The Committee on Payments and Market Infrastructures and the Markets Committee at the Bank of International Settlement (BIS) issued a report resuming the major entanglements of digital currencies on central banking. The possibility of issuing digital currencies must be supplemented by a careful weigh of the implications both for monetary policy and stability of the financial system.
The report considers a wholesale CBDC (for use in financial markets), and a general purpose CBDC (for use by the general public). On the one hand, it finds that wholesale CBDCs might be useful for payments, although supplementary checks are needed to capture the full potential of such new mechanisms. On the other hand, wholesale CBDCs could affect the transmission of monetary policy, although it would not reshape the basic mechanism of its implementation.
Concerning general purpose CBDCs, the impact on the financial and system could be broader and larger in size. Particualrly, the intermediation activity pursued by commercial banks must be carefully accounted for. Furthermore, the reliance of such institutions on customer’s deposits might become less stable in times of stress, as it could be proner to take flight to the central bank itself.
The conclusion is that each jurisdiction considering the launch of a central banking digital currency should consider these implications thoroughly before taking any decision.