Fed Paper: Central Bank Digital Currencies Could Replace Commercial Banks – But at a Cost

Fed Paper: Central Bank Digital Currencies Could Replace Commercial Banks – But at a Cost

Federal Reserve of Philadelphia (Credit: Shutterstock/Bumble Dee)

Central bank digital currencies might one day replace commercial banks. But that comes with risks, according to new research from the Federal Reserve of Philadelphia.

The – titled “Central Bank Digital Currency: Central Banking for All?” – investigated the implications of an account-based central bank digital currency (CBDC), focusing on its potential competition with the traditional maturity transformation role of commercial banks.

“The introduction of digital currencies may justify a fundamental shift in the architecture of a financial system, a central bank ‘open to all,’” the paper, which was published on June 1, reads.

Questions posed by the research arm of the Fed, which were undertaken in collaboration with the Universities of Pennsylvania and Chicago, examined the ramifications of the introduction of a CBDC and how the opening of central bank facilities might affect financial intermediation.

Specifically, the questions were aimed at exploring the role CBDCs play in “giving consumers the possibility of holding a bank account with the central bank directly,” in essence replacing the role currently performed by commercial banks.

Bitcoin News Roundup for June 5, 2020

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