According to the Bank for International Settlements (BIS) annual economic report for 2021, digital currencies from central banks can make significant changes to the financial industry.
BIS analysts believe that government digital currencies should be developed taking into account the public interest, creating an “open space for payments” that will be equally accessible to individuals and legal entities. However, the effective functioning of central bank digital currencies depends on the structure of the underlying payment system and data management mechanisms.
Despite the advantages of government stablecoins, such as increased public access to financial services, as well as faster payments and lower costs of their implementation, their use can lead to ambiguous consequences.
The researchers explained that the widespread adoption of such digital currencies will contribute to the creation of segregated databases and the dominance of central banks in the financial market. This will interfere with the free competition of commercial banks. However, BIS analysts concluded that government-owned cryptocurrencies could significantly improve international payments and reduce the risks of substituting fiat currencies with conventional stablecoins issued by private firms.
BIS believes that digital assets issued by central banks will function most optimally if they operate on the principle of a two-tier system. It should involve commercial banks and other payment service providers who will take over most of the customer experience. Analysts noted the need to create state digital currencies using an identification system that will ensure data confidentiality and prevent illegal activity.
“Digital currencies of central banks can lay the foundation for a new digital payment system. They will provide broad public access to financial services and ensure rigorous data governance standards. This is the best way to use digital money in accordance with the interests of society, ”said Benoit Coeure, head of the BIS Innovation Center.
Earlier, BIS President Agustin Carstens said that only central banks can ensure the stability of digital currencies, so they must play a leading role in their development.
