The Bank of Spain joins the debate on digital currencies through a recent report. It acknowledges the role of the Facebook project in digital currency plans.

The Bank of Spain (BDE) recently published a study, through which it joins the existing debate about central bank digital currencies (CBDC), and proposes to “open an orderly discussion” on this issue.

The document seeks to review the reasons that justify the issuance of a CBDC. It also makes a preliminary analysis of the main implications that the issuance of this type of currency could have for central banks.

Juan Ayuso and Carlos Conesa are the authors of the study, titled “An Introduction to the Current Debate on the Central Bank Digital Currency.” In their analysis, they talk about the current motivations that drive the issuance of CBDC.

They acknowledge the role that Bitcoin, and other cryptocurrencies, as well as pegged cryptocurrencies, or stablecoins, have had in accelerating research on central bank digital currencies. They especially refer to Facebook’s Libra project.

Payment System Problems and the Unbanked

The researchers are also members of the Bank for International Settlements (BIS) Committee on Payments and Market Infrastructures. They believe that the growth of the cryptocurrency and stablecoin market is not the only motivation for central banks to address CBDC.

They cite the existing difficulties with the use of cash as another engine. They add the issue of financial inclusion and the limitations of payment systems, especially cross-border ones.

Consequently, central banks mainly seek to solve the problem that the low use of cash has created in some economies. Besides, they aim to have access to the unbanked market through a CBDC.

Concern about Deposit Flight

Ayuso and Conesa also explain the three fundamental concerns that may have an impact on the operation of central banks, in case they issue a CBDC.

They propose three possible scenarios: one in which the CBDC could displace bank deposits, and another one in which the digital currency facilitates the flight of deposits from an entity at a certain moment of crisis. The third scenario has to do with a probable “massive flight of deposits from the banking system, in the event of a global distrust in the financial system as a whole.

The concern about a possible bank run is recurring among analysts at the Bank of Spain. Galo Nuño, a member of the General Directorate of Economy and Statistics of the financial institution, conducted a previous study on CBDC that also mentioned this disadvantage.

Both studies agree that it is necessary to weigh the limitations of the financial system that a central bank digital currency could overcome, along with the improvements that the currency could bring.

Ayuso and Conesa highlight the possibility of designing a kind of “personalized CBDC model”, according to the particularities of each economic system. They outline solutions to the concern raised, such as placing a limit on the use of the digital currency with caps on balances.

By Willmen Blanco


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