- Countries that fail to offer a CBDC risk losing power to foreign tech giants
- CBDCs offer greater security, lower transaction costs and higher accessibility
Central banks that chose not to establish official digital currencies are risking losing autonomy and control over their financial systems, the European Central Bank said.
“Issuing a central bank digital currency would help to maintain the autonomy of domestic payment systems and the international use of a currency in a digital world,” the ECB said in a report published Wednesday.
Customers and businesses without access to a central bank digital currency will be forced to turn to outside providers for the services, potentially undermining central bank dominance, the ECB said.
“Attention should be paid to the risks to stability that might arise if a central bank does not offer a digital currency,” the ECB said. “One concern could be a situation in which domestic and cross-border payments are dominated by non-domestic providers, including foreign tech giants potentially offering artificial currencies in the future.”
CBDCs offer greater safety and lower transaction costs, the ECB said. CBDCs also provide greater accessibility because there is no need for financial intermediaries.
“A CBDC would have the potential to widen access to payment services, promote financial inclusion and lower mark-ups of traditional intermediaries,” the ECB said. “If made interoperable with non-domestic payment systems, it could contribute to filling gaps or correcting inefficiencies in cross-currency payment infrastructures, including for transfers of remittances.”
If officials are on board, ECB President Christine Lagarde said that a CBDC may be operational in Europe within the next four years.
As digital assets and blockchain technology continue to infiltrate traditional financial systems, central banks across the globe are being pushed to consider new options. The Bahamas became the first nation to issue an official digital currency with the Sand Dollar’s launch in 2020. The People’s Bank of China is poised to debut its CBDC by the 2022 Olympic Games. On the other hand, the Bank of Canada and the Federal Reserve have both been hesitant to pull the trigger, but have expressed interest in further CBDC research.