Tribune. How to remove the threat that cryptocurrencies pose to the stability of global financial systems, and allow central banks to maintain control over money supply and interest rates? The envisaged solution to this very urgent problem involves central banks issuing their own digital currencies. But if these allowed them to maintain control, they could also cause major upheaval.
Within a few years, several major central banks will be issuing some form of national digital currency. Work is currently underway at the US Federal Reserve (Fed), the European Central Bank (ECB) and the Bank of England.
China at the forefront
The People’s Bank of China has taken a head start; it is already at the pilot stage. She created a national cryptocurrency that works through a phone app. The stated goal is to replace cash, improve financial inclusion, and build more efficient payment systems across the country. China already has a very sophisticated telephone payment network, and the public seems to have less qualms about protecting privacy.
A digital currency issued by a central bank (MNBC) is similar in some ways to bitcoin, but it is issued in the national currency: so we could see the birth of a “eurocoin” or a “britcoin”, stored on a digital ledger or held on individual accounts opened with the central bank.
The benefits for governments are first of all to prevent the current threat posed by private digital currencies to financial stability and their economic power, and also to maintain control over the money supply and interest rates to support economic growth. economic policy.
In addition, central banks would have better information on how people spend, and could more easily pilot “helicopter money” (direct financial assistance distributed to households or businesses). MNBCs would also provide greater flexibility in negative interest rates if they resulted in the abolition of cash currency. This could help boost economies during a recession.
Destabilization of the banking system
MNBC holders would benefit from a risk-free asset because, unlike commercial banks, central banks cannot go bankrupt. Payment processes would also be much cheaper, faster and easier for international fund movements.
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