IfW in the News

Central Bank Digital Currencies Can Disrupt, Bring More Stable Financial System: EU Report

04.07.2018

In a paper for the EU parliament, Kiel Institute researchers analyze pro and cons of crypto currencies and central bank digital currencies

Excerpt from the Article

(...) The report mentioned that issuance of a Central Bank issued digital issue could have disruptive effects. Having a CBDC is stated to allow citizens to hold their money in a digital form as opposed to having to deposit them in banking institutions.

“With a central bank digital currency (CBDC), the broader public could be granted access to non-tangible central bank money.” the report added. “A digital currency issued by the central bank could substitute bank deposits as the main form of money holding”.

This move would entail major changes to the financial system causing commercial banks to come up with more reliable funding sources to replace deposits. Thus forcing banks to innovate come up with an alternative to the current reserve system.

“CBDC is not necessarily a bad development, but instead could finally pave the way for a more stable financial system.” the report concluded.

Complete article