Bank For International Settlements (BIS) Believes Central Banks See Zero Value In CBDCs

Bank For International Settlements (BIS) Believes Central Banks See No Value In CBDCs

Agustin Carstens, the general manager of the Bank for International Settlements (BIS) said that banks should be cautious when considering issuing central bank digital currencies (CBDCs). He said that during a speech at the Central Bank of Ireland a few days ago.

BIS Warns About Issuing CBDCs

As cryptocurrencies expanded, there have been many discussions regarding how digital assets could eventually change the current economic system. Central Banks and other institutions started to analyze the effects of launching their own CBDCs.

Carstens said that central banks are not “seeing the value” of issuing a central bank digital currency. This move could severely affect financial stability and how the monetary system works. There are different countries that have been evaluating the possibility to issue CBDCs.

As he explained, the current monetary system consists of a customer-facing banking system and the central bank. With CBDCs, deposit and lending business would move into central banks, which would produce a one-tier system.

On the matter, he commented:

“There are historical instances of one-tier systems where 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 hold up that system as something that will serve customers best.”

When there are financial problems in a specific economy, customers move away from the riskier banks and move towards those that look safer. As Carstens continued, a central bank digital currency would also have an impact on the monetary policy environment.

In several countries, the demand for cash is still high. Thus, there is no urgency in implementing a substitute for cash as a CBDC. Moreover, CBDCs are still untested, meaning that institutions would need a longer period of time to understand how the technology works and which is the effect they could have on the economy.

Indeed, he said that experiments show that new technologies would not work “any better than existing ones.” In addition to it, Carstens mentioned that there is no clear demand for CBDCs from society.

The BIS head seems to have a negative point of view regarding virtual currencies around the world. He said in the past that cryptocurrencies represent a bubble, a Ponzi scheme and also an environmental disaster. Moreover, he added that cryptocurrencies are not “sustainable as money.”

There are several countries thinking about issuing CBDCs. At least most of them have been analyzing the possibility of issuing a central bank digital currency. Some of these countries are the United Kingdom, Sweden, Norway, Canada, and Ukraine, among others.

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