerging cryptocurrencies like Bitcoin have added to fears whether central banks to ensure a worthy alternative before unregulated payments will take over.
But the implementation of a digital currency controlled by central banks has some corners of commercial banks worried they’ll lose customer’s deposits.
According to Fitch Ratings’ recent study, the improperly managed adoption of central bank digital currencies could topple down financial systems, including risks of massive transferring of funds out of bank deposits into CBDC.
The most likely solution will be a two-tier model, whereby CBDC would be issued by central banks, but its distribution would be entrusted to commercial institutions, Coeure said.
The first deputy governor of Sweden’s Riksbank, Cecilia Skingsley said, central banks will play a “focused and narrow role” in providing the infrastructure on which the private sector can build, “and that’s where we are going to stay.”
But she also warned commercial banks shouldn’t rely on their “divine right” to control clients’ deposits.
“It’s something that the banks have to some extent to compete for. It’s always up to depositors what they find is to be the most attractive way to store their money,” Skingsley said.
Eventually, as Coeure said, digital money shouldn’t get “changing the way the financial system works.”
As reported before, Federal Reserve’s digital dollar makes Wall Street worry.
In July, officials at the Boston Fed and the MIT plan to unveil their research that says a digital currency could fundamentally change the way Americans use money, leading some financial companies to lobby to slow its creation.