The central bank governor, Mario Marcel has said that central bank cryptocurrencies (CBDC) can provide more freedom during a time of “unconventional monetary policies.”
The opening remarks from Marcel recognised that cryptocurrencies like Bitcoin are already showing some disruptive potential and provide several benefits over the legacy platform. He said:
“Disruptive technologies in Finance or ‘FinTech’ are transforming the financial industry landscape, challenging traditional business models. These technologies have been able to address some gaps in the traditional financial industry that can be grouped into five categories: Access, Speed, Cost, Transparency and Security.”
The governor goes onto highlight that this new tech could be adopted by the banking system in order to mitigate its intrusive potential. On top of this, distributed ledger technology (DLT) could provide us with some benefits which controversial money technology isn’t able to.
However, DLT and CBDC might be able to “enhance market efficiency” based on some research, says Marcel, who also notes these digital currencies can be more flexible in an “unconventional” monetary policy environment.
Even so, one of the main benefits would be:
"Crisis management around the Zero Lower Bound. In a world of low real interest rates, the impact of unconventional monetary policies, such as QE, nominal GDP targeting and forward guidance, appears to be limited. [...] Fixing negative nominal interest rates in a flexible way could improve the Central Banks’ toolkit.”
The governor has acknowledged some of the potential drawbacks. A one step forward, two-step back kind of thing. One drawback being that more research is needed to fully understand the potential of the technology. Furthermore, the general public could infer negative interest rates as “a new tax” and would likely see pushback from lawmakers.Investment Disclaimer