- Researchers at the European Central Bank said introducing CBDC is the only option” to ensure the present monetary system.
- They made the conclusion after reviewing information from 150 research papers on the topic.
- The study also dismisses worries that CBDCs would reduce the credit supply, calling them baseless predictions.
According to some researchers at the European Central Bank (ECB), the “only option” that would ensure a smooth continuance of the present monetary system is the introduction of digital currency in the form of central bank digital currencies (CBDC).
They made the bold claim in a 52-page research paper released this month titled “Working Paper Series: The economics of central bank digital currency,” drawing information from 150 research papers on the topic.
The paper’s opening statement noted that, in the previous 15 years, interest in the economics of money and payments had grown significantly and had reached beyond a purely academic audience.
The report said physical money would lose its “economic fitness” as cryptocurrencies and large digital platforms continue infringing on the financial system, introducing CBDCs as a viable solution. While many central banks actively researched the potential of CBDCs, they have only been launched in two countries, the Bahamas (Sand Dollar) and Nigeria (e‐Naira).
The authors examined potential regulatory action that may aid CBDCs in accomplishing their objectives and emphasized the significance of central banks reaching the proper amount of CBDC take-up.
The paper further noted that there are no alternative regulatory promises to eliminate the threat to the two‐layer monetary system. In its words, “Since cash is only available in physical form, it is by construction not fit for the digital age.”
The study also dismisses worries that CBDCs would reduce the credit supply, pointing out that such predictions were baseless.
This report marks the second crypto-related topic that the ECB published in August 2022. In a previous comparison of the cross-border payment capabilities of CBDC, Bitcoin (BTC), and stablecoin, CBDC came out on top.