A Major Turnaround! The Bank for International Settlements Bullish on the Future of National Digital Currencies
The General Manager of the Bank for International Settlements (BIS), Agustin Carstens, appears to have changed his negative stance on Central Bank Digital Currencies (CBDCs), stating recently that this innovation could open up entirely new possibilities.
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In a report titled "The future of money and payment systems" released by the Bank for International Settlements on December 5th, Carstens pointed out that new technologies such as Central Bank Digital Currencies (CBDC) could build a more efficient and inclusive financial system.
Advantages of CBDC
Carstens stated that the introduction of CBDC, which could be used by the general public including businesses and consumers, could bring significant changes to the financial sector. Its 24/7 payment mechanism offers new possibilities, including anonymity and peer-to-peer transfers. He further pointed out:
If the main participants of CBDC are financial institutions limited to those already using central bank deposits, they will be compatible with central bank clearing liquidity provisions and will not raise issues related to tracking money flows.
However, Carstens also mentioned that opening it up to the general public could raise a series of issues, such as how to designate which third-party institutions are responsible for carrying out Know Your Customer (KYC) and Anti-Money Laundering (AML) regulations.
Previous Stance
According to reports, in March of this year, Carstens suggested not to issue digital currencies and was not optimistic about CBDCs. Carstens previously criticized:
In the long-standing financial system, central banks do everything. Most countries still have a high demand for cash, so there is no urgent need to replace cash with CBDCs, and the technology is still "untested." Central banks currently do not see incentives to venture into this unknown territory.
At that time, Carstens reiterated the central bank's position and pointed out that central banks should not hinder innovation for their own interests, but they should not ignore issues related to financial stability and rush forward.
However, Carstens seems to have taken a new stance on digital currencies, believing that central banks need to take the lead in controlling digital assets to establish specific standards. He also mentioned recently that central banks provide the necessary foundation for the credibility of CBDCs to ensure security and liquidity. Additionally, they have a responsibility to remain at the center of the global payment system, and if they retreat at this stage, the situation will become uncontrollable.
Further Reading
- Bitcoin funds rank fourth in the top ten stocks most popular with millennials, surpassing Microsoft and Netflix
- Global custody bank BNY Mellon changes its strategy on blockchain, cutting a large number of DLT developer teams
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