Central Banks’ Cryptocurrencies Threaten Commercial Banks
May 29, 2018
The Bank of England has published a working document dated May 2018 to express the idea that central banks issuing their own digital currencies are likely to threaten commercial banks.
Activity of current commercial banks is based on offering to store funds on accounts for individuals and companies. That is how banks gain net interest profit. As the document says, digital currencies of central banks may undermine this model.
The Bank of England supposes, central banks will offer storing money as own digital currencies in the future and convince their customers that doing so would be safer than fiat in commercial ones. Moving on, citizens may gain access to continue making payments and transfers with digital wallets.
According to the document, obtaining immediate access to storing money in central banks and making payments is going to produce devastating impact on commercial banks. Private individuals and companies may get a new store of value so commercial banks may face outflow of clients that is going to intensify in the case of financial instability as citizens will be more trusting to central bank rather than commercial one.
As for the Bank of England, it is not going to issue its own cryptocurrency though its CEO Mark Carney used to state lately, he keeps these options open.