Saturday, November 11, 2017

Denmark Central Bank Governor Speaks Against CBDC

We have been covering the ongoing discussion/debate over whether central banks will issue so called central bank digital currencies for some time now. We have noted that central banks around the world are looking into this idea while still moving very gradually on any actual implementation. 

Now we have this speech by Denmark National Bank Governor Per Callesen. He speaks against the idea of central banks issuing central bank digital currencies to private citizens for reasons we have pointed out here before. Below is the relevant excerpt from his speech on this issue (added underline is mine).


. . . . . 

"For very different reasons it is neither to be recommended that central banks change their entire business model from being the banks of banks to issuing digital currency to the general public, say by opening an account for every citizen and company (including foreigners?). For a start it would not create something which is not already offered by private banks. It would not be a substitute to notes and coins but to private bank accounts. 

It would therefore rather open a highway to bank runs, challenging financial stability, unless the amount allowed would be limited to an extent where it could not serve useful transactions purposes. It would add competitive distortions at the expense of private institutions and very substantial costs in terms of IT, staff and regulatory compliance. In addition, piling up large deposits from the general public in central banks would raise the question if central banks should also engage in centralised and perhaps politically motivated lending activities.       . . . . 

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