(BlockBar) The benefits of central bank digital currencies (CBDC) were highlighted by a European Central Bank (ECB) official. But along with it stressing upon the cautions as well. Vitas Vasiliauskas, who is a Chairman of the Board of the Bank of Lithuania and a member of the Governing Council of the ECB, delivered his speech at the Reinventing Bretton Woods Committee conference called “Managing the Soft Landing of the Global Economy”. In the conference, Vasiliauskas specifically focussed whether CBDCs should be wholesale, retail, or both.
According to Vasiliauskas, CBDCs should serve as a medium of exchange, a means of payment, and a store of value which reflects the qualities of the current forms of central bank money. But he also stressed that it should not be a conventional reserve account or a private crypto asset. CBDC would be available to the general public during the event of its release. But access to the wholesale one would be open to financial institutions only.
Vasiliauskas discussed about the potential benefits from the CBDC in which he named reduction of counterparty credit and liquidity risks, and increased efficiency of payments and securities settlements. The interest-bearing retail CBDC could strengthen the pass-through of the monetary policy to deposit and lending rates as well as the transmission of policy. But Vasiliauskas cautioned:
“The amount of cash in circulation is declining in some countries. This could mean that one day, even if it seems like a distant prospect — every single person will have to have an account with a private entity just to make payments. Unfortunately, this may lead to increased levels of financial exclusion.”
Vasiliauskas said that a retail CBDC would thus ensure that people continue having access to central bank money, and could eventually have positive effects on financial stability.But one of the key issues the central bank must consider is the CBDC’s adhesion to the money laundering requirements and also the way it can apply the anti-money laundering (AML) standards to anonymous forms of CBDC.
As per the reports, the European Central Bank released a report on the potential impact of digital currencies on economic developments and monetary policy, where it specifically states that if any complications occur then cryptocurrencies should became a credible substitute for cash and deposits.
