The views and opinions expressed in this article are those of the thought leader as an individual, and are not attributed to CeFPro or any particular organization.
By Aleksi Grym, Head of Digitalisation, Bank of Finland
What will be some of the implications of central banks introducing digital currencies for banks?
That depends entirely on how central bank digital currencies (CBDC) will be designed. It would not be in a central bank’s interest to undermine the banking sector by, for example, enabling quick and large outflows of funds from bank deposits to CBDC. Nor is there an intention to distort competition in the payments market. CBDC should complement rather than substitute any existing payment services.
It is also likely that the banking sector would play some role in the distribution of CBDC. A central bank usually doesn’t have the capabilities required to offer digital retail payment services to a wide audience.
The objectives of a central bank digital currency may also be different for different countries and regions. In Northern Europe, for example, the banking sector is already highly digitized and there is a wide variety of digital payment services already available. The purpose of a CBDC would likely be to modernise cash in some sense. In other regions, in contrast, CBDC might be more seen as a pathway towards financial inclusion. If the commercial market isn’t able to provide low-cost basic banking and payment services to the entire population, then maybe there is a case for a central bank driven solution.