One of the hard-core Bitcoin critics, Agustin Carstens, general manager at the Bank for International Settlements, drew the attention to the number of risks associated with central banks issuing their own digital currencies. Opposing the idea of central banks issuing their own virtual tokens better known as CBDC, he said that it could create a great level of financial instability and threat to current monetary policy-making.
Recently, IBM announced that they have signed six international banks to launch their own stable coins on IBM’s Word wide. One of the investment banking giants JPMorgan Chase has also announced their own digital token called JPM coin. combining all of that, it seems like the trend of issuing banks’ own token is picking up the pace and will soon become prevalent. According to Carstens, a central bank-issued digital currency (CBDC) could be the potential risk to the current banking system.
Agustin Carstens is known for playing his role as stern Bitcoin fault finder over the years, in fact, he compared Bitcoin to “a bubble, a Ponzi scheme, and an environmental disaster.” Giving a speech in Dublin on Friday he cited some of the potential threads that CBDC could bring to current banking infrastructure. Explaining the risks, he said that in case of financial panic, a central bank-issued digital currency (CBDC) might lead the people to move their money from central banks to a monetary authority and erode the base of the current system. Talking about other risks, he said that potential changes to how interest rates affect the public’s demand for money can lead the bigger central banks towards accumulating their assets. This may further impact the financial market liquidity.
In the speech that was given at the Central Bank of Ireland, the general manager noted:
“There are huge operational consequences for central banks in implementing monetary policy and implications for the stability of the financial system. Central banks do not put a brake on innovations just for the sake of it. But neither should they speed ahead disregarding all traffic conditions.”
Ever increasing popularity of cryptocurrencies and sharp fall in use of cash as a medium of exchange in countries such as Sweden has created a dilemma about if the central banks should start offering the digital tokens for the public along with their existing offers of banknotes.
However, regulators and officials are exploring this area with extreme care that made the progress quite slow. Moreover, the Bank for International Settlements report says that there are only a few central banks which are expecting to launch their own digital tokens in upcoming years.