Story originally published on May 28, 2019, by Marko Vidrih, ALTCOIN MAGAZINE

Edited by Sarah Dolezal, GBA member and acting-communications manager

A representative of the European Central Bank (ECB) delivered a speech supporting the use of digital assets via a central bank on April 12 at the Reinventing Bretton Woods Committee conference, “Managing the Soft Landing of the Global
Economy,” in Washington, D.C.

Vitas Vasiliauskas, Chairman of the Board of the Bank of Lithuania (CBDC), discussed the benefits of issuing central bank digital currency, but also raised the question of whether bank digital currencies should be used only for wholesale or retail, or is it appropriate to use them for both options. Vasiliauskas finds that bank digital currencies should serve as a means of exchange, payment and value preservation – reflecting the qualities of the current forms of money of the central bank – and not the usual reserve account or private cryptocurrency asset.

“In the event of the release of the retail CBDC, it would be available to the general public, while access to the wholesale one would be open to financial institutions only,” Vasiliauskas said.

Among the potential benefits of issuing CBDC, Vasiliauskas noted that an increase in the efficiency of payments and settlement of securities, as well as a decrease in credit risk and liquidity risks of the counterparty is at the top of his analysis.

Vasiliauskas also said that, “The amount of cash in circulation is declining in some countries. This could mean that one day, even if it seems like a distant prospect — every single person will have to have an account with a private entity just to make payments. Unfortunately, this may lead to increased levels of financial exclusion.”

According to Vasiliauskas, for retail trade, government currencies will provide access to money of the Central Bank, and as a result, their release will have a positive impact on financial stability. The banker also stressed the importance of complying with the requirements for countering money laundering in case of issuance of state cryptocurrencies.

Other benefits noted include how interest-rate retail trade using CBDC can improve monetary policy and modernize its processes with respect to deposit and loan rates, according to a representative of the ECB.

The ECB recently published a report on the potential impact of digital currencies on economic development and monetary policy, which deals with the consequences of replacing cash and deposits with cryptocurrencies. The study emphasizes that currently, cryptocurrency does not perform the function of money.

And earlier, Francois Villeroy de Galhau, a member of the ECB Board and Governor of the French Central Bank, expressed the opinion that stablecoins have more potential than Bitcoin.


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