Bank of International Banking Member Releases Central Bank’s Digital Currency Analysis Report ChainB.com

nOutburst Comments: The Bank of International Settlements has been averse to cryptocurrencies, but this sentiment has not interfered with the objective thinking of its employees. Recently, the heads of the two working groups of the bank submitted an analysis report based on the central bank’s digital currency (CBDC). They emphasized the impact of such digital currencies on central banks and financial markets, but also showed that the advantages of cryptocurrency technologies need to be used, and introduced the concept of “wholesale CBDCs”. Overall, the report provides a more comprehensive overview of CBDC and is worthy of reference.n
nTranslation: Inan
Bank for International Settlements Issues Warning on State-Owned Cryptonic Currencyn
Klaus Löber from the European Central Bank and Aerdt Houben from the Dutch Central Bank are the heads of two working groups of the Bank for International Settlements. They submitted a 34-page document entitled “Central Bank Digital Currency.” According to the foreword, the document aims to “highly summarize the effects of the central bank’s digital currency (CBDC) on payments, monetary policy, and financial stability. This analysis reflects its preliminary thinking on this rapidly developing field and is further The beginning of the discussion and research work. The document also stressed that the issuance of CBDC needs careful consideration.”n
The word “prudential” appeared many times in the report. For example, “Every step in the issuance of CBDC must be considered carefully and comprehensively. It is necessary to further study the effects it may have on interest rates, intermediary structure, financial stability, and financial supervision. The impact on the prices of other assets and other assets is still not clear, and it is worth further exploration.”n
The Bank for International Settlements has been very active on the issue of cryptocurrency recently. Last month, his governor said, “Although cryptocurrency may be seen as a payment system that does not require government involvement, it has become a combination of bubbles, Ponzi schemes, and environmental disasters.”n
At present, cryptocurrency seems to have become an increasingly important topic, at least some of the central banks have begun to consider this new thing. Although the Bank for International Settlements released its disregard for cryptocurrency last month, the report did not completely deny state-owned cryptocurrencies. It “found that wholesale CBDC may be useful for payment, but more work needs to be done to assess its full potential. Although the basic mechanisms for the implementation of monetary policy will not be changed by CBDC, its dissemination may be affected.”n
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Wholesale CBDC is more suitable for central banksn
The report emphasized: “Many forms of CBDC are possible. They have different implications for the payment system, monetary policy transmission, and the structure and stability of the financial system. This report analyzes two major CBDC variants: wholesale and universal. Wholesale models limit access to predefined user groups, while general-purpose models allow extensive access.”n
In contrast, “general-purpose CBDCs may have a wide range of impacts on banks and the financial system. Commercial banks’ reliance on customer deposits may become less stable because deposits may be more easily transferred to under pressure. In addition to financial stability, the central bank needs to carefully consider the impact of the effectiveness of financial intermediation.”n
The report supports the wholesale CBDC:n
n”The combination of wholesale CBDC and the use of distributed ledger technology may increase the efficiency of settlement involving securities and derivatives transactions. The current implementation of the wholesale payment scheme – in line with the central bank system’s capacity, efficiency and robustness Requirement – Looks similar to existing infrastructure, and the advantage is not obvious, although future proof of concept may vary depending on the system design, but before the Central Bank can effectively and safely implement new technologies supporting wholesale CBDC , more experiments and experience are needed.”n
nObviously, too many general-purpose cryptocurrencies, even if supported by the state, will undermine economic stability, but this does not mean that the more effective aspects of the technology should not be applied to the central bank’s settlement layer. Of course, the Bank for International Settlements like blockchain technology. So far, the only central bank in developed countries that has seriously considered CBDC is the Swedish central bank, and its research on “e-krona” will not be completed until next year.n

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