Central bank digital currencies or CBDCs might offer new types of businesses improved access to cost-effective reserve bank funding while potentially reducing the role of large banking institutions when it comes to settling big transactions, according to recent statements from a senior Bank of France official.
With increasingly high stakes involved in the creation of digital currencies, the Bank of France is taking part in the European Central Bank’s (ECB) research study into how a digital euro might be used in wholesale bank-to-bank lending and in daily retail banking activities.
A wholesale CBDC may lead to demand from financial services providers that don’t yet have access to reserve bank money, according to Denis Beau, Deputy Governor of the Bank of France. Beau’s comments came during an online seminar that had been organized by the OMFIF think-tank.
As reported by Reuters, Beau noted that “even if these actors would be … subject to similar regulatory requirements, the role of large banks in the settlement of transfer orders in central bank money would be challenged.”
The largest reserve banks, such as the ECB, are focused on launching digital cash, so it may streamline payment channels while addressing issues like negative interest rates and make sure they are not giving up control to virtual currencies.
The scope and scale of CBDC research has varied greatly from one country or jurisdiction to another. The People’s Bank of China (PBoC), the nation’s central bank, is now in the advanced stages of testing a virtual renminbi which is intended for individual consumers and local businesses.
The Bahamas has introduced a fully-functional digital “Sand Dollar” and Switzerland reports that it has carried out testing involving large-scale bank-to-bank virtual currency transfers.
US Federal Reserve Chair Jerome Powell recently clarified that China’s virtual yuan project was not necessarily going to lead to the Fed hurrying to introduce a digital version of the US dollar.