CBDCs Are The Only Solution For Smooth Continuance Of Monetary System

According to the European Central Bank, CBDCs are the only alternative for the smooth continuation of the present monetary system (ECB).

The observations were made as part of an ECB Working Paper Series on Monetary Policy and Financial Stability in Relation to CBDCs, which was released in August and collected data from 150 research publications on the subject.

The paper’s introductory paragraph highlighted that interest in “the economics of money and payments” had increased dramatically during the past 15 years and had expanded beyond a solely academic audience.

The study examines that procedure before introducing the CBDC’s goals and the complex privacy concerns that surround them. The authors found:

“While consumers tend to attribute high importance to privacy in surveys, they tend to give away their data for free, or in exchange for very small rewards in practice […]. Analyzing the roots for this apparent dichotomy, researchers point to various contributing factors.”

CBDCs Are The Only Solution

As money loses its economic “fitness” and crypto and BigTech (large digital platforms) continue to invade the financial system, the research concludes that the adoption of CBDCs is “the only approach to ensure the smooth continuation of the current monetary system,” stating:

“There is no regulatory alternative that promises to eliminate the threat to the two‐layer monetary system. Since cash is only available in physical form, it is by construction not “fit” for the digital age.”

The authors focused on the importance of central banks attaining the proper amount of CBDC “take-up” and examined possible regulatory actions that may assist CBDCs in meeting their objectives.

No Reduction In Credit Supply

The report also disputes concerns that CBDCs will reduce credit supply, claiming that such projections were unfounded. It was found that more research is needed in the areas of privacy and end-user preferences for CBDC services.

This is the ECB’s second report on cryptocurrency-related matters this month. CBDC came out on top in a prior comparison of the cross-border payment capabilities of CBDC, Bitcoin (BTC), and stablecoin.

Toni Ahnert, an ECB Research Economist, Katrin Assenmacher, head of the ECB’s Monetary Policy Strategy Division, and Peter Hoffmann, an economist with the Financial Research Division, are among those who contributed to the paper.

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