LONDON • The world’s central banks can’t ignore the growth in cryptocurrencies and may at some point have to consider whether it makes sense for them to issue their own digital currencies, according to the Bank for International Settlements (BIS).
“Whether or not a central bank should provide a digital alternative to cash is most pressing in countries, such as Sweden, where cash usage is rapidly declining,” the BIS said in its quarterly review. “But all central banks may eventually have to decide whether issuing retail or wholesale CBCCs (central bank cryptocurrencies) makes sense in their own context.”
In making these decisions, institutions will need to take into account of not only privacy issues and efficiency gains in payment systems, but also potential economic, financial and monetary policy repercussions, according to the BIS.
The BIS said one option for central banks might be a currency available to the public, with only the central bank able to issue units that would be directly convertible with cash and reserves. There might be a greater risk of bank runs, however, and commercial lenders might face a shortage of deposits. Another question to be resolved would be the question of privacy. — Bloomberg