In an interesting post at Tokenpost, we see that the Bank of International Settlements (BIS) is pulling back the reins a bit on the charge towards CBDCs and stablecoins, which it had been previously encouraging, at least in one sense as a less costly cross-border payments alternative. This piece is basically around retail CBDCs, which can be an interesting approach to generating more financial inclusion but which of course has its detractors.
‘Stablecoins and central bank digital currencies (CBDCs) have been eyed by various governments as potential solutions to deficiencies in remittances, cross-border payments, and financial inclusion in emerging market and developing economies (EMDE). However, the Bank of International Settlements (BIS) pointed out that these financial tools are yet untested and might introduce risks into the financial system.’
The piece goes on to point out the various strengths of these crypto assets versus the traditional banking model, which for emerging and developing economies can be inaccessible and relatively expensive, discouraging participation. The major concern here seems to be lack of fully tested systems, so the piece has somewhat of an odd flow to it. We wonder if the Fed has anything to do with putting out such a post, since the U.S. is an active member of BIS and has been publicly skeptical of the rush into CBDCs (we continue to wait on the research paper that was expected more than a month ago).
‘ “Stablecoin arrangements aspire to improve financial inclusion and cross-border remittances – but they are neither necessary nor sufficient to meet these policy goals,” the BIS wrote. The organization pointed out that they haven’t yet been tested at scale and that it’s not yet certain if they “offer lasting competitive advantages” over other digital payments services such as e-money, mobile banking, and improvements made on existing transfer systems such as the SWIFT gpi. In fact, the organization said that stablecoins might introduce new challenges and pose new risks for EMDEs…
While a number of central banks worldwide are already considering the issuance of a CBDC, the BIS also questioned the need for such projects and pointed out that CBDCs present their own policy challenges for EMDE authorities. “While research is ongoing, it is not yet clear whether CBDCs are necessary or desirable for all jurisdictions,” the report concluded.’