Central banks warned on virtual currencies

Central banks warned on virtual currencies

Central banks warned on virtual currencies

According to Reuters, the Bank for International Settlements (BIS) warned Central Banks on the risks before issuing their own cryptocurrency in a report.

It also advocates that banks and other authorities "continue their broad monitoring" of digital currencies outside centralized control such as Bitcoin.

Jacqueline Loh, chair of the markets committee at the BIS, said: "A general objective central bank digital currency could impact bank deposits, a major source of funding for commercial banks, with implications for financial stability".

"There are risks we do not fully understand at this point", BIS markets committee chair Jacqueline Loh (羅惠燕) said.

Likewise, digital currencies could serve as a "robust and convenient" alternative to cash, but already available, fast and efficient retail payment products - such as the European Central Bank's TIPS - probably limit its benefits.

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Everyone else can access money issued by the central bank in the form of cold hard cash.

"A general objective central-bank digital currencies could give rise to higher instability of commercial bank deposit funding", the BIS stated. It said last month its study won't be finalized until late 2019, later than initially indicated.

"The potential effect of fraud could be more significant because of the ease with which large amounts could be transferred electronically", states the report by the BIS, which is often described as the central bank of central banks.

"DLT is where the action is", said Coeure, who is also an European Central Bank executive board member.

This could lead to the central bank having to take a greater role in allocating economic resources, fundamentally altering the relationship between the public and the private sector, the report added.

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Governor Mark Carney of Bank of English stated that CBDC needs careful consideration, a new method to use the new technologies to fill the current demand for reliable, real-time payments.

Last month USA regulators joined a growing chorus of officials saying they may need new powers to regulate cryptocurrencies.

"It's clearly a learning curve and regulators across the world have addressed what are the immediate risks created by private digital tokens", Coeure said.

"Investor protection along with anti-money laundering and terrorist financing safeguards are the priority, while consideration of cryptocurrencies' underlying and futures markets would come later, Coeure said".

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