Bank for International Settlements general manager Agustin Carstens issued a warning Friday to central banks that might be considering their own digital currencies. While speaking at the Central Bank of Ireland in Dublin on Friday, Carstens warned that central bank-issued digital currencies could potentially undermine financial stability.
As Bloomberg reports, Carstens said that CBDCs could be problematic during any future financial crisis, as they might “lead people to shift money to accounts at the monetary authority from commercial banks, undermining the system.”
He also suggested that CBDCs could create other complications:
Other downsides of CBDCs include potential changes to how interest rates affect the public’s demand for money and lead to bigger central bank balance sheets, which would necessitate a buildup of assets possibly impacting financial market liquidity, he said.
Carstens noted the important role central banks play in providing financial stability, and urged audience members to proceed with caution:
“There are huge operational consequences for central banks in implementing monetary policy and implications for the stability of the financial system. Central banks do not put a brake on innovations just for the sake of it. But neither should they speed ahead disregarding all traffic conditions.”