This week's report from the Bank for International Settlements, an international organisation for central banks in Basel, Switzerland, says virtual currencies issued broadly by central banks could worsen bank runs.
Jacqueline Loh, chair of the markets committee at the BIS, said: "A general goal central bank digital currency could impact bank deposits, a major source of funding for commercial banks, with implications for financial stability".
In its inaugural report on central bank digital currencies, the BIS's Committee on Payments and Market Infrastructures (CPMI) and Markets Committee analyse the potential impact of CBDCs on various sectors of the financial system.
In an opinion piece on Tuesday titled "Bitcoin is not the answer to a cashless society", ECB executive board member Benoît Coeuré and Bank of International Settlements Markets Committee chair Jacqueline Loh write that, while digital money may be the way of the future, existing public cryptocurrencies like bitcoin are not that future.
Any step towards a possible launch of a CBDC should be subject to careful and thorough consideration.Now such transactions use a massive and complex web of critical infrastructure - much of it based in London - which could in theory become defunct (or at least see major reductions) if the need for a trusted middleman is removed.
Likewise, digital currencies could serve as a "robust and convenient" alternative to cash, but already available, fast and efficient retail payment products - such as the European Central Bank's TIPS - probably limit its benefits.
The BIS urged central banks to continue their studies of digital innovations and also consider the implications of not issuing CBDCs.
"But these are uncharted waters, with potential risks". The Fed's Powell said a year ago that "governance and risk management will be critical" for cryptocurrencies.
It said the distributed ledger technology underpinning cryptocurrencies could be used to raise the efficiency of securities and derivatives transactions.
Although this report was released at a time where cryptocurrencies such as Bitcoin have huge volatility, this has not affected the price swings. Everyone else can access money issued by the central bank in the form of cold hard cash. They are to meet in Buenos Aires early next week to discuss if new regulation is needed for private cryptocurrencies.
A report written by Klaus Löber, who is a Senior Advisor at the European Central Bank (ECB) and Aerdt Houben, who is the Director of the Financial Stability Division at De Nederlandsche Bank (DNB), details the negative impact it could have on the economy.
Coeure indicated on a conference call with reporters that the initiative to regulate private cryptocurrencies, led by Germany and France, probably won't immediately result in concrete action.
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