A new joint European banking report has poured cold water on the effectiveness of so-called central bank digital currencies (CBDCs).
The report, submitted by two working groups under the auspices of the Bank for International Settlements (BIS) and European Central Bank (ECB), warns about the “adverse” effect of introducing a CBDC.
It also advocates that banks and other authorities “continue their broad monitoring” of digital currencies outside centralized control such as Bitcoin.
“Any steps towards the possible launch of a CBDC should be subject to careful and thorough consideration. Further research on the possible effects on interest rates, the structure of intermediation, financial stability and financial supervision is warranted,” its authors conclude.
“The effects on movements in exchange rates and other asset prices remain largely unknown and also deserve further exploration.”
In separate comments on the report’s findings, ECB and BIS executives Benoît Cœuré and Jacqueline Loh said that decentralized digital currency, specifically Bitcoin, was “not the answer to the cashless economy.”
The hands-off approach to CBDCs further broadens the divide between the EU and other countries’ central banks on the concept.
Russia, Venezuela, the Marshall Islands, Cambodia, Turkey and Iran are conversely issuing or at least sympathetic to the concept of state-issued cryptocurrency.