Agustin Carstens, General Manager of the Bank for International Settlements (BIS), once again took the time to warn of the dangers of issuing a central bank digital currency (CBDC)
Carstens warn about CBDC
He made this known in a speech to the Central Bank of Ireland. There, Carstens pointed out that central banks have not yet seen the value of traveling to an unknown and uncertain area of central bank digital currency issuance (CBDC).
He went on to say that such a move by a central bank will fundamentally change both the monetary system and financial stability.
Two stages of the monetary system
He further explained that the current monetary system consists of two levels – the customer-facing banking system and the central bank. These two levels work hand in hand.
Once a CBDC is introduced, the lending and deposit business of commercial banks would have to switch to central banks. This then leads to a single-stage system
Carstens also stated:
"There are historical examples of one-tier systems in which the central bank did everything. In the socialist economies before the fall of the Berlin Wall, the central bank was also the commercial bank. But I do not think we can think of this system as something that will serve customers better. "
The head of the BIS continued:
"In times of financial stress, money tends to move from banks that are considered high risk to banks that are considered safer. Therefore, it is not far-fetched to envision a scenario in which a CBDC could raise a premium over fiat currency. For example: If one euro buys deposits at the commercial bank central bank digital currency worth less than one euro,
A CBDC would also have a significant impact on the monetary policy environment "changing the demand for base money and its composition in an unpredictable way".
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Postal source: GM of the Bank for International Settlements (BIS) warns against the central bank's digital currency
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