Library

The emergence of cryptocurrencies is paving the way for Central Bank Digital Currencies (CBDCs)

The emergence of cryptocurrencies is paving the way for Central Bank Digital Currencies (CBDCs). This article details the pros and cons of issuing CBDCs in four different variants: from the more modest proposals (limited to wholesale payment systems), where the risks and benefits are relatively low, to the more ambitious ones (central bank accounts for the entire population), where the ambitious goal of ending banking crises face a severe disruption of financial intermediation as we know it, and the problems that arise in political economy from an excessive concentration of power in central banks. Additionally, the article includes an analysis of the evolution of central bank balances and the inherent risks when their size increases significantly, expanding the role of the central bank beyond its current functions.

Categories: Recommended Readings
Author: BBVA