• The US Treasury recently conducted a study on CBDCs, and found that its introduction could destabilize the banking sector while potentially increasing household welfare.
• Before now, US lawmakers expressed dissatisfaction with developing central bank digital currencies (CBDCs).
• The study also revealed that apart from banks’ destabilization and boost in household welfare, introducing the central bank digital currency may decrease the financial system volatility.
Introduction Of Central Bank Digital Currency (CBDC)
A recent study by the United States Treasury revealed that the introduction of central bank digital currency (CBDC) could potentially destabilize the banking sector while also having the potential to boost household welfare. Before now, US lawmakers expressed dissatisfaction with developing central bank digital currencies (CBDCs). In a new bill, the board noted that the Fed has no authority to develop and issue a central bank digital currency, as it may affect the privacy protection of digital asset investors.
Impact Of CBDC On Banks
Based on the Office of Financial Research’s study, the effect of these central bank digital currencies could be drastic given the economy’s current condition, and introducing a central bank digital currencies could lead to instability and reduced bank equity. It believes establishing a CBDC or stablecoin in the economy may raise competition between digital currency and bank deposits. This may push banks to increase deposit interest rates to reduce the spread between deposit and lending transactions. However, this will result in reduced equity for banks as they rely on deposits for their lending activities.
The research board claims there will be a slight gain for consumers amid this competition between digital currency and banks – up to 2%. Don’t wait! Jump on this Crypto Deal and get a 150% Welcome Bonus plus 100 Free Spins on your deposit today! The benefit might not last if competition favors digital currency however, as households will face financial instability due to this shift.
The study also revealed that apart from banks’ destabilization and boost in household welfare, introducing CBDC may decrease financial system volatility – asset price volatility dropping after integrating CBDC into economy. BitStarz Player Lands $2,459,124 Record Win! Could you be next big winner? 570% up to 12 BTC + 300 Free Spins for new players & 1 BTC in bonuses every day only at Wild.io Play Now!
US Government Attacks Bitcoin In New Report While Promoting A CBDC It added that though introducing Central Bank Digital Currency (CBDC) can have potential benefits such as decreased system volatility and increased household welfare; it can also harm banks by reducing their equity levels due to increased competition from crypto-assets like Bitcoin or Ethereum .