While the future of Bitcoin is still up in the air, governments around the world are catching wind of its success. Currently, officials in the European Central Bank are thinking about central bank digital currencies(CBDC). The Chairman of the Board of the Bank of Lithuania has become a part of the governing council of this soon-to-be CBDC.
While the future of Bitcoin is still up in the air, governments around the world are catching wind of its success. Currently, officials in the European Central Bank are thinking about central bank digital currencies(CBDC). The Chairman of the Board of the Bank of Lithuania has become a part of the governing council of this soon-to-be CBDC.
Back in May of this year, the ECB made a report about the potential of digital currencies to affect the economy and monetary policies. These policies state that if implications on economy turn up, then cryptocurrencies can become a proper substitution for money and deposits, even though currently they cannot fulfill these functions.
Some of the benefits of the CBDC include increasing payment efficiency, as well as much better security settlements. Reducing counterparty credit, in addition to lowering the liquidity of risks are also welcome contributions.
Now, the retail CBDC, which would be charged with interest, would purportedly help with the transmission of monetary policy, as well as ensuring the pass-through of the policy to deposit, and lending rates stay as high as possible.
With that being said, the technology is not without its risks. On that, Vasiliauskas has stated:
“The amount of cash in circulation is declining in some countries. This could mean that one day, even if it seems like a distant prospect — every single person will have to have an account with a private entity just to make payments. Unfortunately, this may lead to increased levels of financial exclusion.”
If the CBDC were retail, this would ensure that the people can always access central bank money. This could have great effects on the financial stability of every participating country.
While this sounds excellent, there are a few issues with implementing CBDC’s. The first issue is that the central bank will have to figure out how to monitor the usage of the CBDC when it comes to money laundering. Applying anti-money laundering standards to an anonymous CBDC will prove a challenge, albeit a worthwhile one to take.
Back in May of this year, the ECB made a report about the potential of digital currencies to affect the economy and monetary policies. These policies state that if implications on economy turn up, then cryptocurrencies can become a proper substitution for money and deposits, even though currently they cannot fulfill these functions.
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