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Cryptocurrency an unknown risk for central banks

Global
Uncategorized
Regulatory & Government

(13 March 2018 – Global) The Bank for International Settlements (BIS) has warned central banks about issuing their own cryptocurrency.

The report by BIS markets committee and the payments and market infrastructure committee is wary of any central bank digital currency (CBDC) and told banks to think hard about potential risks and spillovers, with Jacqueline Loh, chair of the BIS markets committee saying, “there are risks we do not fully understand at this point”.

 The BIS report looks at the possible impact a “wholesale” digital currency aimed only a limited audience like banks, and a “retail” version for all, would have on the market. Benoit Coeure, chair of the BIS payments and market infrastructure committee said there was more caution with a retail CBDC which is “unchartered waters”.

A retail CBDC could impact deposits, a major source of funding for commercial banks, with implications for financial stability in time of market stress, and there was no evidence that a digit currency would allow central banks to implement monetary policy better than with tools they already have, the report said.

The report identified blockchain or the distributed ledger technology (DLT) as a more productive pursuit with Mr Coeure and Bank of England Governor Mark Carney both highlighting it as a priority.

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