JP Morgan, the US banking giant, has warned against the hasty introduction of Central Bank digital currencies (CBDC) into the financial system. The bank said that the creation of new channels of retail loans and payments based on CBDC should not occur at the expense of the existing financial system. A hasty introduction of CBDC in the retail market can “cannibalize” the existing financial infrastructure.
Josh Younger, JP Morgan strategist, expressed his opinion on this issue and called for the inclusion of financial resources in the CBDC plan. He said that there’s no need to change the existing monetary system, as it is possible to increase access to financial services without that.
Younger said that CBDCs becoming the main form of transactions could lead to an outflow of funding sources from existing commercial banks by 20-30%. Banks use the deposited money for financing and offer customers interest. A sudden switch to CBDC-based accounts can disrupt the banking system since a commercial bank will not have the funds to offer loans or mortgage services.
The JP Morgan strategist also suggested setting a $2,500 limit for CBDC accounts. He explained that such restrictions meet the needs of low-income households, so they will not cause serious inconvenience. At the same time, such a decision will avoid any serious impact on the banking system. Most American families have less than $1,000 in current accounts, so the $2,500 limit is a win-win option.
“If every last one of those depositors were to hold only retail CBDC, it would not have a material impact on bank funding,” Younger said.
US lawmakers are planning to adopt a law on stable counting. It will allow commercial banks to offer consumers services related to stablecoins. However, such a decision may cause serious problems in the future: shall the popularity of commercial stablecoins increase, a conflict may arise between them and the US CBDC.
Stablecoins are in great demand, billions of dollars revolve in transactions on various exchanges. As more and more countries are moving towards launching their national sovereign digital currencies, it can lead to conflicts between CBDCs and stablecoins.
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