New post
Felicia Tan
in
Crypto
June 7 13:10

Fed: digital dollar will weaken commercial banks and increase Central Bank power

Experts from Federal Reserve Bank concluded that the issue of the digital dollar may undermine the ability of financial institutions to lend promising investment projects.
44
0
The report issued by the organization on the digital currency of the central bank (CBDC) points to the serious transformational role that the financial system plays.
Central bank may loose its role as a partial reserve mechanism. Its essence is that banks use most of the deposits to issue loans, holding only a small part in case of a massive withdrawal of funds by depositors.
According to researchers, CBDC issuing will actually eliminate demand for deposits as a source of bank loans, which will reduce their availability to the public. At the same time, the risk of bank panic will virtually disappear due to the central bank monopoly on deposits.
There have been examples in history where central banks have taken on the role of lenders to individuals and enterprises. They mentioned the experience of the Bank of England, which in the XVII century was engaged in issuing mortgage loans. These were financed by household deposits.
Specialists of the Federal Reserve believe that in the absence of the necessary competence in search, monitoring and selection of promising projects for lending, the central bank can assign this role to commercial banks, which will act as its agents.
Earlier, former CFTC head Christopher Giancarlo presented a whitepaper of the digital dollar.