A European Central Bank (ECB) personnel highlighted the advantages of central bank digital currencies (CBDC). However, he stressed caution in a speech written by the Bank of International Settlements on 27th May.
The chairman of the Lithuanian Board of the bank, Vitas Vasiliauskas, also a member of the operating council of the ECB, on April 12th gave out his speech at the Reinventing Bretton Woods Committee conference. It was aimed at “managing the soft landing of the world economy.” He specifically debated whether CBDCs should be retail, wholesale or even both.
He went on stressing that Central Bank Digital Currencies should operate as a medium of trade, a store a value, and a means of payment. Furthermore, it should reflect the characteristics of the current forms of central bank money. However, it should not conventionally reserve an account or even a private crypto asset. Also, in the act of releasing the retail Central Bank Digital Currency, it should be readily available to the general public. Moreover, they should be accessible to the wholesale in which it should be open to financial firms only.
Among the potential benefits from the Central Bank Digital Currency, he highlighted higher efficiency security settlements and payments, and also a reduction in the liquidity risks and counterparty credit. The interest-holding retail Central Bank Digital Currency could purportedly heighten the transferring of monetary policy and rigidize the pass-through of the policy to lending and deposit rates. Despite that, he gave a warning; the amount of money in circulation is reducing in some states. It could entail that one day, though it could be viewed as a distant prospect, each individual would be expected to have an account with a unique entity just to make payments. It may lead to advanced levels of financial exclusion in an unfortunate case.