Central banks were afraid of their own plans
Central banks and the threat of digital currencies
Central banks saw a threat to commercial banks with government-backed digital currencies. According to Bloomberg, the US Federal Reserve (FRS), the Bank of England, the European Central Bank (ECB) and the Swiss National Bank have published reports describing the potential risks of this local currency. At the same time, each of them except the Federal Reserve have their own plans to develop a central bank digital currency (CBDC), though the U.S. regulator is considering that option.
Safe haven from the Central Bank of Commerce
During the crisis, "the CBE can be seen as a safe haven," according to reports from the Bank for International Settlements (BIS). Central banks fear that in the event of economic shocks, citizens will start buying the national digital currency instead of keeping their money in commercial banks as they see tokens as a more reliable investment. The deposits of global banking giants could shrink and jeopardize the financing of the entire industry. State-supported digital currencies "could lead to an increase in deposit volatility and / or a significant long-term decline in customer deposits," a report said. "In certain circumstances, this could affect the profitability of the bank, lending and financial services in general," BIS officials said.
Study central banks
Central banks are considering offering their own digital tokens amid the high volatility of commercial cryptocurrencies. Governments are drawn to the ability to conduct instant international transactions with low fees and little or no regulatory restrictions. However, reports suggest strict rules for transferring or holding central bank digital currencies. Therefore, governments hope to reduce the risks to the commercial financial sector and allow a transition period before the introduction of the digital currency. Central banks are also considering the possibility of introducing price controls.
China and the digital currency ⠀
China has already started adopting the digital yuan, which has led many countries to consider creating such a national currency. The US Federal Reserve recently announced that it was preparing a study into the possible introduction of a digital dollar for publication. ““The most important criterion for evaluating the digital central bank currency and other digital innovations will be the answer to the question: Are there clear and tangible advantages that outweigh them? the costs and risks? Commentary on Federal Reserve Chairman Jerome Powell's draft. The European Union, England and Switzerland have long since announced the development of their own CBDCs.
