The BIS publishes a document on the impact of CBDCs and the implications for monetary policy and financial stability

In a new study by the Bank for International Settlements (BIS), they examine the issue of digital currencies by central banks (CDBC for its English acronym), its economic impact and where one of the focuses on reserves, central bank balance sheets, Monetary Policy and Financial Stability.

This thesis unifies academic and policy aspects of CBDC, examining technological architectures for their evolution as well as privacy protection, and it is interesting to watch how the BIS shows that CBDCs are part of an idea your time has come She.

The integration into the system, It is seen as a great opportunity to improve payments with the help of advanced technologies while maintaining the fundamental characteristics that are unique to central banks, such as objectivity, liquidity and integrity. While they emphasize that CBDCs aim to provide a universal medium of exchange in the digital economy, they should not be understood as a mechanism to disintermediate the financial sector; on the contrary, their usability as a means of payment should be maximized by establishing an interaction with other banks.

The BIS publishes a document on the impact of CBDCs and the implications for monetary policy and financial stability
The BIS publishes a document on the impact of CBDCs and the implications for monetary policy and financial stability

From a political point of view, the design of the CDBC is crucial so that the public policy objectives can actually be achieved, which implies a division of labor between the public and private sectors. As for the technology, it mentions that the CBDC could be of a similar design to Bitcoin; However, they point out that this would be “harmful”. for the environment, as it is based on proof of work, which ultimately requires a lot of energy.

The monetary system with a CBDC for retail

Source: Auer and Böhme (2021)

At the macroeconomic level, it is highlighted that the impact of CBDCs focuses on three fundamental aspects: the impact on the issuance of CBDCs on bank lending, the impact on financial stability and their use in monetary policy.

This document shows a survey that shows that Users trust government agencies and traditional financial institutions to protect their personal data more than new players such as large technologies. For the above, technical design and solid institutions are considered relevant for CBDC systems to maintain public trust and truly deliver on the promise made to users while maintaining high standards of payment system integrity.

Despite the challenges of creating CBDC, the vision of this research also looks at how to improve cross-border payments and achieve greater integration with the digital economy.

One of the conclusions they draw is that in issuing a CBDC, central banks will seek to improve the payment system at various levels so that inclusion and efficiency are key elements that give importance to CBDCs.; However, it is a priority that mechanisms are in place to protect the confidentiality of the data and the integrity of the payment system. In general, the issue of a CBDC represents the digitization of the economy and a key factor within the monetary system.

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