Bitcoin Global News (BGN)
March 27, 2019 -- ADVFN Crypto NewsWire -- Cryptocurrencies
and blockchain technology have sparked polarizing arguments for
their implications in almost every industry they become associated
with. For global central banks, the topic runs deeper than whether
or not to handle cryptocurrencies such as with other financial
institutions or businesses looking to diversify. For central banks,
it has become a niche debate on the creation and or use of CBDC
(central bank digital currencies).
BIS Lack of
Clarity
Ongoing research of both activity
amongst other central banks, as well as within the organization
itself has stirred uncertainty for the stance on CBDCs for BIS. In
January their data on the technology revealed strong interest
amongst their industry. BIS operates as a central bank between
other major central banks. They found that roughly 70% of central
banks are conducting research into CBDC issuance and 50% are
currently running CBDC research, pilot projects or
proof-of-concepts, which is a 15% increase since their report in
2017.
However, last week one of the
bank’s general managers cautioned strongly against implementing the
technology in a speech held at the central bank of Ireland. Agustin
Carstens warned that this type of change would lead to a one-tier
system, where the same type of transactions would be used between
individuals, as with between global financial institutions. He
referenced a historical example of a one tier-system:
“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 better.” -
Agustin Carstens
Wholesale vs.
Retail
This distinction of a tier system
would not be involved in every instance of a central bank issuing a
digital currency. Traditional cryptocurrencies are based on open,
public networks supported by public mining systems. CBDCs would
operate on a centralized network, but be able to interact with
public networks. BIS themselves delineated two forms of CBDCs in
their January report:
-
Wholesale - restricted-access
digital tokens for wholesale transactions between banks
-
Retail - “general purpose” -
functioning similar to fiat, but digital
-
Retail - “account-based” -
operating similar to exchange traded products
Overall BIS has the goal of making
monetary policy more predictable and transparent their 60 central
bank members. CBDCs could prove useful in this pursuit for two main
reasons. Second, hey have the ability to regulate capital adequacy,
meaning that tokenized assets would make it easier to maintain the
checks and balances for equity and capital assets of central banks.
First, they could cement reserve transparency, meaning that using
digital ledgers, it would be much easier to ensure liquidity, and
prohibits banks from creating money in specific industries or
regions without limit. Yet, this side of the topic was not
cited.
“So far, experiments have not shown
that new technologies would work any better than existing ones.
There is no clear demand for CBDCs on the part of society. There
are huge operational consequences for central banks in implementing
monetary policy and implications for the stability of the financial
system.” - Agustin Carstens
https://www.bis.org/speeches/sp190322.pdf
By: BGN Editorial Staff