Deutsche Bank is preparing for CBDCs, the next generation of money that will replace fiat money, while the Bank of England is studying the potential threat that this new form of money represents to the services of current commercial banks.
Deutsche Bank, one of the world's largest and most important banking and financial services corporations, published a report in which he reveals the important work that central bank digital currencies will play (CBDC) in the not too distant future. With world powers like China and Japan getting closer to launching one of these digital currencies and others like the United States and Europe studying the possibility of joining this trend, CBDCs are “the next generation of money,” as stated Deutsche Bank.
This entity points out that the potential of a digital currency meets the needs of society, which is why they are capable of completely replacing fiat money (the money we traditionally use). Meanwhile, the Bank of England foresees major complications for the world's banks if they do not begin to adapt to this new form of money. Until now, as we mentioned, nations such as China, Japan, South Korea, Spain, France, the United Kingdom, the United States, and others are studying and developing research, trials and public tests to create and issue a CBDC, while the Bahamas is became the first country to issue one: the «Sand dollar«.
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The next era of money
“After centuries of monetary economics, we are finally ready to move into the next era of money.”
With these words, Deutsche Bank points out that banking entities are preparing to adopt what will be the evolution of fiat money that we know today and to "rethink" the next era of money that lives in CBDCs. According to the entity, the adoption of new digital currencies is a natural process but one that is carried out slowly, since researchers from banking entities are focused on developing an effective way to advance towards this money model, without sacrificing privacy. and the security that fiat money provides.
“This is taking time, especially in advanced economies where privacy is a big concern.”
However, the entity affirms that the current pandemic is accelerating this process, motivating or forcing banks to more quickly study the technology necessary to digitize money and give rise to the creation of CBDCs that will increasingly replace cash in the future. nearest.
For some time now, Deutsche Bank has been very interested in knowing the impact that CBDCs will have on the current financial system and how the issuance of digital currencies from different nations will affect the world economy. At the beginning of October, this bank published a report where he argues that the CBDC revolution will be gigantic for the financial system and for society, even more than that caused by the companies themselves. cryptocurrencies, .
The problem of traditional banks
On the other hand, the deputy governor of the Bank of England, Jon Cunliffe, states that the function carried out by commercial banks, as intermediaries of financial processes and custody of funds for their clients, will undoubtedly be affected. Therefore, these entities must quickly adapt to new digital currencies if they want to remain relevant within the financial system.
During a webinar reported by Reuters, the deputy governor of the entity stated that it is not the Bank of England's job to protect the business models of private banks, should the country adopt a digital currency. Cunliffe assured that the arrival of a CBDC will reduce the need for families to keep funds stored in traditional banks, since the technology that supports these digital currencies will allow users to have a self-custody system where they can store and manage their own money.
Cunliffe also says that the transformative change that these currencies will have within society will reduce the need to use electronic payment solutions, banking applications, digital wallets and even cryptocurrencies. The entity represented by Cunliffe has already established a working group to study the development of a CBDC together with other banking entities in the world, including the Bank for International Settlements.
Privacy or control with CBDCs?
Although the change is imminent, China is advancing by leaps and bounds in this development compared to other nations in the world and, according to Deutsche Bank, this is due to the fact that concern about privacy in this nation is much lower than in countries such as the United States or the United Kingdom. United, in addition to having a society where more than 80% of its citizens are accustomed to using digital solutions without depending on cash.
However, despite the fact that this entity states privacy as the main factor that developers investigate and that has delayed this innovation, it seems that the intention of many with CBDCs is contrary to this ideology. For example, the general manager of the Bank for International Settlements (BIS), Agustín Carstens, questions the anonymity that cash allows, while pointing out the potential control that CBDCs can allow over user transactions. For his part, the director of research at the Federal Reserve Bank (FED) of Boston, Robert Bench, considers that privacy should be one of the fundamental elements to take into account when designing and issuing a CBDC.
Continue reading: Jerome Powell speaks on CBDCs at the virtual conference organized by the IMF
