Historically, only a small group of central banking, academic, and financial sector professionals have shown much interest in the economics of money and payments. This has significantly altered over the past 15 years as technology innovation is upending the payments industry on an unprecedented scale and the changes that follow are becoming apparent in individuals’ day-to-day lives. The development of central bank digital currencies (CBDC), in the opinion of the European Central Bank (ECB), appears to be the “only solution” that would guarantee the “smooth continuance” of the existing monetary system.
The remarks were presented as part of an ECB Working Paper Series on Monetary Policy and Financial Stability in Relation to CBDCs, which was released in August and drew information from 150 research papers on the topic. Toni Ahnert, a research economist at the ECB, Katrin Assenmacher, the head of the ECB’s Monetary Policy Strategy Division; and Peter Hoffmann, an economist in the Financial Research Division, are among those who contributed to the paper. The authors presented the argument:
“Public digital money in the form of a CBDC could replace banknotes as the monetary anchor of today’s two-layer monetary system and help retain monetary sovereignty if global stablecoins become widely used.”
“Consumers often place a high value on privacy in polls, but in reality, they frequently give out their data for no charge or for very little compensation […]. Researchers examine the causes of this apparent dichotomy and identify a number of significant elements.”
The paper concludes as fiat currencies losses its value while cryptocurrencies and tech giants continue to undermine the financial system, the emergence of CBDCs is “the “sole answer” to ensure a smooth continuation of the present monetary system,” asserting:
“The threat to the two-layer monetary system cannot be removed by any regulatory substitute. Cash is not “suited” for the digital era by design since it can only be obtained in physical form.”
- CBDC found to be superior mode of payment as compared to Bitcoin and Stablecoins: ECB report
- Stablecoins as form of payment not a right match in real economy: ECB Report