Recent research by the Treasury’s Office of Financial Research refutes the threat that CBDC poses for commercial banks. This publication is made amid intensifying political debate about a Fed-issued CBDC.
Recent research contradicts the notion that a central bank digital cryptocurrency would pose a threat to traditional banks.
On July 12, the Treasury’s Office of Financial Research published an article on CBDCs, stability. According to the researchers, “the adjustments made in private financial arrangements to accommodate a CBDC could tend to stabilize rather that destabilize” the financial system.
The paper addressed the concern that a CBDC could facilitate bank runs by encouraging deposit holders to withdraw their money from banks. This is a common criticism of CBDCs. Many CBDC skeptics are concerned about the potential damage that a digital link with the Federal Reserve could do to commercial banks.
The authors do not address concerns that CBDCs could be used to spy on the government. The authors do point out that CBDC outflows can be used by policymakers to identify banks that are more efficient than current systems permit.
“If they want to withdraw funds from the bank they can transfer their funds to another bank. These withdrawals might not be immediately noticed by regulators, and even if they were, it might be difficult to distinguish them from regular inflows or outflows that banks’ client transactions generate. The introduction of a CBDC gives policymakers a new source for information: the flow and movement of funds into digital currency.
In recent months , the topic of a CBDC has been a focus of intense political back and forth . The benefits of CBDC over existing payment systems have been a major concern for Republicans in the US.
