Bank for International Settlements Says: Central Bank Digital Currency May Lead Banks to Run on

nOutburst assessment: The Bank for International Settlements stated that while digital currencies can bring more convenient payment methods, taking into account the behavior of people in passionate situations, the convenience of such payments will also increase the pressure on banks to run. Moreover, this phenomenon cannot be eliminated through the intervention of other agencies. For currencies based on distributed ledger technology, some agencies are already considering it, and it is unclear what impact this prediction will have.n
nTranslation: Annie_Xun
According to the Bank of International Settlements (BIS), the digital currency issued by the central bank (CBDC) may lead to more drastic bank runs during financial stability.n
This is what some people call a “central bank’s central bank.” It is argued that those who want to develop and publish fully digital currency must “carefully weigh” the impact of this, especially when it comes to monetary policy and overall stability. BIS currencies of this nature “may contribute to payment but require more work to assess the full potential.”n
n“Universal CBDC may lead to a high degree of instability in commercial bank deposit funds. Even if the design mainly considers the use of payment, it may lead to a rapid and large-scale rush to the central bank to challenge commercial banks and central banks to cope with this situation. The capacity of the situation.”n
nFinally, the authors of the BIS report once again mentioned this issue, assuming a situation in which digital money provides depositors with a convenient way of capital transfers, and in the case of bank runs, even powerful banks will encounter problems.n
n“According to the background, the flow of deposits in the environment that should be passionate may be very large. An important element of this system-scale flow is the sensitivity of depositors to the actions of others. The more other depositors leave the weaker banks, The greater the stimulus for yourself, the presence of CBDC will sharpen and widen the incentive for today’s run, as CBDC may be the preferred destination, especially if deposits are not insured or deposit insurance is limited, weaker banks will face running Even strong banks will face a withdrawal trend because of CBDC.”n
nn”Even if you are desperate to provide a large lending institution, it will be very difficult to prevent such a run.”n
nBIS’s attitude towards the application of distributed ledger technology is relatively neutral. The past report shows that even though the technology has great potential, it is unlikely to be widely used by banking institutions in the near future. This contrasts with the sharp criticism of cryptocurrency by leading BIS leaders in the past.n
Whether this kind of prediction will hinder the central bank from issuing such currencies is not yet known. At present, some institutions are already considering adopting some cryptocurrency elements in digital currency projects.n

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